June 11, 2008

Weekly News Round-Up

Gotta love this: a blog called The Mortgage Lender Implode-o-Meter, featuring Mr. Mortgage. Interesting reading, although I am not sure I agree that Northern California is the epicenter of the subprime implosion. What about Las Vegas, what about Southern California, how about Florida? I mean I know we are #1 in a lot of things, but I’d hate to think of this as our new crown. In all fairness, he does say that many areas have held up well. In a separate post he gives 8 reasons why the housing crisis in our fair state is probably worse than we think, which includes the high inventory, the “catastrophic” fall in median home price, and one of the favorite comments on this blog, the buy vs. rent ratio. And we haven’t reached the bottom, which we all knew, but he observes that what may be “most frightening is that CA has not seen a Spring/Summer selling season without ‘exotic/affordable’ loan programs in years. 2008 is the first. We are in uncharted territory.” Nothing like being in the forefront of a new movement!

But if you think we’ve hit the bottom when it comes to mortgage lending and the persistent crisis, you may need to think again, according to Business Week. The next wave of ARMs are scheduled to reset in April 2009, according to their article “The Next Real Estate Crisis.” Lucky us. “Among the states expected to be worst-hit is already battered California. Today, outstanding option ARM loans in the U.S. total about $500 billion, about 60% of which were sold to California homeowners, according to Credit Suisse. Option ARMs were especially popular in the state, where they were heavily marketed during the boom…” Does the fun never stop?

There does seem to be a silver lining, albeit small and in another part of the country, but Mlive.com reports that the “Foreclosure Glut Helps Habitat for Humanity in Michigan.” While Habitat for Humanity typically builds new homes, along with their recipients, this crisis is allowing them to alter their strategy and not only take advantage of low prices, but to rehab properties that have sat idle, which in turn helps neighborhoods. Maybe this is an opportunity for Habitat or other similar organization to do the same in our area?

A story in the Daily Business Review makes me question the competence of some lenders, who compound the foreclosure problem by claiming they cannot find the borrower. Down in Florida, a Miami-Dade Circuit judge is appointing guardians ad litem to help clear foreclosure cases. Lenders claim they cannot find their mortgagees, and have publicly stated to the judge they have no record of driver’s licenses, employer name, etc. Seems to me I remember having to supply everything but my cat’s birthday when I applied for loans. And all financial documents that require notary need a picture ID. And in this day and age, with Google and other search engines, is it really that hard? Apparently so.

McMansions and McMortgages are on the way out the door. Builders are finally getting savvy to what the new buyer wants and can afford. Leading builder, KB Homes, is adjusting its strategy, shrinking homes and amenities in an ever-shrinking financial market. CNN money did an in-depth and lengthy article on “Downsizing the American Home,” that made for good reading. While the majority of the housing in our area is not newly built, there are lessons to be learned here.

Bonus Giggle of the Day: Go check out this post on my favorite non-local housing blog, Santa Barbara Housing Bubble. I have mentioned this blog before because I love the creativity and writing style. I aspire to write more like this.