Create Jobs= Create Income= Create Buyers= Create Home sales!

Oliver

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1.5 Million Face Immediate Risk of Job Loss as a Result of Small Business Owners Who Took out Toxic Home Mortgages according to Bornstein & Song, CPAs & Consultants Study with MerchantCircle

Toxic Mortgage Study will Continue Nationally, Including Florida, Arizona, Michigan, and Nevada

Los Altos, CA April 23, 2009— New study results show more than one-third of all California small business owners took out risky or toxic mortgages such as Alt-A, Alt-A ARMs, Option ARMs, Interest-Only, and Subprime, etc. to get cash for business expenses during the peak of their home values from 2004 to 2007. As the first wave of mortgage resets hit, small business owners will be at-risk of “payment shock” and default as their monthly mortgage payments skyrocket. The toxic mortgage resets began in the 4th Quarter 2008 and will continue through 2012. “The resulting defaults will be the cause of the 2nd “Tsunami” Wave of Foreclosures that will dwarf the subprime crisis and will take many homeowners and small business owners by surprise. In California, these inflated mortgage payments will threaten more than 2.1 million small business jobs,” said Prof. Samuel D. Bornstein.

“I purchased my home in 1999 for 235K,” says Keith Capsuto, owner KC Photography & Music in Oxnard, CA. “Within the first 3 yrs. it had a value of $650K. I did the foolish thing of buying the home with an ARM loan to save money for business expenses. Up to the turnaround in the real estate market, I had been doing a fair amount of business, but it dwindled off sharply and by 2008, I was almost bankrupt. Now in 2009, business is about gone! I am 8 months behind on my mortgage with credit cards up to the hilt from business expenses. I am attempting to work with my mortgage company and on the brink of filing for bankruptcy.

Chris Carter
eVolV equity

Don Q

There is still an awful lot of fraud and deceit built in to asset prices. President #44 and Congress #111 are doing the best they can to keep the juggling game going and keep all the balls in the air. Everybody is waiting for a piece of the stimulus or bailout pie and that means that prices won’t fall.

So I don’t think we’ll be seeing a bottom in this downturn this year or even next, as there are just too many bottom callers out there.

When the bottom callers get discouraged and are wary of every little uptick, warning us of false dawns, then I will start seriously thinking a bottom is at hand.

Cheers!

#1: Somewhat agree, although my gut feeling is that the decline will be even further than that. Obviously it’s hard to predict since it’s almost entirely dependent on the level and shape of market manipulation by the government (similar to the GSE’s market share of loans and foreclosure activity shaping the current market), but there are still significant downward pressures. Remember, most of the alt-A defaults are coming, job losses (including under-employment) are accelerating and that will mean more defaults, and the median at 250k is still roughly 5x income, where it should be closer to 3.5, even without an overshoot due to fear and uncertainty.

#2: Mostly agree; I think volume may drop off a bit in the later part of the year as people realize the up-swing is not coming quickly, but there will still be bargain hunters on the low end.

#3: When stimulus money dries up, there will need to be more allocated to keep the economy artificially inflated, and by that time there may be enough outrage about government waste to limit the amount spent in Gigantic Waste 2. I don’t think it’ll feel like the end of the recession by then, even if the numbers say everything is good.

#4: Totally agree, and I wouldn’t be surprised if it’s even worse. The government is doing little to nothing to help private industry, and demand is already crippled, and getting smaller every day. California’s government, for their part, is raising taxes, sucking more money out, and will be a fertile ground for anti-business lawsuits resulting from job losses, which should really ramp up this year. California could be a very scary place in a year or two.