Friday, February 29, 2008

Bigger Cities Join in Abnegation

ab·ne·ga·tion (#b.n2-g"ZshMn) n. Self-denial.
Sacramento is facing a budget shortfall of $48 million to $58 million next fiscal year. The city's general fund budget is about $450 million.

Under the city's proposed "voluntary separation program," full-time employees with at least five years of continuous city service are eligible, with priority given to workers who have been at the city for 10 years or more. The city is offering one week of pay for each year worked, but the amount cannot exceed $50,000.
...To pay for the buy-outs, the city will us up to $7 million from its reserves, according to the report. The city anticipates it will save up to $13 million in the first year and $20 million in future years.
Source: Sacramento Bee

Draw down the reserves $7m to save $13m. Here's an idea; lay them off. Be sure to read the responses.

Thursday, February 28, 2008

Short Covering

Cotton and other commodity prices cause delivery services to save money on uniforms.

Seriously, Da governator is showing his liberal streak.
Schwarzenegger supports closing loopholes, then backtracks

Gov. Arnold Schwarzenegger on Thursday told Los Angeles business leaders he endorsed a proposal by Legislative Analyst Elizabeth Hill to close $2.7 billion in tax loopholes to help close the state's remaining $8 billion deficit for the upcoming fiscal year, but he later backed off those remarks and said he isn't "necessarily" supporting her recommendations.

...$1.3 billion rollback of tax credits -- from $94 to $294 -- for individuals or families that claim dependents on their returns. ...research and development tax credits
...sales tax exemption on the leasing of films and tapes

"I agree that we should go for it and we should do it because everybody has to give something in order to make this work."


Now we know that when he was accused of groping he was merely reaching for their wallets. [I don't think she's carrying a wallet.]

Another view of the heavier 49 State winter uniform. Further below the Texas only version.

In Memoriam

THE YEAR WAS 2081, and everybody was finally equal. They weren’t only equal before God and the law. They were equal every which way. Nobody was smarter than anybody else. Nobody was better looking than anybody else. Nobody was stronger or quicker than anybody else. All this equality was due to the 211th, 212th, and 213th Amendments to the Constitution, and to the unceasing vigilance of agents of the United States Handicapper General.
Excerpt from "Harrison Bergeron" by Kurt Vonnegut (1961).

Tuesday, February 26, 2008

Carl Cole Breaking News

3:09PM PST - Carl Cole is no longer associated with Keller Willams Camarillo. Praphrasing; "Bothe the distance and difference in markets, it just isn't a good fit."

My brief conversation indicated that Mr. Cole was on premises and she asked if I wanted to talk with him. I declined. I expressed my sadness at his circumstance and made it clear I was sympathetic to his having been decieved but that I was not prepared to let happen to Ventura county what happened in Bakersfield. It was at this point that the K-W front office person made it clear he would not be joining the team.

Monday, February 25, 2008


A few tidbits to look at while finishing my taxes:

N.B. Some may require registration to see the full article.

Housing: Homeowners Losing Equity Lines
The Housing ATM is closed.

Land Use, Planning: The Next Slum?
Typical Pro-Urbanist wishful thinking. "The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today."

Nonprofit buys foreclosed homes

Friday, February 22, 2008

"Short Cuts Were Taken''

File this under "Sauce, goose, gander."

Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish

Feb. 22 (Bloomberg) -- Joe Lents hasn't made a payment on his $1.5 million mortgage since 2002.

That's when Washington Mutual Inc. first tried to foreclose on his home in Boca Raton, Florida. The Seattle-based lender failed to prove that it owned Lents's mortgage note and dropped attempts to take his house. Subsequent efforts to foreclose have stalled because no one has produced the paperwork.

``If you're going to take my house away from me, you better own the note,'' said Lents, 63, the former chief executive officer of a now-defunct voice recognition software company.
Lents's attorney, Jane Raskin of Raskin & Raskin in Miami, said she has no idea who owns Lents's mortgage note.

``Something is wrong if you start from what I think is the reasonable assumption that these banks are not losing all of these notes,'' Raskin said. ``As an officer of the court, I find it troubling that they've been going in and saying we lost the note, and because nobody is challenging it, the foreclosures are pushed through the system.''
Awesome article.

Thursday, February 21, 2008

$16 billion and counting

Everyone remembers Elizabeth Hill. The day after Christmas she suggested the removal of home mortgage deductibility from California income taxes. She's baaaack. Supposedly she's a budget analyst for the Legislative Analysts Office (LAO) but lately she's appointed herself Governor and started proposing tax legislation and producing budgets. Today's exercise in excess is to go one better than Da Governator and admit to a $16b deficit topping his $14.5b up from $14b up from $10.6 up from $4.5b estimate(s).
In contrast to the administration’s across-the-board reduction budget-balancing approach that fails to prioritize state spending, we offer an alternative approach for the Legislature’s consideration. By making more targeted reductions; eliminating or modifying ineffectiveness or nonessential programs; and adding ongoing revenue solutions, we believe this approach offers the Legislature a better foundation to begin crafting a 2008-09 budget that focuses on essential services. This piece provides an overview of the key components of this alternative approach. Our alternative budget would end the 2008-09 fiscal year with a $1.3 billion reserve, and remain balanced through 2012-13.

Quick glossary:
fails to prioritize state spending= doesn't play favorites
By making more targeted reductions = play favorites
eliminating or modifying ineffectiveness or nonessential programs = trim the fat canard
essential services = union contracts
adding ongoing revenue solutions = taxes, lots of new taxes

At least we've reached the half-way point in admitting to the actual shortfall. Stay tuned.

Tuesday, February 19, 2008

Shock Surprise

Gov. Arnold Schwarzenegger on Tuesday signed an executive order freezing state hiring and halting nonessential service contracts -- a move he said could save the cash-strapped state $100 million by June 30.

Schwarzenegger issued the order on the heels of a $2 billion midyear budget reduction to deal with the state's projected $14.5 billion deficit. The governor also urged the Legislature to immediately begin working on more cuts for the 2008-09 fiscal year, which begins July 1. Story.

Understand $100 million is nothing. It will probably cost more to institute a hiring freeze than the $100m projected savings. The implosion stays on schedule.

Monday, February 18, 2008

K-Mart Just Walks Away

Don't you just love it when an idea becomes so ingrained that everyone starts thinking the same way?

Kmart's closing leaves south Oxnard no comparable store

Sears Holdings Inc., Kmart's parent company, announced two weeks ago it was permanently closing the store at Channel Islands Boulevard and Ventura Road.

The store had closed for three days after a Jan. 22 rainstorm caused part of the roof to collapse. It reopened for a day and a half, then closed again after company officials determined it was "inoperable."

A Sears spokeswoman cited the rain damage and a decision not to renew a property lease that expired Jan. 31 as the reasons for shutting down the store.

Next year, Home Depot plans to raze the 104,000-square-foot Kmart, its 9,300-square-foot garden center and an adjoining 16,000-square-foot strip mall.

Home Depot is proposing to build a 106,000-square-foot store and a nearly 35,000-square-foot garden center, plus 604 parking spaces. An environmental impact report on the project is being prepared by the city.
This is really more of an urban planning failure than anything. Read the quotes from people that say it is easier to drive the 10 miles to camarillo than the 3 miles to the North Oxnard stores.

Sunday, February 17, 2008

OWC Big Time

Pure marketing and financial genius. If I had a spare house or twelve lying around I'd be doing the same thing. Enjoy a master practicing their craft.

The agent page.

Custom Terra Bella single story home on one acre. Grand in scale and beauty. The entrance greets you and your guests with a welcoming and warm feeling. Recently installed walkway,walls,pilasters,lights,pillars, decorative stone and a water fountain. Interior has been painted, travertine floors have been added in the entry, and other rooms. New Bathroom cabinets,sinks and faucets have been recently added. Kitchen cabinets have been refinished. All the appliances stove, microwave, oven have been replaced. Fabulous kitchen with center island and separate breakfast area, with view of pool and yard. All the carpeting has been replaced. Large patio area, with pool/spa, Bar-B-Q area and fire pit with seating. The Guesthouse has a private entry and features full kitchen, great room, bedroom and bathroom. Tri-level yard has room for tennis court or horses.

$1,545,000. So far so good? Now the bait: "Owner will carry 90% for 3 years at 5.5% Interest Only."

Inspired! Think about it. As the seller you get $150,000 upfront and $7700/month for 3 years at the end of which you get the house back or another $1.4m. Win-win as is oft heard on these pages. Think deeper and you realize what is being described is a savvy homeowner making a LEAP investment on the future value of their asset. But that's not all. the terms are, to say the least, extremely generous on the front end for the seller. What a great money to make on the way down.

Trail of Tears and Anger

Put down your coffee for this one. Take your blood pressure pills and get comfortable. We have a story to tell.

Declining values, defaults, foreclosures catch many local residents by surprise

A crisis hits home

By Scott Hadly
Sunday, February 17, 2008

Sitting in his bare kitchen surrounded by boxes of financial records, John Bailey looked as if he couldn't believe what was in front of him.

"I never thought this would happen to me," Bailey said last month as he looked at the stack of paper that told the story of how he lost his home.

The 74 year-old, who wears his red plaid shirt buttoned to the neck, is one of the 1,500 Ventura County homeowners whom lenders foreclosed on last year as the housing market crumbled under the weight of failing subprime loans.

On the top of Bailey's stack was a letter from the bank, letting him know that his home had been auctioned off, and he had a few weeks to clear out.

It was a depressing end to a monthslong fight for Bailey, who conceded he was out of options.

He and his wife, from whom he is now separated, had refinanced their Camarillo Springs home four times over six years as its value steadily climbed.

Refinanced four times in six years.

Each time, the couple pulled out a little money to fix up the place and to supplement their variable income.

Living off the equity extraction.

But when they tried to take out money again in early 2007, they discovered that the value of their home had plummeted.

Tried to refinance a FIFTH time in seven years. Aged 73 at the time.

The home was worth less than what they owed, said Bailey, who still works installing fiber optics in homes and businesses. They soon got behind on making payments and started to get notices that they were falling into default.

Got behind in mortgage payments that were lower than what he was looking to take on.

Bailey spent several months trying to work things out with the bank but failed. In the middle of negotiations on a "work-out" plan, the bank — without notifying him — auctioned off the property, according to Bailey. He found out about it on Dec. 4, a few days after the sale.

More than 9 months of delinquency and he thought he was in the middle of negotiations.

There's no government program he can turn to, and no more last-minute ideas or negotiations, Bailey said, just the prospect that he will never retire and never own a home again.

"I've been through ups and downs before, but I thought we'd make it through this one," said Bailey, who has dark bags under his blue eyes. "Forty-three years, and we never missed a mortgage payment on the various homes we owned. I didn't think it would turn out like this."

The correction

For anyone caught up in it, the mortgage crisis hit less like a market "correction" and more like a series of little roadside bombs that keep popping off, peppering neighborhoods with swaths of collateral damage.

It harmed poorer communities worse than others, with Oxnard taking the biggest hit in Ventura County.

Not true. For but one instance Oxnard is not the poorest community in Ventura County. The places with the most urbanism and the places with the most growth are taking the biggest hits and earlier. Notice as the article continues the frequent implication that these are almost historical events of 2007 and not an ongoing accelerating problem.

The correction also did damage to parts of Camarillo, Thousand Oaks, Simi Valley, Fillmore, Santa Paula and Ventura.

About 1,500 Ventura County homeowners were foreclosed on in 2007, a 90 percent increase over the previous year, according to DataQuick, the La Jolla-based real estate information company.

Ventura County ranked 31st for foreclosure activity out of the top 100 metro areas in the nation, according to statistics released last week by RealtyTrac. The Irvine-based company comes up with the ranking by comparing the number of homes in an area with the number of foreclosure filings, which include notices of default, auction sales or bank repossessions.

Ventura County is not a Metro Area. The term is Oxnard-Thousand Oaks-Ventura, CA (MSA) which does not include Moorpark, Simi, Santa Paula, Ojai and sundry.

Cities in California, Ohio and Florida dominated the list, with Detroit at the top followed by Stockton and then Las Vegas, according to RealtyTrac.

Although foreclosed homes make up less than 1 percent of the 243,000 county households, the numbers only tell part of the story.

Almost all who own homes here have felt the downturn in some way. Whether they were part of the more than 5,000 homeowners in default on their payments last year, or simply homeowners who watched the value of their houses — probably their biggest asset — plummet.

The median sales price of new and existing homes and condominiums in Ventura County dropped from a high of $630,000 in 2005 to $525,000 at the end of 2007. The median is the midpoint, where half the homes sell for more and half for less.

N.B. Nearly half of that decline has been in the last 6 months. The decline is accelerating.

Some estimate prices won't hit bottom for two more years. That's not good news for thousands who will see the value of their homes drop below what they paid for them.

Two more years of decline would encompass tens of thousands of homes underwater.

According to data compiled by The Star, the total market value of homes foreclosed on in Ventura County during 2007 totaled almost $750 million.

The Center for Responsible Lending, a nonprofit based in Washington, D.C., projects that foreclosures will, over the next year or so, continue to push home values down by an estimated $6,300 per house. The group estimates that in Ventura County foreclosures will eat away about $730 million in property values.

Talk about bad reporting. Foreclosures do depress local property values but they are not what is responsible for the other 90% of observed declines.

The group projects that nationally the amount of wealth that will be lost because of the spillover from foreclosures on subprime loans made in 2005 and 2006 will be more than $200 billion.

Not subprime. The MSM is so 2007. It only started in subprime. this is like saying the crisi on the titanic is contained to the bow.

It goes beyond property values, with the downturn slamming mortgage companies, banks, Realtors and workers in the building trades.

Assessing the damage

Economists differ on what effect the market correction will have on the overall economy.

Ventura County has not been hit as hard by the mortgage crisis as places like San Bernardino, San Joaquin and Riverside counties, according to Mark Schniepp, executive director of the California Economic Forecast in Goleta.

Ahem, hundreds of Countrywide layoffs? Further down in the story they contradict themselves on this very point. Again the MSM is mixing issues. It is like the "mortgage crisis" is the cause and result all in one. If only the mortgage industry could get back to 2005 everything else would be fine. Not.

Barring massive layoffs, terrorist attacks or some other kind of unforeseen shock to the local economy, "I think we'll weather the storm," Schniepp said.

Bill Watkins, executive director of UC Santa Barbara Economic Forecast Project, agreed. Economic indicators are good, said Watkins, who is more worried about how layoffs at Amgen Inc. and Countrywide Financial Corp. might hurt the area.

Both economists said efforts by lenders and President Bush to encourage banks to work with borrowers could also help some vulnerable homeowners. Over the next year or so, as many as 2 million homeowners with subprime adjustable-rate mortgages will see their rates reset higher, according to federal figures. So far, the industry has renegotiated the terms on about 200,000 of those loans.

No, the blogs have already shown that number to be a lie.

"I see the challenge we have is the number of resets," said Bob Davis, branch manager of First Mortgage Corp. in Ventura.

Right now, Davis said, he thinks there isn't enough incentive for lenders to work with borrowers. He sees the work so far as "a drop in the bucket."

"Basically, I'm screwed," said one Camarillo small-business owner facing a possible foreclosure. "Everything they're proposing in the last 30 to 60 days won't help us at all."

The man, who asked that his name not be used, said he and his wife used the equity in their home of more than 40 years to help cover mounting medical bills for their family. It worked until the market dropped last year.

The best part about a blog is calling bullshit when you smell it. There's a reason people like this request anonymity and it rarely has anything to do with medical confidentiality.

"There are needs, and there are wants," the man said. "For some people, they refinanced because they wanted the new car or the 34-inch plasma TV. We don't have the new car or any of that stuff. We took out equity to pay for needs."

Apparently owning a home in the face of mounting living and medical expenses was considered a need as well.

It's hard to ignore that the past year was pretty bad for many homeowners. All indications are that this year will be even worse as a big chunk of adjustable-rate mortgages in the county reset to higher monthly payments.

In some neighborhoods, as many as 40 percent of the loans taken out in 2006 were subprime adjustable-rate mortgages, according to federal Home Mortgage Disclosure Act data compiled by The Star. The monthly payments on many of those adjustable-rate loans are expected to jump by 30 to 40 percent this year.

EN readers are directed to look at the really spiffy interactive maps for context when the Star gets around to fixing them. Without knowledge of the area it may seem confusing. Suffice that the really high concentrations of bad lending are in very recent high density construction. Static picture here.

It means more homeowners likely will be stretched to the limit to pay their monthly mortgages, leading to possible foreclosure.

Trying to stay afloat

"If we can't sell, we'll just walk away," said Maria Ambriz, who with her husband, Jack, has watched the monthly payments on the Camarillo home they bought in the spring of 2006 soar from $2,500 to $4,700. They're spending about 85 percent of their monthly income just to cover the payments.

Let's do the math. $4700 is 85% of $5,500/mo. We'll be kind and assume take home not gross. That means if they didn't lie on their loan they would have qualified for a $250,000 mortgage not the $540,000 mortgage debt they appear to have.

The couple said they didn't understand the rate increase that came with their adjustable-rate mortgage loan.

While the couple said they are partly to blame, they think their Realtor and mortgage broker should share some responsibility.

"No one ever explained that to us; they sort of smoothed things over and said we could do it," Ambriz said.

A friend of hers who cleans houses is facing similar problems after being coaxed into buying a $400,000 home.

"It makes no sense that she got a loan, and now she's like $30,000 in debt because she was using a credit card to try and cover her payments," said Ambriz, 55.

In the case of the Ambrizes, they thought they'd quickly be able to refinance the home as its value increased, but it didn't happen. The couple cannot refinance because the value of the home dropped, and they now owe more than it's worth.

Although they haven't fallen behind in their payments, Maria and her husband, a 50-year-old retired Marine gunnery sergeant, are each working two full-time jobs. They both work night and day.

Four full time jobs plus military retirement to bring home $100k/yr? And they bought in Camarillo? Yes, a condo.

The silver lining is that their home is so little that they pay almost nothing for their utilities, said Jack Ambriz, who works as a security guard and for a company that makes computer chips for cell phones.

"We don't see each other," said Maria, who works at a pharmacy and as a customer service manager at Big Lots. "We have so much stress."

Trying to keep up with their mortgage each month has left the couple sleepless and tense. They've both lost an unhealthy amount of weight. In December, everything reached a breaking point.

"Finally, I started crying and said, We can't do this anymore,'" said Maria, who sold most of her jewelry to keep up with her rising mortgage payments.

Their options now are limited.

If they continue to make their interest-only monthly payments, they'll owe even more on the home in a year, and its value will likely have dropped lower than it is now. They're trying to do a "short sale," selling the home they bought for $610,000 for $399,000. Of course, they would lose their $73,000 down payment and may still owe money on the house, but they would walk away with their credit intact.

The worm turns. The $4700 is not just an ARM but an Option ARM.

"We both have cried over this," said Maria. "I'm crying right now because I don't want to lose the house. We love to work hard but not like this. There's nothing else to do. I say to my husband, Don't worry honey, we'll buy another house some day.'"

Last week, they got an offer for $405,000 on the home. While they want to sell, and their Realtor is confident the deal will work out, the bank ultimately has to approve the transaction.

In some Ventura County communities, more than half the properties for sale are either bank-owned or "short sales," homes priced for less than what the owner paid.

That means opportunity for some people.

With two kids and a relative all squeezed into their 900-square-foot Thousand Oaks home, Laurence and Kaylene Jacobson longed to move up.

But prices in Thousand Oaks, where median home values peaked at $690,000 in late 2006, were beyond what they could afford.

When prices seemed to plateau and drop a little, they saw their chance and snapped up a bank-owned home on Teasdale Street for $521,000. It had sold in 2005 for almost $700,000.

They thought they'd timed everything right, but almost immediately Laurence was laid off from Amgen.

"That was like a blow to the solar plexus," said Kaylene, who is 38.

What was it the economist said earlier in the piece? Barring massive layoffs, terrorist attacks or some other kind of unforeseen shock to the local economy, "I think we'll weather the storm," Schniepp said.

She later collected her thoughts and chalked up the change to "God's plan" for her family. Laurence, 35, quickly switched gears and ramped up a computer consulting business he had nurtured out of his home.

The Jacobsons — the couple have a daughter Rebekah, 4, and a son, Nate, 7 — suddenly found themselves juggling a mortgage on their old home, one on their new one and an equity line of credit.

Despite the stress, the couple said, they have things under control.

"I think people got crazy there for a while, and a lot of people got into loans without really understanding what it means," she said. "We know exactly what we're doing."

That's why you are paying two mortgages?

Critical observer

John Kaspar is not as big a risk-taker. Ventura County's high-priced market has kept him on the sidelines. A manager at a building supply company in Camarillo, Kaspar is hesitant to leap in and buy.

Married with three children, Kaspar watched prices even in middle-class parts of Camarillo nudge up past $540,000 two years ago when he began looking.

By traditional lending standards, a family would have to earn $150,000 a year to afford a home in the range of $511,000 to $612,000, according to some estimates.

"We prequalified for $500,000, but there was no way I was going to do that," he said.

Kaspar didn't want to overextend his family. He's seen booms and busts before. He felt the "bubble was about to pop."

But it has been difficult to sit and watch.

"I have a friend who refied' five times and mostly for silly things," he said.

Now that the market's crashing, Kaspar is not sure if it's fair that people who took big risks and their lenders — some of which were "absolutely predatory" — should get government help.

I do. So do we all.

Friday, February 15, 2008

Muni Bonds Fail

Bloomberg is covering the muni bond market seizure. Here is someone who is shocked, stunned and surprised by the recent turn of events:
``The problem with most auction bonds isn't the bonds' credit quality or default risk,'' said Joseph Fichera, chief executive at Saber Partners, a New York-based financial adviser to local governments. ``The problem is that there isn't enough demand for the bonds because some issuers gave monopolies on the distribution to a few banks.''

Truth is that the bonds are selling just with repricing to reflect the buyers perception of risk. For instance:
a $100 million Port Authority of New York & New Jersey bond reset at 20 percent, up from 4.3 percent a week earlier. The rise in the port authority's rate increased interest costs on the securities by $305,278 this week alone.

This is what happens when credit contracts. Everyone pays. And lets face it there just isn't as much faith in our government when it comes to financial credibility anymore.

Lies Pt 2 The Bottom Falls Out

Part two of the article from last week.

The only way people cope with the middle-class meltdown is by falling into debt.

You've probably heard that the average U.S. household carries $9,300 in credit card debt. But that misleading statistic includes the debt of the self-employed and some small businesses. The 2004 Survey of Consumer Finances, which does not include business debt, showed that 54% of households had no credit card debt after paying their monthly bill and that the average household credit card debt was just over $2,300.

Mortgages, which represent 79% of all debt, are the more pressing concern. But even according to the most pessimistic estimates, only 1% to 2% of homeowners will be forced into foreclosure in the next few years. Assets have grown faster than debts for most middle-class families. Median net worth has grown 35% since 1989, according to the Federal Reserve Board, and only 15% of households have debt payments worth more than 40% of their income or are 60 days late on any debt payment.
[end self serving lies]

Again with the cute aggregation/disaggregation dissembling. Compound that with out-of-date statistics and you can make anything look sanguine. Look at this graph courtesy NYTimes:

See the low point? 2004. Read above where they pulled the $2300 credit card number. 2004. And they don't even mention MEW. I mean, look at this poor girl. Her parents can't even afford new jeans.

Thursday, February 14, 2008

Note to REIC

It ain't sick, it's dead. A year ago, maybe even 6 months ago there was a possibility of salvaging the old business/industry. Now we just need to bury the carcass and do something different. There's lots of nice people in the industry. Hard working, ethical and all that. For them I'm sorry but we can't let the others continue to do this. There's a storm coming. Right or wrong millions of people upside down and trapped are going to lash out and the target is going to be the REIC.

DataQuick for Jan 08

Dataquick has put up the LATimes sponsored SoCal home prices by zipcode here.

The numbers are just so wild you have look for yourself. Whole cities with no sales, mature cities with 3-5 sales but prices off 40%. The word is freefall.

Update:there's a local realtor who provides a very detailed breakdown for Camarillo.

Friday, February 08, 2008

Zillow Is Good (for something)

It comes as no surprise to regular readers that I am extremely critical of several aspects of the online real estate business Zillow. At Akubi's request I have set for later today a comprehensive critique but before all the bad how about some good:
Homeowners True Believers: 77% Believe Their Homes Held or Increased Value in 2007
"This survey reveals that despite the data to the contrary, people either aren't paying attention to their housing market or are in denial about their own home's value," said Dr. Stan Humphries, vice president of data & analytics. "This likely reflects the fact that most Americans have not realized home-related losses because they're staying in their homes. Even in declining markets where a greater percentage of new homeowners are underwater on their mortgage, it's important to remember most people are not really affected by declining values unless they absolutely must sell or need to immediately refinance or withdraw equity. This has contributed to the healthy investment intent, particularly in home upgrades, despite the downward trending markets."
Ahhh, the American consumer, bless their wallets.

Wednesday, February 06, 2008

La Plata Redux

Everyone remembers las week's Sunny Side of The Street post where we compared two neighbors looking for a buyer. Turns out the the "nice" 2865 is also for rent. Let's see how renting does as an investment strategy:

Rental $2,900
3 Bed, 3 Bath
2,036 Sq. Ft.

Sold new 05/14/2001: $416,000 We'll go with all the usual assumptions. Mortgage is ~$310,000 which is ~$1800/mo. Taxes are $380. Mello-Roos/HOA guessing a low $250. Call it all in $2500/month. This idea cash flows if they can actually get the $2900 for a house that is also for sale ($749,000). In fact given my conservative estimates I'd bet the expenses on this house are exactly $2900/mo. This is called needs based pricing. Good luck with that.

Monday, February 04, 2008

Invest in San Bernardino

Sold 09/15/2006: $632,500

Jan 2007 est: $682,000
Jan 2008 est: $529,000 -22.4%

Zillow here.
But not to worry, you can rent this beauty for only $3,800.

Smell the desperation.

Sunday, February 03, 2008

Lies Damn Lies and Statistics

Hat tip Wagga.

We all know Fresno housing is located ground zero in the zone of total destruction so a little whistling past the graveyard is almost inevitable but...

A fact and fiction campaign
Five things candidates say about poor middle class that are myths.
By Stephen Rose
02/01/08 18:14:05

The American middle class is fighting for its life -- or at least that's what Lou Dobbs would have you believe. The CNN anchor's rants about "the war on the middle class" are probably the most prominent examples of such economic doom-saying, but he isn't alone.
Democratic presidential candidates pepper their debates with references to the assault; leading liberal thinkers argue that supply-side conservatives captured the Republican Party during the Reagan administration and implemented policies that continue to privilege the super rich today. They tell a compelling tale of middle-class decline. Pity it isn't true.
The middle class is shrinking.

True, fewer people today live in households with incomes between $30,000 and $100,000 (a reasonable definition of "middle class") than in 1979. But the number of people in households that bring in more than $100,000 also rose from 12% to 24%. There was no increase in the percentage of people in households making less than $30,000. So the entire "decline" of the middle class came from people moving up the income ladder. For married couples, median incomes have grown in inflation-adjusted dollars by 25% since 1979.

What a nasty lying bastard. I mean come on does he think all his readers dropped out of grade school? He "mentions" inflation but then makes his point by ignoring it.

An income of $100,000 in 1979 dollars would need $285,710 in 2007 dollars. And then we can see how much the middle class has further fallen by looking at the trend of two income households.

I'll be tearing this jerk a new one a myth at a time over the morning.

mBay the New Bidding War

BusinessWeek has this about something we predicted long ago, buying your own mortgage for pennies on the dollar. my target price was 40¢ but now that appears to be irrelevant. this is the sh¡t that pisses me off. It is in everyone's best interest to have these kinds of transactions as open and transparent as possible. Here previous note holder won't even tell her who to whom they sold her mortgage. Money quote:
Judge Christopher Sontchi of the U.S. Bankruptcy Court in Wilmington, Del., said there was no legal reason why homeowners shouldn't be allowed to participate in bankruptcy auctions at which hedge funds and other big investors buy mortgages for as little as 50 percent of their face value. But he said it isn't his job to look out for the interests of consumers in a bankruptcy case.

Hey judge! Newsflash, it IS your job to get the best price for the assets.

My suggestion: Right of first refusal. Asset sales of debt instruments in good standing are subject to debtor matching the highest bid.