And Realtors wept

American Home Mortgage, one of the largest and most well-known mortgage lenders in the United States of America, just announced the layoffs of 7,000 of it's 7,750 employees. AHM has also stopped accepting mortgage loan applications following a cease and desist order from the states of New York and Connecticut as an investigation into violations of mortgage banking laws at the company goes into overdrive. More will be known as to AHM's business future following hearings August 24th to determine whether the cease and desist order will be permanent and whether AHM can even keep it's lending license going forward.

AHM CEO Michael Stauss:

"It is with great sadness that American Home has had to take this action which involves so many dedicated employees. Unfortunately, the market conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that we have no realistic alternative."

More evidence that the real estate market is slowly, but surely unraveling.

Let's hope the guy behind the curtain comes out with a mattress to ensure that soft landing repeatedly promised by the NAR, that group of oh so in-the-know, trusted advisors.

429 Housing Units For Sale in Lake Forest, CA

According to ZipRealty as of June 28, 2007 there are now 429 inventory units for sales in Lake Forest, CA (Orange County). Not too shabby when you consider we have a population here of approximately 69,000 people (2005 stat).

223 of these 429 units in Lake Forest are single-family home units.

On May 24th OC Prudent Bears reported that Mission Viejo, California, our affluent neighbors to the south of Lake Forest, was now witnessing home inventory of over 1,000 units.

Now OC Prudent Bears shares with us that Newport Beach, Calfifornia has achieved the same notoriety.

Wow! Now just stand back and watch the numbers grow.

But the Realtor told me everyone wants to live here

Think again.

Mr. Esmael Adibi, the Director of Chapman University's Anderson Center for Economic Research, and Mr. James Doti, the president and Donald Bren Distinguished Chair of Business and Economics of Chapman University, both claimed today that over the short-term fewer people will be migrating to Orange County, California.

Why? Here's the article from the Daily Pilot.

Mr. Adibi:

"Orange County is going to be a strong economy no matter what, but there will be fewer people moving in because of high housing prices and unaffordability," said Doti, the president and Donald Bren Distinguished Chair of Business and Economics at Chapman. "But we hope in the coming years, that will subside because of the natural amenities this county offers."Those amenities, Doti said, included the county's landscape, its educational system and its bustling arts scene.

Also, he said, the increased reliance on exports would turn the area into a trading hub."Global trade will be greatest with Asia, Southeast Asia and the trading port for much of that will be Southern California," he said.

A problem for the county, according to Doti and Adibi, was the housing market, which was slowing due to high mortgage rates and a decrease in the population — between the ages of 25 and 49 — that usually bought homes. Adibi said the average Orange County family paid 49.8% of its gross income on mortgage payments last year, a record amount.

While we keep reading how the National Association of Realtors and the California Association of Realtors wish to position themselves and staunch advocates of affordable housing, it's not quite making it happen on the streets of Orange County.

Median home prices in Orange Country rose again in May by 0.8% to $635,000.

I mean, when you think about it, why would realtors want home prices to come down to affordable levels when that would have an adverse affect on their income (6% of the home value sale)? I guess, you'd have to assume then that a home sale at any price, even if it's lower, is better than no sale at all. And a commission check is better than no commission check at all.

OK.

Good to be clear about what's important to realtors - and to what extent they are truly interested in affordable home prices in Orange County.

Denial California-Style

Don't worry, Californians.

California is not in a real estate crisis and doesn't figure to be in one soon.

Mr. Tom Elias of the Daily Breeze (L.A.) asserts that you can hardly go wrong when investing in California real estate. So if you are holding on to that home, or have recently purchased a home in the Golden state at top dollar, you're investment is surely "safe as houses". Indeed, California has experienced it's share of booms in it's history, but rarely are these booms followed by serious busts. Usually the declines are gradual and take many years to reach bottom.

Mr. Elias suggests also that "in-migration" will eventually save California's downward spiral housing market and preserve real estate values. Everyone wants to live here and this feeds the rational exhuberance of California housing demand. Rising tides float all boats. Soon renters earning $75,000 per year will be able to move up the proverbial California housing food chain and afford a home of their own. Though how this phenomanon is theoretically achieved is not precisely explained.

I thought I'd post this article by Mr. Elias to demonstrate the level of denial out there in the state about the California housing market. It is, in a word, quite unbelievable.

Mr. Elias' assertions might hold water if it weren't for some annoying little tidbits of fact facing potential homebuyers in California. The 2006-2007 housing crash, Mr. Elias, is different from previous boom-bust chronologies in California. What we are seeing is home financing for families with median to upper median-level income drying up almost completely. Lending standards are becoming more and more restrictive. While your "in-migration" may very well be increasing slightly each year in California, the incomes of those new residents are unfortunately not increasing proportionately with housing costs in California.

Overbuilt areas and non-overbuilt areas face similar music - that real median incomes in communities like Newport Beach, Long Beach, Irvine, Lake Forest, combined with the California-spend-it-if-you-got-it-lifestyle, simply do not support the magnitude of debt required to leverage a home. Becoming a homedebtor is still possible, but it's not something anyone in there right mind should consider right now. Mr. Elias' article fails to account for the mass emigration of people from the state of California due to housing costs (U.S. Census Bureau and U.S. Department of Finance) being "out of control", among other important reasons.

Even if Mr. Elias' assertion about "in-migration" were true, the notion that this influx of people searching for the good life would contribute to an economic rising tide in the state under which all boats would float, is fantasy. If anything, the result of such a theory would be that demand for rental housing in California would skyrocket to unprecedented proportions in the short run, but homes would remain unaffordable. In the medium to long run, housing values will fall substantially.

An almost perfect storm is brewing in Southern California real estate. Even those that would make the most from selling and financing homes, and who would walk over dead bodies and lie during the entire trek to preserve that earning potential, know this truth.

If you now own a home in Southern California, then you should be using every recourse to sell the living shit out of it. Drop your drawers on price, incentivise like no tommorrow, just get the f*#$ out!

If you are thinking about buying a home right now in Southern California, you should dunk your head in a cold bucket of water and then think again. Now is the worst time ever to purchase a home. Changes in the U.S. economy, the job market, the U.S. dollar, lending standards and price trends are aligning themselves to suggest one thing: Wait.

Redfin CEO Kelman: REIC "Marketing Itself Off A Cliff"

The manifestation of online real estate search engines, sales and buying tools with links to all that the MLS previously afforded real estate consumers - and much more is scaring the shit out of certain individuals who have chosen the profession of home realtor.

Realtors mistakenly view themselves as the most motivated party to sell your home or help you buy a home.

This assumption is incorrect.

They are NOT the most motivated to do either. They are motivated to make sales commissions which are directly proportional to the sale price of a home.

The truth is that home sellers and home buyers are more motivated. And they no longer need realtors in the same way they did before to intermediate on their behalf. If 80% of prospective homeowners are no longer looking at newspaper ads, no longer phoning up Joannie Loves Chachi Realty Group, and prefer to research home information, sales history, prices and neighborhood data online, including crime and school district statistics, then the realtors job and importance suddenly becomes less significant.

Realtors might be tempted to assert that only they "understand your needs" when it comes to buying or selling a home. But those days are over. A computer really can perform the light lifting regarding the research.

So why are realtors necessary? What tasks or duties of the home selling and home buying process make them so indispensable?

Perhaps there are certain duties and legal paperwork items to which realtors have traditionally attended.

Glenn Kelman, CEO of Redfin offers the following in the Ad Age article:

"The most motivated advertiser is the seller and millions of homeowners are proactive now. If people can see a home without an agent, where does that leave the industry? It's kind of marketing itself off a cliff."

Right off a cliff, indeed. Sometimes CEOs like to use the damnedest of metaphors to get their point across.

Underestimating the breadth and depth of the Housing Crash

Slate.com's article about the American "Housing Market Catastrophe-in-the-Making" helps to shine a wider light on multiple economic sectors and businesses that are reporting substantial negative impacts as a result of the housing dive.

Who can now say that no one was really hurt by the housing industry deception, lies and the shameless, incessant pumping by realtors?

The truth is that many industries will be hurt by the housing market crash - and seriously hurt. It is not too difficult to see many American workers (and even illegal immigrant workers) losing their jobs, and then wondering to themselves, after years of growing sales and business growth, how and why could this now happen?

The depth and breadth of the housing crash is likely more profound than anyone first believed.