Greenacres: The Place to Be?

In 2005 life was obviously very good in Orange County, California. There were so many things you could see, do and achieve. It never really mattered how much money you actually earned from your employment or what you're disposable income looked like after all expenses and debt payments. All that mattered during this glorious slice of time was how much you could borrow. Banks throughout the land enabled all Americans - both rich and not so rich - to borrow heaps and heaps of dough.

It is shocking to consider the shear amount of money that Californians not only borrowed to buy their primary residence or investment property, which was sometimes $500,000 or even more, but also how much they borrowed on top of all of that in the form of HELOCs (home equity lines of credit) loans, which the consumer could use...well, for almost anything from a set of new kitchen counter tops, to a new Harley-Davidson motorcycle, to a vacation for two in the Azores. It didn't matter what you're net paycheck looked like, or your next paycheck for that matter.
The banks who gave lent the money did not care. So why should anyone have cared?

Here's a single family house in Mission Viejo that was first listed for sale June 20, 2005, a full three months after it was purchased in March 2005 for a whopping $930,000.

What's interesting is how this house was listed and then delisted over and over again in utter futility over a period of 4 years. Why?

Today (June 2010) it is listed once again for sale at $715,000. With a 20% down payment of $143,000, the income requirement to purchase this bad boy is $141,500 assuming 5% mortgage and zero other monthly debt liabilities (I've always been interested to know just how many people in Mission Viejo bought their cars for cash, i.e. have no auto loan(s)) This home is located in the Capistrano Unified School District, which is on it's 7th superintendent in just 4 years. Given the recent district turmoil from questionable past leadership and the impact of the California budget crisis might be something for prospective buyers with families to think long and hard about.

28861 Greenacres, Mission Viejo, CA 92692
4 bed
2.5 bath
2,800 sq. feet
6,000 sq. foot lot
457 days on market (technically speaking yes, but based on original list date)
Asking: $715,000 (Correction - MOVED UP TO $745,000 on day of post!)
Last Purchase: March 2005, $930,000

HEYYYY! Great to see you again! Where have you been!?

This is a beautiful house. The owners took good care of it. But given recent comparable sales (comps) of like size and features that have sold in the $650K range, Greenacres comes back to us somewhat (update: way) overpriced. This is common to see everywhere in Orange County, I believe, whenever sellers and banks try to place a tourniquet on monumental financial mistakes of the past.

The thing is, it's been 4 freaking years since the original purchase. I mean, I don't know what it was listed for in 2006, 2007, 2008 and 2009 (I wish Redfin kept a history of this), but hasn't the train sort of left the station already on $745,000?

We'll soon see.

Mortgage Loan Resets to Explode in April and May. And Just In Time For Summer Home Selling Season!

I simply can't wait for the April and May spring flowers to bloom.

And for the next wave of ARM mortgage resets to go KABOOM!!!

Sweet mother of god, look at April and May 2009 for mortgage loan resets!

Weeeee, this is going to be an the "funnest" summer ever!

You are a homedebtor, not a homeowner!

Stop arguing! If you live in a $750,000 home and you owe $750,000 or less in a mortgage loan for that same home, then you don't own that home, ok?

You are homedebtor, not a homeowner.

If you live in a $750,000 home and you owe nothing (i.e. it's bought and paid for through either blood, sweat and years, a massive inheritance or through ill-gotten gains), then you are a homeowner.

See the difference?

Don't let these SUV-driving, cell-phone toting, reserve trademarked Realtors in the area tell you any differently.

You owe. You do NOT own.

We need to change the conversation in this country about real estate on so many levels, because people who purchase homes in this country using leverage do not technically own the home until the mortgage is paid off.

The same is true when I buy a car via an auto loan. Sure, I'll drive the car off the lot and all around the town. I'll fill it up with gas, and spill some Diet Coke on the floor. I might even unknowingly drive right into a demolition derby contest at the Orange County Fair and obtain a few "minor scratches" in the process. But unless I paid for that vehicle in full from the start, it's not freaking mine! I may even possess the title for the car in a neat little folder in a desk drawer where I live, but the car is not paid for. It's not my car!!!!

So can the American public, the American media, and our elected officials in Washington pretty please with freaking sugar on it, STOP CALLING PEOPLE "HOMEOWNERS", UNLESS THE OWN THE HOME OUTRIGHT AND HAVE NO DEBT AGAINST IT?!!!

In otherwords, let's be a litte more specific going forward before we bailout the patheticly stupid, greedy and illiterate, shall we? I mean, that's not asking too much, is it?

People who are upside down on their freaking mortgages right now, in the state of California, are NOT HOMEOWNERS!!!! They are mistaken HOMEDEBTORS that, under normal lending standards and rational financial principles and without Realtor malfeasance, would otherwise be, and actually SHOULD BE RENTING a home, or condo, or apartment to live in.

But no.

The American media would prefer for us to all stop what were doing and hold a candlelight vigil to save the precious so-called "underwater" and irresponsible debt-freaks and use the term "Homeowner" to best describe their emotional plight!

I don't doubt that these people are in anguish over their circumstances. I don't doubt that families with young kids are under stress as a result of this. But America, and California in particular is, today chock full of imbecilic, overgrown children who have the attention span of a gnat, and cannot read a freaking mortgage contract, let alone hire an attorney to have it read to them. The responsibility is theirs to carry. They need to foreclose. They need to move to an apartment or condo, pay off their outstanding debts or get them forgiven and start over.

Since when are we obligated to pay for the misfortunes of others?

I get all that Judeo-Christian B.S. about the "Good Samaritan". I understand the "come on, help a brother out" speak.

My parents just lost half of their savings in their 401k.

They are over the retirement age. They both worked and saved since they were 18.

Who is going to bail them out?

Nobody.

My point is, you can't force people to be "good samaritans". My parents started saving late and put money in risky investments in their 401K plan. They've paid the price.

What we are doing, what President Barrack Obama is doing, what House Speaker Nancy Pelosi is doing, is perpetuating the problem of irresponsibility, financial illiteracy and not allowing individuals to pay or benefit from the consequences of their actions.

We are praising a nation of spoiled, overgrown, childish debtfiles, while their children are watching.

You are homedebtors, not homeowners!

California's Crisis in Waiting: The 2008 Option Arm Implosion

Dr. Housing Bubble takes us all to school for an important lesson on the next phase of the greatest housing crash in American history: $500 billion of option ARM loans waiting to go *POOF* - 60% of which were signed for homes in sunny and delightful California.

True to form, most Americans (and Californians) apparently chose option 1: Minimum monthly payment.

Come on, think about it. How else can one afford the monthly payments to "own" that 7-times-your-annual-salary-home price?

A lot like making that minimum payment on your credit card every time, but not paying down the balance borrowed, so interest charges accrue into a 600 lbs. hungry and angry Silverback gorilla. Oh, nevermind that menacing figure in your rear view mirror. That's just your collossal unpaid loan balance waiting to destroy your future financial livelihood!

Man, I wish they would come out with auto loans structured like this! I would buy a fucking Ferrari!

Oh California! You thought you could have your state budget crisis cake, educational cuts, and housing crash too?

This is goddamned scary.

So You Drive an SUV?!

If you drive an SUV, ok you do look cool. But you are getting absolutely hosed right now in a big way, aren't you.

Damn!

Today, gasoline in Lake Forest, California is now $4.55 per gallon (87 octane)!

In Orange County, the average price is $4.58 per gallon (87 octane)!

A week ago? $.4.40

A month ago? $3.89

A year ago? $3.19

Man, it must really suck. But since SUV drivers really want to look cool, but prefer the Bill Clinton era fuel prices, yet still don't want to crimp their OC lifestyles, why not go electric with your next vehicle?

Being OC-cool and going alternative power with your wheels are no longer mutually exclusive concepts. Check out the 2008 Tesla Roadster from Tesla Motors of California. You can order one today.

100% Electric powered

o to 60 mph in 3.9 (would blow the doors off most SUVs)

13,000 rpm redline

135 mph (It's OK. You can cry.)

220 mile range per charge (requires 3 hours to charge in normal electric socket) ($0.02 per mile).

Price? $100,000

OK, scoff if you want. Our grandchildren will be laughing at our silly asses for driving carbon-fueled SUVs, much like you laughed at your own parents/grandparents for using a typewriter at their 1970s and 1980s office job.

Besides, we need to develop a sense of humor about all this because, $6.00/gallon gas is exactly the two-by-four-across-the-face that we Americans need to wake up, innovate, lead the world, and unlock our economy's full growth potential. If you based your small business or your household budget on the availability of cheap gasoline, you better be ready to embrace change or be Darwinized. The idea that must continue down the same course with our energy policy because that's the way it's always been done is ludicrous and insanity defined. We've followed the innovative spirits of BP and Exxon and GM and Ford long enough. They've given us $5.00/gallon gasoline, the Ford Mustang, and the Chevy Tahoe SUV. GM and Ford will both be bankrupt by 2010 and so will we, if we don't change.

The GDP of the United States has been shackled by poor government policy in Washington, lack of innovation in the hearland, and economic dependency on foreign nations for our energy. These foreign nations want to destroy us due to our infidelic way of life which is unlike there own, and now wish to exploit America's Achilles' heel to the fullest.

And here's the best part.

We let them.

We must become independent of other nations to secure future economicy prosperity.
America should start to retrofit it's vehicles and engines to clean power sources now and not wait.

Will it be painful? Yes.

Will there be numerous job losses? Very likely.

There could be numerous new jobs and professions as well that cannot be outsourced.

The losses might be no different than what happened to all of the coopers, buggy whip salesmen and blacksmiths.

Let the prices of oil climb to $10.00 per gallon. It should. By 2028 the oil for gasoline be gone.

The price of sand and glass is going to eventually plummet.

Almost there Orange County! Almost There!

Today a gallon of gasoline in Lake Forest, CA was priced at $4.41!

Man, we are a few nanoliters away from that $5.00 per gallon milestone.

Just remember that once we reach that summit, we'll all have to remember who to thank.

By the way, just who should we thank?

Countrywide CEO Mozilo Greasing the Skids

Reuters news agency cites that apparently Countrywide CEO/Douchebag Angelo Mozilo didn't think there was anything wrong with the idea of providing certain customers, so called "Friends of Angelo", special help with mortgage loans. Some of these customers may very well have been executives of Fannie Mae.

Way to go, Tangelo. Keep it up. You're doing good. A few more hits like these and you'll make the cover of Time Magazine for sure.

125 Days Later: Lake Forest Home Still Won't Sell

125 days on the market is really not that much time.

It's only two (correction FOUR) months.

It's now May and homebuying season should be in full swing for families dying to quit renting and start "owning".

And so it is that a 4 bedroom, 3 bath single family home is put up for sale in little old Lake Forest town. Close to the main thoroughfare for which the area was once known (El Toro Road), close to shops, but nestled tightly into a typical OC suburban tract.

22612 Auburn Dale Dr., Lake Forest, CA, 92630

Asking price: $564,900

Asking price/ sq ft: $309

Income requirement: God only knows. Let's divide by 4 and say $140,000 per anum.

Purchase price: $721,000 (holy hell!)

Purchase date: 6/13/06

Size: 4 beds, 3 baths, 1,829 sq ft (built in 1977)

MLS: P619632 (126 days on Redfin)

Zillow Zestimate: $548,500

2007 property tax: $2,187

HOA dues: unknown

Type: Contemporary

Stories: 2 Levels

The Listing: Great price to purchase in 'pride of ownership' Sunwood tract! Priced for a quick sale. Oversized backyard offers room for a pool and possible RV parking too! New roof was installed in 2006. Home has a wonderful flowing floorplan with vaulted ceilings in living & dining room & spacious family room with fireplace. Concrete and covered patio for family fun and weekend entertainment. Large master suite. Free Lawn service for 12 months. Don't be shy.. write it up.

I'm not sure what "pride of ownership" refers to when we're witnessing the current owners vacating the the adobe an entire 9 months after purchase. But OK.

"Don't be shy". I doubt shyness has anything to do with the original $721K price tag or the $156K sales discount in 2008 on this home.

Man, thankfully by now we're all fluent in "Realtor speak" around here.

Love the bit on room for "possible RV parking too!". And with an exclamation mark! These homes on Auburn Dale Drive are situated pretty close together as it is. But, I mean, if you really want to win friends and influence your new neighbors, yeah, go ahead. Park that gas-guzzling vehicular monstrosity of yours in the skinny alleyway right next to your new house (and theirs). The neighbors will just love you for that I'm sure.

And how about "Priced for a quick sale." Well, maybe.

This home was purchased in June 2006 during the sub-prime, no doc hay day for a logic defying $721,000. I will surmise that back in those days nobody in Lake Forest, California even thought twice about a.) leveraging themselves to the freaking hilt, b.) following realtor bullshit lies like "get in now while you still can " and just "refinance later", and c.) paying $394.00 per square foot for a 30 year old single-family home.

But then here we are today, after 2 months on Redfin, and this ideal home for a young family is priced with a $156,100 discount off the original buy price. That's a lot of dough, isn't it? Not if one considers that this home was criminally overvalued in the first place when it was purchased 2 years ago-as were most OC homes.

Still, $565,000 might be a good sale price if one considers comparable homes of similar size and configuration sold over the past 3 months in the area.

But clearly this home is another textbook example of buying at the market peak in Lake Forest, California, well before the certain-to-come market correction. Now prospective homebuyers/fence sitters in Lake forest continue to ponder in amazement as to just when the eerie doppler-effect-effect-distorted, ice-cream-truck-like music might stop.

Lansner: California Home Prices Down 20%

John Lansner delivers more glorious California housing market news.

If it was ok for California realtors to cheerlead the entire real estate market to its euphoric price highs, is it now OK to stare with gaping mouth amazement at the collossal and historic housing crash now underway?

Yeah go ahead, it's ok. As long as you don't block traffic.

And Realtors Wept - Part II

As a follow-up to the previous post And Realtors Wept, the hits keep coming:

American Home Mortgage has offically declared bankruptcy today according to Bloomberg.

Where is that cushy mattress when you need it?

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.

OC California: "Unbelievable how many people were conned into taking these mortgages"

State of California homeowners, as of July 2007, rank second to only Nevada with the most frequent use of the f-word.

Foreclosure, that is.

The OC Register reports that in Orange County foreclosure filings totaled 1,647 in June, or one for every 589 households. That's down about 8 percent from May, but more than doubled the total compared to June 2006.

There were over nine thousand filings in Orange County, California over the first six months of 2007, over three times the number of foreclosure filings during the same period in 2006.

The OC Register article quotes Dr. Walter Hahn, an Irvine-based real estate economist and consultant, who says that foreclosures will increase going into 2009. Hahn says millions of subprime borrowers and real estate speculators will see their introductory "teaser rates" adust and will not be able to afford higher payments.

"It is just unbelievable how many people were conned into taking these mortgages," Hahn said.

Would we call it that?

Dr. Walter Hahn, 40 years of real estate experience in Southern California

I mean, being "conned" into taking a mortgage? That sounds like pretty strong language, while admittedly probably not as strong as the other f-word being used with just as high frequency in 1 out of every 589 OC households right about now. I don't know. Being conned into doing something sounds so criminal!

There are hundreds of OC mortgage brokers out there still touting the merits of interest-only and pay option ARM loans. Is it OK that people are still being "conned"? Maybe these mortgage brokers are just trying to do their part and contribute to the greater good of Orange County society because they know something most of us do not. Perhaps the rate of interest that the layperson sees today are at an all-time high, while OC mortgage brokers sees lower rates on the horizon?

And what role did Realtors play in selling these homes to home debtors in Orange County?
Did they assuage home debtor concerns about the balloon mortgages, saying it would all be OK and that they could "just refinance in a couple of years"?

Let's remember that the OC median home price was around $600,000 per unit in 2005.
Median gross incomes for families in Orange County, CA hovered at around $75,000 per annum. Those two market variables (some like to call them fundamentals) don't always make good bedfellows, unless you can get creative. Real creative. To buy a home with such an income, well, let's just say it would take "some doing". And some outside of California, where home values tend to be a little more grounded with reality, might call creative home financing "cheating". But let's not use that word. Let's just say the OC realtor found a homebuyer, and just referred them to a "great contact" of theirs in the mortgage business, and, abracapocus, deal is sealed. The homebuyer is now a glorified OC homedebtor and welcomed to the exclusive club! Over there is my accountant Skippy, and over there is my broker, Scooter, and next to the hearth, my realtor-niece Buffy! See you at the martini bar! Don't forget, tee off at 10:00 sharp!

Now fast forward to July 2007. A number of those better-than-median incomed OC homedebtors are falling hopelessly behind with their mortgages. Notices of default are three times what they were a year ago. Lending standards have tightened dramatically in most corners. Inventory of OC homes are increasing. Several large mortgage lenders (many based in Orange County) have gone out of business entirely. Some smaller lenders are trying desperately to stay in business. Meanwhile, Realtors are left scrambling on deck, unsure what message should be relayed to prospective clients: "What are we supposed to say again? 'It's a great time to buy' or 'houses are staying on the market longer than they used to'? "Oh God, what do we say now? What do we say!?"

And the pay option arms and interest-only loans? Hey, whether you need them or not, these same mortgage financing intruments that were used to "con" millions of OC home debtors? They are still in the front window of most banks and lending institutions here, here and here.
Fact is, the instruments might very well make sense to prospective homebuyers who have money to burn, strong cashflow, financial flexibility, and are somehow not averse to interest rate risk of any kind.

"Unbelievable how many people were conned into taking these mortgages".

True. Very true, but nobody put a gun to anyone's head.

And so it is. Caveat emptor, Orange County. Caveat-freaking-emtor!

The Real Estate Special Interest Payouts To Congress

Most Americans view with disdain the daily "greasing of the skids" by special interest groups to gain favorable influence for policy votes in Congress. And who can blame them? One could argue that the bribe-like activities of special interest groups, PACs (political action commitees) in Washington D.C. are amoral and corruptive. It's that special, not-so-perfect aspect of the American political system.

Indeed there are thousands of special interest groups executing their plans every week in Washington D.C.. Now it is possible to track whether your own representative in Congress is being influenced monetarily, by whom and by how much. Just visit the website: Maplight.org.

In our main area of interest, real estate, there are some interesting surprises.
So who in Washington is getting the most slap-back cash from real estate industry special interest groups including realtors, subdividers, ?

Well, according to Maplight. org - and this may be just the tip of the iceberg of total funds paid, here you go, my fellow Americans:

Top 10 Recipients Funded by Real Estate Industry (all groups)
Recipient Amount
Joseph Lieberman: $966,665
Hillary Clinton: $632,830
Jon Kyl: $352,994
John Isakson: $325,810
Bob Corker: $290,403
Richard Santorum: $279,423
Bill Nelson: $227,330
Harold Ford: $219,633
Charles Schumer: $219,514 (Mr. SubPrime-Bailout-Program)
Michael DeWine: $183,630

Top 10 Recipients Funded by Real Estate Agents & Managers
Recipient Amount
Hillary Clinton: $530,058
Joseph Lieberman: $356,660
John Isakson: $199,200
Charles Schumer: $193,812
Jon Kyl: $170,932
Richard Santorum: $162,825
Bob Corker: $157,465
Robert Menendez: $154,930
Bill Nelson: $151,280
Mel Martinez: $143,900

Gee, with some of these nice payouts, these Congressional problem solvers might - just might mind you - be able to afford a down payment on an Orange County single family home!

Economic Snapshot for June 2007

Dr. Christian Weller, Senior Fellow of the Center for American Progress and the Economic Policy Institute, certainly doesn't pull any punches when laying down the economic outlook from June 2007.

Jesus, are things really this bad? Here are some of Dr. Weller's sobering observations:

Wage growth is weak . Factoring in inflation, hourly wages were 2.3% higher and weekly wages were 1.5% higher in April 2007 than in March 2001.

Benefits are disappearing. The share of private sector workers with a pension dropped from 50.3% in 2000 to 45.0% in 2005, the last year for which data are available, and the share of people with employer-provided health insurance dropped from 63.6% to 59.5%.

Family debt is on the rise. In the first quarter of 2007, household
debt fell relative to disposable income for the first time in five years, but
still stayed at a comparatively high 130.7%, the third highest on record. In the fourth quarter of 2006, families spent 14.5% of their disposable income to service their debt—the largest share since 1980.

Families feel the pressure. The share of new mortgages entering
foreclosure was 0.5% in the fourth quarter of 2006, the highest level on record since 1979. The default rate on credit cards grew to 3.9% in the first quarter, an increase of 29.5% over the first quarter of 2006. And the personal bankruptcy rate, measured as bankruptcy cases relative to the U.S. population, grew by 51.5% from the first to the fourth quarter of 2006.

Housing market slows. New home sales increased in April 2007, spurred by an unprecedented decline in prices. The median price of new homes sold dropped by 11.1%, the largest one-month drop since the Census first recorded these data in 1963.

Gas prices rise sharply. In the first week of June, gasoline prices
averaged $3.15 per gallon. In inflation-adjusted terms, gasoline was at its highest level since June 1981 and it was 91.9% more expensive than in March 2001.

Savings plummet. The personal savings rate of -0.8% in the first
quarter of 2007 marked the eight quarter in a row with a negative personal savings rate.

Already weak job growth slows. Monthly job growth since March 2001 has averaged an annualized 0.6%. Over the past 12 months, the average monthly job growth was 160,400 jobs, compared to 213,400 in the preceding 12 months.

Poverty climbs. The poverty rate increased to 12.6% in 2005, the last year for which data are available, from 11.3% in 2000.

The government’s finances deteriorated. In 2001, the CBO anticipated that the government balance between 2002 and 2011 would be in the black to the tune of $5.6 trillion. Today, the CBO projects deficits between 2002 and 2011 of $2.9 trillion. This constitutes a deterioration for the period 2002 to 2011 of $8.5 trillion.

These deficits won’t shrink: Between 2007 and 2016, the CBO predicts cumulative deficits of $1.8 trillion. If AMT reform and permanent tax cuts for the wealthy are included, the total deficit for the next decade would come to $3.5 trillion—even if the costs for the wars in Iraq and Afghanistan drop below current projections in a few years.

This endangers our economic independence. Foreign investors bought 82% of new Treasury debt and the share of U.S. foreign-held debt grew to 46% from 32% from March 2001 to March 2007. The quarterly interest payments from the federal government to foreigners rose to $38 billion in the fourth quarter of 2006 from $21 billion in the first quarter of 2001.

Trade deficit remains high despite strong export growth. In the first quarter of 2006, the trade deficit rose slightly to 5.3% of gross domestic product from 5.2% in the fourth quarter of 2006. Yet these last trade deficits are still larger than any trade deficit since the Great Depression recorded before the third quarter of 2004.

Following last week's approval ratings for President George W. Bush (Only 19% of Americans consider the country to be "on the right track"? Are we sure he's taking pointers on economic policy from the Almighty?), these economic findings just add more fuel to the fire.

Read the full report here.

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.

OC Unemployment Increased Slightly in April

The Orange County Employment Development Department recorded a slight uptick in unemployment for the county, rising from 3.4% in the month of March to 3.5% in April 2007.

According to EDD stats the labour pool of OC (all jobs) is 1.63 million. Out of that number 1.57 million are employed. Approximately 56,300 don't have work.

April 2007's rate of 3.5% signifies a 0.3% increase in unemployment over April 2006, when unemployment was just 3.2%.

California's statewide unemployment also increased to 5.1% in April, compared to 4.8% unemployment in March 2007 - this despite the addition of over 7,400 nonfarm jobs in April.

On the face of it, not an earth-shattering increase. But it is mid May. The OC economy is considered one of the strongest in the state of California, if not the world. Do these minor increases in unemployment indicate the beginning of something far more ominous brewing in the OC economy for 2007? May's unemployment numbers will be critical. Typically April and May have been extremely robust months for employment figures even when one seasonally adjusts the employment stats.

Bipolar World of OC Housing Market Reporting

From the OC Register real estate headlines today.

The first, a sign of improvement, a message of sunny days and summer fun ahead: Bank notifications of default declined by 13% from March 2007 to April 2007.

The other message, a horrific crash of twisted wreckage so mind-numbing you just can't look away: Home foreclosures in OC rose 129% between April '06 and April '07.

Welcome to Orange County California!

Mr. Lawrence Yun of the N.A.R. Weighs In Again

Mr. David Lereah was the Chief Economist of the National Association of Realtors (N.A.R.). Now that Lereah is pulling the ripcord and escaping the N.A.R. before the house literally burns down, Mr. Lawrence Yun, the Senior Economist of the N.A.R. steps up in his new flame-retardant suit.

He's not just a "senior economist". He's the freaking Managing Director of Quantititative Research for the National Association of Realtors.

OK, but who is this Mr. Yun really?

Does he have some fresh or even forthright comments about the state of the American housing market?

Will he come clean about the N.A.R. being a cartel driven by realtor sales commission earnings and sales strategies, not consumer education, market principles, business ethics, and operating as "trusted advisor"?

The answer is a resounding no.

Mr. Yun is a Lereah lacky. In February of 2007, he echoed Lereah's comments about the true state of the American market. If one were to follow this N.A.R. quantitative propeller head around all day, he'd have real estate consumers believing that the market bottom was hit 4 months ago and that everyone should get ready for a recovery later in the year:

"Sales will recover gradually over the second half of the year and prices will begin to edge up again"

Mr. Yun was wrong in February. He and the N.A.R. are wrong again now.

The U.S. economy is slowing down significantly, the U.S. dollar is approaching an all-time low in value versus the Euro and the British Pound, U.S. inflation remains completely unchecked by the United States Federal Reserve Commission, fuel prices in the United States are approaching unchartered territory at almost $4.00 per gallon in California, a jaw-dropping number of mortgage lenders have been completely or partially destroyed, surviving lenders have restricted their lending standards substantially, HELOC loans are down by 20% year to date and subprime and Alt-A loan foreclosures are rocking the entire industry - and we haven't even explored the probabilities that prime loans may also weigh in badly before the year is out.

To Mr. Yun and members of the National Association of Realtors: It's time for someone from your decrepit organization to step up to the plate and tell it like it is.

The Rancid Truth - Mortgage Lenders Make More Commissions By Screwing The Borrower

From California's North County Times:

California mortgage brokers, most of whom are licensed by the state Department of Real Estate, are legally obligated to act in the best interest of the borrower.
"However, there is no enforcement mechanism in place to ensure that they (do so)," said Paul Leonard, director for the California office of the Center for Responsible Lending. Leonard told a state banking commission earlier this year that mortgage brokers "have strong incentives to make abusive loans that harm consumers, and no one is stopping them."

A mortgage broker's incentive "is to close the loan while charging the highest combination of fees and mortgage interest rates the market will bear," a 2004 study prepared by Harvard University's Joint Center of Housing Studies concluded.

Brokers can earn higher commissions -- up to 3 percent instead of the typical 1 percent -- by having customers buy loans with interest rates that are higher than market rates, with prepayment penalties charged if the loan is paid off before a certain date, and with little or no verification of the borrower's income, known as "stated income" loans. That's the difference between a $12,000 and a $4,000 commission on a $400,000 loan.

But why will the home finance market bear high fees AND high mortgage interest rates? How can structuring loans that promote perpetual financial serfdom be acceptable to the borrower? How can reckless underwriting practices as well as tried and true "bait and switch" tactics be acceptable to loan consumers?

The answer is the 21st century financial retardation of the American consumer. Sure, one can certainly blame mortgage lenders and realtors for all of the hell breaking lose in real estate. It's almost too easy to do so - much in the same way one might blame ants for showing up at a picnic.

Compensation schemes like the ones described above might make one's blood boil, but the truth is that none of these incentives would ever be that attractive or effective, if the American consumers fueling the insanity weren't so incredibly illiterate when it comes to their own money.

We are approaching the middle of 2007 and millions of American home borrowers (not homeowners) are now paying the price with personal bankruptcy and home foreclosure - harsh lessons to learn that will likely affect their financial lives for years to come.

Housing Crash Leads to Tragedy in Orange County

For California realtors Joni and Kevin Park a "black cloud" of real estate worries and financial stress led them down a tragic path to self-destruction last week. After wielding a gun and threatening security officers at a high-end Laguna Beach resort, and later charging police officers on the scene, Joni and Kevin Park were shot dead by OC police while their children watched.

Now all that remains is an expensive room sevice bill, and a young family in grief asking themselves just how and why something like this could ever happen to their own parents.

Are more tragic stories like these likely to increase as the housing bubble bursts in 2007 and the Ponzi scheme comes crash down around us?