If you can look past all the “rescue plan” “bailout” buzz there’s another hot topic – short sales. Both the OC Register and The LA Times posted stories on their real estate blogs discussing the state of short sales and their influence on the current local market.
Both outlets take different approaches to the issue and come up with the same results – short sales are the drain on the current market. The abundance of short sales are making the market difficult for buyers to get into it and navigate it as well.
A UCSD professor Ryan Ratcliff gave his firsthand experiences with the foreclosures to the LA Times and they concluded:
As short sales relate to the question of a housing rebound, he [Ratcliffe] concludes, that they “have temporarily hijacked the market mechanism” and that “the near-term course of the housing market will be determined more by the procedural timelines of foreclosures and short sale approvals than any notions of a magic price that will clear existing inventory.”
The OC Register quoted UCLA’s forecast as stating:
A realistic forecast of the bottom of the housing market needs to explicitly acknowledge that short sales have temporarily hijacked the market mechanism: the near-term course of the housing market will be determined more by the procedural timelines of foreclosures and short sale approvals than any notions of a magic price that will clear existing inventory. After our housing mega-bender, we will be suffering inventory indigestion for some time to come.
No matter how you slice it – the short sales are having a huge impact on our market. Until the short sale issue is resolved we will not see any resolution as far as this “bottom” we are all searching for.
An Orange County investment adviser named Thomas C. Scott says he has spotted a new trend: cash-strapped retirement-age Baby Boomers moving in with others to save money.
Scott, CEO of Scott Wealth Management and author of the forthcoming “Fasten Your Financial Seatbelt,” says that at the epicenter of the housing collapse, Orange County, “I’m hearing a pattern of stories about people caught short with maxed-out mortgages, big houses that won’t sell, and eroding incomes who are throwing in the towel and sharing homes with others.”
These Boomers counted on home equity to fund their retirements. But too many refinancings and too much risk-taking have wiped many people out.
Boomers are getting squeezed from both ends, he says. “They loaded up on mortgage debt during the good times, and calculated their retirement assets based on inflated home prices. Now all that paper wealth is gone, they’re stuck with white elephants, and the end of their peak earning years is in sight.”
Scott says the housing bust could be lengthy, and painful. “The collapse of the 1980s took seven years to work itself out. In the next seven years, some 30 million boomers will reach retirement, many unprepared.”
Seven years may seem like a long time, but it’s a mere blip compared to the prediction one expert came out with this week.Jeffrey Gundlach, chief investment officer at Los Angeles-based mutual-fund company TCW Group Inc., said in a conference call that the housing slump is getting worse.
Gundlach based his assessment on a belief that housing prices still face several more years of decline, a protracted slump, he said, not seen since the Great Depression. Moreover, Gundlach said it’s possible that home prices could be sluggish until 2022.
“If it’s like the Depression experience — and it sure is shaping up that way — it could take several years. Maybe we won’t see a bottom in home prices until 2014,” he said.
There are worse things than sharing a house with someone in Orange County, but that’s not the way anyone envisions their retirement. If you’re not of retirement age, take a lesson from your elders and learn how to save. Pay off your debt as soon as possible and start saving every spare cent you have. Live frugally and use credit sparingly and preferably not at all. Educate yourself about personal finance. And if you buy a house, make sure it’s one you can afford: Experts say it should cost no more than three times your annual income.
I don’t know about you but I’m pretty tired of the “bail out” blare out. It seems that the bail out, err, I mean, rescue plan, continues to move forward, but with very little support. This bandaid seems to only be effective to stop some of the bleeding, but there will be quite a scar for years to come if we add an additional $700 billion of debt to the current crisis.
But the real question is, what do OC’ers think of all of this?
Jon Lansner’s blog had a survey asking OC’ers what they thought about the ability of the President’s team to fix the mess. The results:
The OC Metblogs (our local “to the left” e-publication) implores everyone, regardless of party line, to tell their Congress person about their questions regarding the proposed plan.
They note,
No matter what your political persuasion, our children and our grandchildren will be paying for risks that private companies chose to make. Nobody put a gun to their head and forced them to bundle shaky mortgage loans along with regular stocks and investments, or even to offer these loans to people who obviously did not qualify. And a lot of people got rich off of those. But now the taxpayers are expected to help them out.
It seems that Americans aren’t very confident about the plan that is trying to be pushed through – regardless of party affiliation. Of course, both candidates have given their disapproval for at least parts of the plan. The hardest part about this is that no one likes the plan, but no one can come up with anything better.
What are your thoughts and criticisms of the “rescue plan”? Will it work? Is it worth the risk? What are the biggest problems?
Who can buy a Santa Ana house for $249,500 and sell it 20 days later for $575,000?
Meet Vijay and Supriti Soni, a husband-wife money-making team of Corona del Mar. A Corona del Mar couple in the real estate flipping busines. They’re track record is astounding, averaging a 48% gain in 92 days.
Their scheme? Why it’s simple, of course. By a bank foreclosure for cheap. Say you’re flipping it, and then sell it for gobs more in a mere 30 – 90 days. Oh, need a buyer willing to go along with this scheme? No problem, just pick one of your many nearby relatives (that happen to have alternate names) or what about the family gardener? Oh, wait, you also need a down payment? No problem, when your family owns an escrow company. Just increase the sales price and say the buyer is putting 10-20% down. You won’t have to actually show the money, because your escrow company is working with you. Oh, shoot, you also need a bank that you can trick? Why, no problem, WaMu is ready and willing to help out (they’ll even use their “preferred” appraisers to make sure the loan goes through).
Don’t believe it? Get the full story at the OC Register (”WaMu loaned millions to O.C. home flippers with fraud history” by John Gittelsohn). It’s along article, but the schemes these people pulled just get better and better. Here’s an outline, per the Register, of their property “flips”:
Jul 31, 2007: Suniti Shah (Lohia’s daughter, Supriti’s sister) buys at $443,181
Nov 21, 2007: Sells to Colomba Cortez ( $558,000 WaMu mortgage)
According to the article:
“Records show that Washington Mutual, America’s largest savings and loan and one of its most precariously perched lending institutions, financed at least 43 mortgages worth $24.5 million on properties bought and sold by members of the Soni family since early 2007.
Of the 22 homes sold in that period, at least six have become problems for Washington Mutual: Four were foreclosed, one received a notice of default and another was listed for sale at a $260,000 loss. Total value of WaMu’s mortgages on the troubled properties: $2.7 million.”
So, what was WaMu thinking? Well, just look at today’s state of WaMu and it doesn’t take much to see that they weren’t thinking… logically, anyway. They were after money. Even in a failing market, they were still willing to throw out huge mortgages at properties that have no business being over $300k. In their minds, it was okay, there was a 10-20% deposit (which probably never existed). It’s just like Wells Fargo in the other Santa Ana case I wrote about in July (”Who’s got the lower IQ? Wells Fargo or these owners?“).
However, in WaMu’s case, what takes it from just bad business practices to fraud by WaMu is the fact that they pressured their contracted appraiser company to only use a group of appraisers that give the right, top dollar appraisal. The appraisal company folded to WaMu’s pressure, since WaMu was their biggest customer. In a way, it’s like good old karma… if you’re going to have shady practices, then you deserve shady customers.
The Sonis have a criminal record already. They were convicted of fraud in 2003 , but that didn’t stop their profitable ways. Add to these fraudulent flips identity theft where they got furniture, loan proceeds and commissions, a Mercedes Benz, and plain hard cash.
Note: The following numbers are from Redfin’s Costa Mesa “Overview of Homes for Sale” page. This page includes the Costa Mesa inventory and pricing numbers as well as the associated charts and graphs. So if you would like to see the charts and graphs, click on the above mentioned overview page link. Also, note that the numbers with an asterisk (*) are based on homes sold or taken off the market in last 90 days.
Following are the 2008 detached home statistics for Costa Mesa.
Whereas yesterday’s look at the September numbers for Costa Mesa condos told us that housing prices in Costa Mesa are still declining, the detached Costa Mesa stats are telling a different story. According to the following numbers, the prices for detached homes in Costa Mesa leveled off this month. This could mean that sellers of detached Costa Mesa homes are now able to sell their homes at a sustained pricing level; however, other scenarios are possible. So, as always, I’ll report back next month with updated Costa Mesa housing numbers. We’ll see then if it is possible to determine which scenario is developing for the detached housing market in Costa Mesa.
Median List Sales Price:
September 17, 2008: $666K
August 21, 2008: $667K
Median Sold Price*:
September 17, 2008: $540K
August 21, 2008: $540K
Median List Price Per Square Foot:
September 17, 2008: $365
August 21, 2008: $377
Median Sold Price/Per Square Foot*:
September 17, 2008: $339
August 21, 2008: $333
Median Days on Market*:
September 17, 2008: 87.5
August 21, 2008: 88
Number of Homes on the Market (Inventory):
September 17, 2008: 318
(13 are bank- and MLS-foreclosures; 3 are FSBO)
August 21, 2008: 340
(13 are bank- and MLS-foreclosures; 6 are FSBO)
% Homes with Price Reductions/Median # of Reductions/Median % Reduction*:
Note: The Altos Market Action Index shows the balance between potential buyers and sellers, in other words,
the balance between supply and demand. Above 30 is a sellers’ market; below 30 is a buyers’ market. Also note that Altos numbers are for detached homes only (condos are not included) and that the Altos median sales price and median price per square foot is for the list price not the sold price.
Also,according to DQ News in August 2008, the number of sales of condo and detached Costa Mesa homes combined was 48. And, according to DQNews, the August median sales price in Costa Mesa was $522,500, down 22.01% from the August 2007 price of $670,000.
And, finally, Refin’s median numbers for all Costa Mesa homes sold in last 90 days are $466K and $308 per square foot. The number of Costa Mesa homes (condo and detached) currently on the market is 485.
The following numbers are from Redfin’s Costa Mesa “Overview of Homes for Sale” webpage. This page includes the Costa Mesa inventory and pricing numbers as well as the associated charts and graphs. So if you would like to see the charts and graphs, click on the link for the above mentioned overview page. Also, note that the numbers with an asterisk (*) are based on homes sold or taken off the market in last 90 days.
Following are the Costa Mesa condo housing numbers for September 2008. With the overall median sold price and the median price per square foot considerably lower than last month, the Costa Mesa housing numbers tell the same story that they have been telling for some months now: In a nutshell, housing prices are still declining in Costa Mesa. Also note that the asking (list) price and the sold price are still not in alignment.
Tomorrow we’ll take a look at the September stats for detached homes in Costa Mesa. Preview: a different story than what the Costa Mesa condo stats tell us.
Median List Price:
September 17, 2008: $360K
August 21, 2008: $380K
Median Sold Price for*:
September 17, 2008: $200K
August 21, 2008*: $262K
Median List Price/SF:
September 17, 2008: $299
August 21, 2008: $297
Median Sold Price/SF*:
September 17, 2008: $200
August 21, 2008: $217
Median Days on Redfin*:
September 17, 2008: 85
August 21, 2008: 85
Total Number of Homes on the Market:
September 17, 2008: 164 (10 are bank- and MLS-listed foreclosures; 3 are for sale by owner.)
August 21, 2008: 189 (13 are bank- and MLS-listed foreclosures)
% Homes with Price Reductions/Median Number of Reductions/Median Total % Reduction*:
September 17, 2008: 49.1%/2/11.6%
August 21, 2008: 46.1%/2/10,5%
*Based on homes sold or taken off market in the last 90 days.
For more information on the September Costa Mesa housing numbers, see tomorrow’s post “The Costa Mesa Market Report: Detached Home Stats, September 2008.”
Lehman Brothers in bankruptcy, Fannie and Freddie in federal conservatorship, and Bear Stearns bailed out. These are all signs that the economy is hurting and many businesses are having difficulty. One more sign of difficult times is a rising unemployment rate (currently reported as 5.8% in Orange County by the Employment Development Department ). However, some businesses are striving. And the pool cleaning business seems to be one of these.
This seems counterintuitive. Having your pool cleaned would seem to be one of the first services that homeowners would give up in financially difficult times. But the experience of one pool service owner that I talked to recently reveals that this business is booming. His observation is that instead of going out for entertainment or taking an out-of-town vacation, homeowners are entertaining and taking vacationing at home. In fact, a new term has been coined to describe this: staycation.
These staycations might involve entertaining at home by the pool (if you have one) instead of going out, as well as taking vacations by the pool instead of going out of town. Therefore, homeowners are willing to pay a bit more to keep their pools in top condition. In any case, this pool service business owner said that his job has been so busy lately that he needed a break, so he took a staycation of his own.
If we are looking for silver linings in this storm cloud we are now under, more business for some local enterprises from local residents might be a candidate.
Note: The thought just occurred to me to ask if anyone else has noticed any other business that are doing particularly well during this business downturn. I am mostly interested in those jobs that, like the pool service business, would seem unlikely candidates. SW 9-20-08
Home values continue to slip. This week we received more news indicating that the median value of homes continues to fall. But for someone buying into the market right now, this may not feel like all bad news. The Redfin chart shows a really interesting trend. It seems that the asking prices have leveled out a bit, but what the homes are actually selling for continues to plummet.
So what does constitute for a good Laguna Hills BFYB? Check out these listings to see the best prices per square foot in the city. And it seems there’s one for every price range!
26701 Quail Crk #245
1 bed / 1 bath / 700 Sq Ft
Listed For: $99,900
$/ Sq Ft: $143
Save the date for the CHOC 37 th Annual Home Tour and Boutique, an event that has sold out in the last two years. The tour takes you into three gorgeous North Tustin homes. This year’s tour will be held on Friday, November 21, 2008. The tour is from 10 a.m. to 6 p.m., while the boutique is open 9 a.m. to 6 p.m. The event starts at the Tustin Hills Racquet Club. Tickets sold in advance are $40 (includes box lunch). Tickets sold on the day of event (if there are any left) are $40 (no lunch).
According to its website, Children’s Hospital of Orange County (CHOC) provides “the highest quality medical care to children. Our regional health system includes a state-of-the-art 232 bed main hospital facility in the City of Orange, a hospital-within-a-hospital in Mission Viejo, and five community clinics — plus over 100 additional programs and services. With admissions growing by 91% over the last ten years, CHOC and CHOC at Mission combined rank as the 16th busiest children’s hospital in the country.”
The OC Register interviewed one of the homeowners showing her home on the CHOC tour. Jo-Anne Newton grew up in the Cowan Heights, in a home that was on the CHOC tour. Now, it’s her turn. According to the article, the CHOC tour planners spotted her home when they came to look at another house down the street. They then invited her to be on the tour. Here’s the Q&A with Newton from the Register’s article:
Q:What do you feel is special about your house?
A: The open floor plan. It’s so open, all the windows. There’s one 90-degree angle in the whole house.
Q:What is your favorite thing about the house?
A: Just the openness. It brings the outside in. If you sit here, it’s kind of like being in a tree house. It almost feels like you’re a part of it. I like space and have four kids, so there’s plenty of room for them to run and play. There’s a half-basketball court and pool.
Q:What are your influences in decorating the interior?
A: I think it’s a very eclectic mix of things, traditional, English, antiques, mixed with African and Asian pieces and modern pieces. I don’t plan it out. It’s all by feel. That’s just fun.
Q:What has been the most challenging?
A: It required maintenance because it’s a wood house. The house was built in 1973. We’ve lived here for 12 years. You just have to take care of it. When we moved in, there was no landscaping. It was a big dirt lot. We replaced the deck when we moved in, and we plan to expand the deck and build an outdoor kitchen because we spend so much time outside and we have enough space. I have it all drawn out in my mind already. We added a second story and workout room and guest room.
Q:What style is the house?
A: People refer to it as Frank Lloyd Wright, prairie-style.
Q:What does it mean to you to be on the CHOC tour?
A: Gosh, I think it’s very flattering to be asked. That someone would think our home is interesting, that people want to see it.
Q:Do you have a favorite room?
A: The master bedroom and kitchen. The kitchen because it’s so family-oriented and a good cooking kitchen, and I like to cook. The master bedroom has east-facing windows so I wake up to the sun and the kids love to hang out in there. Everybody’s in there. It’s a big room and there are comfortable overstuffed chairs. The kids lay over the chairs. The kids will hang out there together. They go there to do reading assignments. We focus on eating family meals so there’s no TV in the kitchen, so it’s sitting at the kitchen table together. We wait to eat when everyone gets home.
August’s DataQuick home-sales numbers included a rather shocking decline in median price. For the six-county Southern California region, that price stands at $330,000, down 34% from last August and the lowest since November 2003.
There was some good news: Sales were up for the second straight month. But the sales were overwhelmingly of lower-priced properties, as the median sales price indicates. DataQuick noted that it was still the third-lowest August sales number since it began keeping records in 1988. Furthermore, nearly half of all sales in Southern California were foreclosure resales — lender-owned homes sold to individuals.
In Orange County, the median fell to $440,000, off 32% since last August, when the median stood at $642,250. Sales, however, were up 18% over last August. Among Southern California counties, Orange County had the lowest rate of foreclosure resales — 33.4%.
The numbers — higher sales coupled with plummeting medians — show that home-buyers are seeking bargains. In Los Angeles County, the only county where sales fell year over year — by 7.7% — the median still dropped 31%, to $380,000. In San Bernardino County, the median was down to $215,000, a shocking 40% dive from a year ago. The high cost of “jumbo” mortgages — more than $417,000 — hasn’t helped.
The yearlong plunge in the Southland median sales price reflects three things: Depreciation, a high concentration of sales made after or under the threat of foreclosure (mainly in inland markets), and a dramatic decline in homes financed with larger, so-called jumbo mortgages. Until recently such mortgages were defined as over $417,000 and were common in pricier coastal markets.
Before the credit crunch hit just over a year ago, nearly 40 percent of Southland sales were financed with loans over $417,000, compared with 15.6 percent of sales last month.
Meanwhile, the turmoil in the world’s financial markets won’t help the housing market, reports the L.A. Times:
Whereas interest rates on cars loans, credit cards and some home mortgages are actually down from a year ago, lending standards have grown so tight that only people with the highest credit scores can get the loans. In some cases, even they have been turned down.
Scott Leonard, a Redondo Beach financial planner, said that those who are in trouble now are not likely to qualify for loans to refinance their homes or consolidate their bills — and won’t be able to until credit loosens up, rates drop further and prices begin to rise.”If you’re in a bad situation, I’d be surprised if you would be able to refinance [a home mortgage] now anyway,” he said.And many are in bad situations.
The real estate website Zillow.com estimates 71% of Los Angeles-area homes purchased in 2006 and 56% of homes bought in 2007 are now worth less than their mortgage amounts.
If you can look past all the “rescue plan” “bailout” buzz there’s another hot topic – short sales. Both the OC Register and The LA Times posted stories on their real estate blogs discussing the state of short sales and their influence on the current local market.
Home values continue to slip. This week we received more news indicating that the median value of homes continues to fall. But for someone buying into the market right now, this may not feel like all bad news. The 
