Southern California Real Estate Bubble Crash Blog

(Disclaimer – I am a licensed California Real Estate Broker but NOT a member of the NAR)

The Orange County Register published the following comments from the President of the National Association of Realtors (NAR) made during their recent convention in San Diego:

San Diego The 2010 president of the National Association of Realtors said that most members of her trade group did nothing to contribute to the global economic meltdown, adding that Realtors “don’t have to do any soul searching.”

 Asked at the NAR convention in San Diego if there are lessons for the future about Realtors’ role in the housing bust, Vicki Cox Golder said no.

 “For a Realtor to put someone in a property they can’t afford is something we never do,” Golder told reporters at a media briefing. “We don’t have to do any soul searching because our code of ethics is solid.” 

 The Realtor trade group touts its code of ethics in promotion materials as a strong reason why consumers should hire NAR members rather than using non-member real estate agents.

 Although a number of analysts have said that the blame for the housing meltdown is shared by a wide group of players – from Wall Street and lenders to mortgage brokers and even consumers – Golder said that nothing occurred to make her think that NAR’s code of ethics needs revision or better enforcement.

 Golder said that there are always a few bad apples in any group, but their numbers are few in NAR.

What a load of crap.  “For a Realtor to put someone in a property they can’t afford is something we never do,” I saw dozens of agents do that!!  Even as the market was falling like a stone agents were telling people it was the time to buy.  Go to an open house these days and listen to agents touting the buying opportunities. 

 I’ll never forget a closing I went to about three and a half years ago.  I was the listing agent and the buyer was having a hard time getting a loan and I had worked with the selling agent to give them extensions to get the loan worked out.  I had never met the agent or the buyer but happened to be at her office dropping off some documents while they were signing the loan documents.

 This poor buyer was a gardener who had just come from work for the signing.  He spoke limited English and was signing loan docs for a $759,000 house with 100% financing and a house payment of about $5,000 per month.  The only person in the room who could speak Spanish was his agent, who was a very attractive, buxom, twenty something year old girl with a very low cut blouse.  I remember her leaning down over the table explaining the loan docs to him but no one was looking at the loan papers.  I walked out of there shaking me head saying ‘Future Foreclosure”.  I don’t think he made it a year before the house was back to the bank.

 While I think that ultimately, Congress was at fault for the subprime loan debacle by forcing lenders to make loans available everyone, Realtors surely played a part.  The mantra was “Buy now or you’ll be priced out forever” and  “Don’t worry, you can refinance in a year”.  People with limited education and no understanding of basic economic principals (Realtors) were (and still are) giving advice about the largest purchase most people make in their entire lives. 

 While the NAR touts it’s code of ethics the qualifications to join are rather lax.  All it takes is a real estate license, a pulse and $135 for the dues.  That’s it. No classes, no ethics courses.  You do have to check a box that says you’ve read the code and agree to abide by it.  The entry requirements are low and the standards to stay in are even lower.

Brad Davidson – Real Estate Commission Rebates

I have dozens of frustrated clients trying to buy bank owned property that just can’t grasp why they can’t buy a home.  I feel like I’m constantly the bearer of bad news and I’ve even lost a few clients by being honest with them.

This video says it well:

Here’s the general run down on REO properties.

1.  The asking price means nothing.

2. FHA loans?  Fa-get-about-it.  Banks don’t want them.

3. You’ve got all cash?  We can talk.

4. Communication?  You’ll be lucky if the selling agent even calls you back.

5. Offering over the list price?  Be prepared to remove your appraisal contingency.

There’s one REO broker , OCWEN/Altisource, that out sources the deal to India and you can’t even talk to a human who’s ever seen a house in America.

Buyers need to take a step back and not drink the realtor kool aid that tastes like 2003.  The “shadow inventory” is estimated at 7,000,000 properties.  You’ll have plenty of chances to buy without overpaying to get the $8,000 tax credit.

Brad Davidson – Real Estate Commission Rebates

Realtors are on the march again, chanting that you had better hurry up and buy.  It’s déjà vu all over again.

I had an offer in on a Buena Park home last week that was listed for $299,000.  My client offered $330,000 and didn’t even get a counter offer.  Found out there were 70 offers.  A house in Menifee was listed at $159,000.  They had 35 offers and it went for over $190,000.

My clients who go to open houses tell me the agents are in full “pump and dump” mode telling people the worst is over, we’re at the bottom and they had better hurry up and buy.

I’m a member at Trulia.com and thought you would find some of the Realtor posts entertaining.  These are all California agents.  Enjoy.

First up, Daniele from Anaheim Hills-
“Hello… time for the mid-month check on the market. It was my experience over the weekend that there was WAY WAY more buyers than there are properties to buy right now. I was all over Southern California and it was a zoo everywhere. Not to mention… my listing in Chino Hills had about 19 showings over the weekend.

She goes on to tell how low the REO inventory is without talking about moratoriums or new foreclosure notification requirements.

“I want to end this by saying… if you have been thinking of selling to move up, down-size, or move away… NOW is the time. Time to cash in on this “craze” of activity right now. Buyers are OUT and they are looking for homes. If you or someone you know would like to know just how many buyers are looking for a home like yours…. let me know. I have exclusive tools that I can use to show you how many buyers are actively searching the internet for homes and it can show me…how many are looking for a home like yours!

Helping you build your dreams!”

I bet she ruined a few dreams in her day

Next, from San Jose-
The Market is Changing… You have to Move now!
“I have been helping my partner this weekend with his clients and showing houses and believe it or not it’s been a crazy experience. On all of the houses that I show, we have to wait in line so we can go ahead and look at the property. Is this a sign that the market is changing? Is this next BOOM? bare in mind that the last time I experience this was 2003 till 2005 and that was the boom time.

What is good is that buyers are now qualified based on their true income and that they are really putting a down payment or collateral on the house and last the houses are now priced below what the previous owners have bought it and that is a bargain. (As if that fact makes it a good deal)

I include a link talking about the real estate market and that it’s starting to move and it’s moving Fast.

http://abcnews.go.com/Business/Economy/story?id=7564649&page=1

I hope this will give the potential buyers a clue of what’s happening in our Market here in San Jose. Together we can change this economy back to good one.”

From Santa Clara comes Michael (complete with spelling errors).  This is my favorite.

The bottom is…here! IMHO
“Ok!  I am suffering from too many numbers, quotes and opinions.  Cap Rates, Cap and Trade, Carpet Tiles, Carbon and Tire Piles.   From Obama’s economic plan and Bush’s mistakes to Barney Franks…too much clutter!  Maybe writing three offers and viewing nine homes today or the Starbucks at 9pm has me fired up!

Like Obama said yesterday ” The stars have aligned…”  He was referring to the congress and white house being on the same side, I know.  Who cares!   I only care about the residential housing segment!  In my 28 years of working in the residential housing market has made it clear to me…The Stars Have Aligned..NOW!!!!

The market has bounced around, the housing segment has free fallen, like a trolley car going down Lombard street without a break man.  The job losses are about to level off.  The truth is the housing market is preparing to make a surge big time, in my opinion.  The morgage finance rates are so low they are nearly free considering the 5-7year equity upside that is certainly coming.  Especially the fixed rates.  It is bringing tears to my eyes!..or is it the coffee?

I have been writing offer after offer for buyers, lately (today),  and homes are seeing multiple offers like 2003.  It is amazing how many best buys we are finding for everyone…. I hope you are one.   The inventory is down from 16 months worth to 4 months worth.   Some communities are at 3 months worth of inventory.  The big question….Where is the bottom?  Ummm…I think it is about to go on sabatical.

If anyone is waiting…they are going to be like those in 2005 and “wanting”.    rev.(spurred by great comments to this post)  ~ The difference between 2003-2005 to the present is that in 2003- 2005 we were not aware of the derivitive debacle and the total slide it created.  Today, at least we have more of the facts and can make better decisions moving forward.~ end rev. Market conditions have never been better.   Find a savvy Realtor, mortgage professional and your calculator and get moving on the Foreclosures and Short Sales available.    Where?  Wherever YOU want to buy a home in Santa Clara County or an investment out of the area.  Your Realtor is licensed to sell in California!  Everywhere in California!.

Don’t believe me!   Call your freinds…Call your Uncle, the Realtor…Go to open houses this weekend!  Then come back here and tell me what you learned!”

From Mandy in WestLake Village-
“Buyer’s Beware!

The market has begun to change and the buyers are the last to know.  Great homes are moving fast- clever agents are pricing them below market value which draws a feeding frenzy of multiple offers and bidding wars.  The final selling price is likely higher than anyone would have previously thought.  However, a good portion of buyers are laboring under the mistaken impression that prices are continuing to drop in all market areas and they can name their price.  Educating these buyers as to the reality of the market is proving difficult and sellers and agents alike are getting frustrated with ridiculously lowball offers.  The tide has begun to turn and a home in good condition in a desirable area is under contract before some buyers are even able to view it.  So many homes that can’t be shown because of a renter or some other situation, have multiple offers before anyone has viewed them based solely on the listing details, price, and location.  Watch out for the bottom- if you are diving in to the market now you might strike your head on it.”

Finally from Bob, right here in Coto De Caza responding to my contention that more foreclosures will hit the market soon-

The “so-called” shadow inventory of foreclosures, that you allude to, is a myth. It is falsely based on years old data that has NOT been updated in the past few months, during which a new administration has stepped in and put numerous programs into effect which – along with lenders working MUCH harder recently to modify or refinance troubled mortgages – has taken GIGANTIC strides to mitigate the problems which WERE on the horizon.

I looked up some of the local agents doing this puffing and see they haven’t closed a sale in two years.  It’s sad the things they’ll say to try and drive the market. 

Brad Davidson

Real Estate Commission Rebates

The Orange County Register today reported that the median sales price for March 2009 was $385,000, a $15,000 “jump” from the January low of $370,000.  The writers postulate that after two consecutive months of price gains that, “Orange County’s housing market may have bottomed out”.  They back this up with a quote from DataQuick, “In the world of likelihoods, I think we have seen the price bottom”.

It’s the spring buying season.  Demand, and therefore prices (usually), goes up.  This trend has been exacerbated this year by the shortage in foreclosure properties.  Fannie, Freddie and most of the major lenders suspended foreclosures earlier this year and as of today there are only 551 REO properties on the market out of the 10,418 active listings in Orange County.  Most buyers want a foreclosure property and shortage has created bidding wars.  It’s not at all uncommon to see ten or more offers on REO listings and prices are being bid up well over the asking price. 

Does this signal a bottom?  Not likely.  All it’s done is created a back log of foreclosures.  While the foreclosure moratorium was announced with great fanfare it’s gone quietly un-noticed that the major lenders have started up the foreclosure machine again.  March NOT’s (Notice of Trustee Sale) in California were up 80% to 33,178 in March over February.  Those numbers will probably continue to rise as the system starts to catch up from the moratorium and new notification laws.  These new properties will hit the market come May and June and there should be a constant supply for the foreseeable future.  It’s estimated that 40% of homeowners who are underwater abandon their homes so bailouts aren’t going to stem the tide.

As of today the median list price of the pending sales on the MLS is $375,000.  That shows me some stability for a few months but when demand slows down at the end of summer, the banks will lower prices to keep buyers stepping up to the plate.

Brad Davidson

Real Estate Commission Rebates

I’ve thought for months about writing a post about short sales and why they are such a huge waste of time.  Well, just yesterday another of the many short sales I’ve worked on went in the toilet.  I decided it was time to write something to warn potential victims that they are likely wasting their time trying to buy a short sale.

This time I thought it might be different.  It was a short sale approved by the bank at the asking price.  My client made a full price offer and I was told it was just a matter of the bank approving our specific offer.  Then the trouble started.

The selling agent called and said that there wasn’t enough money at the asking price to cover all the liens and expenses and that she was going to send me a counter offer.  The bank had already approved the deal and it’s basic math to figure out how much you need to close so I was suspect of this agent’s competence.

A few days later she called to tell me that everything was worked out and that we could go into escrow at the agreed upon price.  Escrow opened the next day.

Escrow instructions came out two days later and the deal was changed again.  My commission had been cut by one half point (Before you say who cares, I give back all commissions over one point and that half point would come out of my client’s pocket), they were not going to pay for a home warranty policy for my client, there was no money for a termite inspection and they were short by $2,000 for funds to cover liens and expenses.

I told my client that this wouldn’t be the end of the problems and that he was going to end up getting screwed.  He agreed and I got the pleasure of telling the listings agent to stuff the deal where the sun rarely shines.

EVERY short sale I have ever worked on has been a waste of time.  The listing agents are lazy or incompetent and they’re just going for volume listings hoping that a few will go through.  The bank owned deals are priced just as well and you’ll have far fewer headaches.

I’ll publish my primer on short sales shortly.

Brad Davidson
We Help-U-Buy Realty

Only 1690 homes are listed as closed sales on the OC MLS in January and the median price of those sales took another huge hit. $358,000 was the median sales price of all closed sales as reported on the MLS. That number is lower than any pending sales price I’ve tracked so far. The Data Quick number about to come out will probably be in the $375,000 range either number is a big hit from the December figures.

The median list price of pending sales seems to have stabilized a bit and ticked up to $370,000. I don’t think it points to any sort of market wide stabilization as I have three bedroom single family homes in escrow in Anaheim and Placentia at $237,000 and $270,000 respectively. Those are low prices that make sense for investors who can rent those properties and get a decent cash flow.

I know of a two bedroom condo in Laguna Hills that’s in escrow for $119,000. The low end of the market is still getting clobbered but I’m seeing more sales in the over $600,000 market for homes that were previously selling for over $800,000.

I’m afraid that our government is going to screw things up and prop up over extended home owners. The market is working just the way it’s supposed to with buyers scooping up what they perceive to be good deals on foreclosures. If the Fed’s start rewriting the bad loans people took out they had better rewrite mine too.

Brad Davidson
We Help-U-Buy Realty