DCB?

Whaddya think?

Hoocoodanode?

Can anyone here excuse this?  Doesn’t anyone else see a problem with the government pressuring private enterprise to do what they want them to do?

Is anyone really believing this shite?

Faced with sluggish progress in its foreclosure-prevention effort, the Obama administration will spend the coming weeks cracking down on mortgage companies that aren’t doing enough to help borrowers at risk of losing their homes.

Treasury Department officials said Monday they will step up pressure on the 71 companies participating in the government’s $75 billion effort to stem the foreclosure crisis. The will start this week by sending three person “SWAT teams” to monitor the eight largest companies’ work and requesting twice-daily reports on their progress.

This reads straight out of an SS playbook.  Fascism has a singular face, and it is bullying and intimidation!  That’s change we can believe in.

Who woulda thunk it?

Click here to view the embedded video.

Seriously?  Bad nation-state.  No bailouts for you!

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

This video says it well:

Click here to view the embedded video.

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

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

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

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

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

The systemic risk is that since credit = debt = money, we can pretend that there is more of it than is possible. That is because debt cannot exceed some fraction of the potential future amount of work. When it approaches that point, confidence collapses and the debt is destroyed. We have gone through this over and over and over in history. The hot fad now is to think government can alter this cycle by creating even more debt. The answer to that is : ha ha ha ha. Think it over: by preventing the destruction and extending the time frame of debt (by financing with future deficits) the government lengthens the process, as it did in the 1930s, rather than decreases it.
We are in for a loooonnnnnnnng one this time.

That is why we are just fiddling while Rome burns.  Twist from Housing Doom had it right: what we need right now to fix the housing market is MORE Foreclosures, not LESS.

Data quick shows the median at $397,000 for December sales but the median for homes sold on the MLS is $380,000.  MLS figures do not include new home sales which tend to sell for higher amounts.  In fact there were 207 new home sales with a median price of $498,000.

Pending sales seem to have slowed a bit with only 3734 homes listed as pending sales as of 1/15/09.  The median list price of those pending sales is $365,000 so it seems a lock that we’ll have at least another 10% decline. 

The low end of the market is still falling fastest.  Every day I see more single family properties listed for under $300,000.   We’re back to 2003.

Brad Davidson
We Help-U-Buy Realty

Upper end properties are not moving and equity holding sellers are scarce.  Of the November sales, 1,128 were distress sales.  Those 1,128 properties were either bank owned, short sales or in some stages of foreclosure, 58% of all MLS sales. That’s an ugly statistic.

On the bright side, the price decline may be slowing.  The median asking price of pending sales is $375,000.  That’s the smallest price difference I’ve seen between pending sales and closed sales since I began tracking these numbers in the summer.

While the price slide appears to be slowing, there will be a new wave of foreclosures hitting the market after the first of the year.  Fannie and Freddie both put moratoriums on foreclosures through December 31st and lenders are catching up with new notification requirements. 

I’m sure there are lots of situations like the house next door to mine.  It’s been sitting vacant for about eight months now and the bank didn’t bother to file a Notice of Default until September.  No Notice of Trustee’s has been filed and they could have easily foreclosed and had possession by now.   They must be very busy not to have moved on a $650,000 asset in a good neighborhood.  It going to be a very slow recovery.  If you’re looking to buy property, there’s no need to rush out and join the legions bidding up the REO prices, you won’t miss the bottom.

Brad Davidson

We Help-U-Buy Realty

Last month the MLS shows 2,323 residential sales in October with a median price of $416,500.  Down another $12,500 from September.  What a difference two years makes.

In 2005 I sold a rental house I owned on the Westside of Costa Mesa for $500,000.  I’d had the same tenants in it for years and it as a fixer.  The buyer did a quick remodel (kitchen, baths, carpet, paint and added a garage) and sold it for $625,000.  That same house came on the market last week, as an REO, for $311,000.  50% off the price from less than 3 years ago.  OUCH.

Sales numbers are going to creep down for a few months as the end of the year is always slow.  REO sales are also slowing as the brokers are getting fewer assignments because the lenders are having to meet new notification requirements before filing foreclosure notices and holding trustee sales.  But I feel that the reports that foreclosures are tapering off is premature. So many people are upside down that the temptation to walk away will lead to many more REO’s.

While the prospects are dismal if you’re underwater, the demand for low price REO’s never ceases to amaze me.  I’m constantly seeing bidding wars for well priced property.  Ten or more offers are not uncommon and sale prices ten percent above asking don’t surprise me.

Brad Davidson

We Help-U-Buy Realty

From the figures in the MLS the Median price of all homes sold last month (September) comes in at $429,000.  That’s down another $11,000 from August.

As of October 4, 2008, there were 4,232 pending sales in Orange County with a median asking price of $399,500.  My tracking of pending sales has been an accurate predictor of future prices thus far and it will be interesting to see if the trend holds true.

I have a lot of contacts in the REO business and I’m being told that the number of BPO (broker price opinion) orders are high.  Lenders order BPO’s when a property enters foreclosure to get an idea of what the property is worth for when it’s an REO or for a short sale negotiation. These contacts feel that the next wave of foreclosures could be big.  Not surprising considering everyone who bought for about a two to three year period is underwater.

Even the house next door to mine is empty and the lawn is brown.  It would have sold for more than $800,000 two years ago.  I’m told no neighborhood will be immune in the next wave.

Brad Davidson

We Help-U-Buy Realty

There were over 4,000 pending sales when I ran the numbers in April and perhaps it takes the properties longer to run through the system than I had thought.  When the figures for July came out in August the median sales price was $466,000.  Perhaps the median sales numbers are a three month lagging indicator.

Another factor is that the sales numbers as reported in the OC Register from Data Quick include new home sales.  That definitely skews the median upward. 

In July I wrote “For the 4,183 pending sales as of July 7, 2008, the median list price is $439,000.”  Today, September 3, 2008, I looked at closed sales reported in the OCMLS and found 2,351 closed sales reported with a median sales price of $439,000. 

$439,000 seemed like an awfully big drop 2 months ago but I have been shocked at how far and how fast the market has dropped.

I also ran pending sales as of September 3, 2008, and as of today the median LIST price of all pending sales is $411,000.  That is another big drop and it looks like a cold winter for the housing market.

Brad Davidson

We Help-U-Buy Realty

You’re going to hear it here first. Data Quick will be coming out with their sales figures for June in the next week but I’m going to try and beat them to the punch each month. I don’t know how my numbers are going to measure up in comparison with Data Quick’s far more detailed studies but I’m going to give it a shot. What I think will be very interesting is using pending sales to try and predict future median prices.

Here goes!! According to the totals on the MLS website, June home sales in Orange County totaled 2,176 residential properties. These are mainly resale homes as the majority of new homes are not listed in the MLS. The median sales price of these homes was approximately $475,000.

According to the MLS, May sales totaled 2,135 properties with a median price of $480,000. According to Data Quick and as published in the OC Register, there were 2,266 sales and the median price was $485,000. Given the disparity in the total sales numbers, I’m content with the $5,000 price difference and if the June number is within $5,000 of $475,000 it’s all good.

I’ve always thought that the data provided on homes sales was of marginal value. I’ve long realized that the sales figures as published by the media are a lagging indicator. The 2,176 sales in June are deals that were negotiated in April and May, some I’m sure in March. In essence the median sales figures are two months old.

As of July 7, 2008 residential listings, categorized as pending sales or in back up offers total 4,183 properties. I’ve been tracking this number for the past few months and find it interesting that there are typically twice as many pending sales and back up offers as there are closed sales for the prior month.

A far more interesting number I’ve been tracking is the median list price of the homes categorized as pending or in back up offers.

I wanted to come up with a median sales figure that would be more current and perhaps be a better market gauge than numbers that were essentially two months old. I first tracked the list price of homes in pending sales on April 31, 2008. This is the unscientific part because I’m tracking the price the properties are listed at, not the sales price. While unscientific, my first set of numbers hold up remarkably well. The median listed price of pending sales and back up offers was $475,000 as of April 30, 2008. The same price as I show for closed sales for the month of June 2008!

While I have read that the median sales price number has ticked up a bit, it’s not what I see in pending sales. For the 4,183 pending sales as of July 7, 2008, the median list price is $439,000. If that number were to hold up when the actual sales figures for August are released in September, it would be a continuing slaughter for the OC real estate market. I think the median number will be higher because there are a lot of short sales and REO’s in the pending sales that actually sell for over the list price.

Then again, when I first ran these numbers in April and came up with the $475,000 median, data Quick had just released the March numbers showing a median of $506,000. $475,000 seemed pretty low then too.

I hear Orange County is looking for a new real estate oracle now that Gary Watts has publicly apologized for being wrong. I’ll track these number every month and report here and see how I do.

Brad Davidson
We Help-U-Buy Realty

Here are some prime examples of the losses they’re taking.

23 Leeds Ln., Aliso Viejo

3bdr 2ba 1800 sqft. On the market for $489,000. This house sold for $685,000 in May 2004. We weren’t even at the peak yet in 2004. The buyers put $75,000 down when they bought but pulled that same $75,000 out a year later. The bank eats the entire $685,000 plus the 4 to 6 month of payments that weren’t made plus 6% of the sales price going to commissions.

Let’s add it up: (all rough numbers but close enough)

Price difference    $196,000

Missed payments $ 18,000

Commission           $ 29,000

                               $ 243,000

2 or 3 different lenders are losing $243,000 on a $685,000 loan. That’s a 35% loss. And we’re talking Aliso Viejo, an area of relative stability.

Next.

21595 Audubon Way, Lake Forest

3brd 2 ba, 1070 sqft. On the market for $372,500. This house sold for $605,000 in November 2005. 100% financing. Interesting fact…. the Trustees sale date in the tax record is dated 5/29/08. The bank took this property back less than a month ago.

Here’s what the banks lost:

Price difference     $233,000

Missed payments $ 17,000

Commission      $ 30,000

                           $270,000

Lenders are losing $270,000 on a $605,000 loan. That’s a 44% loss. I’m really surprised at how hard hit Lake Forest has been. I’ve always thought of it as a desirable area.

Here is the winner, or loser if you own stock in large lending institutions.

1609 S. Woodland Pl., Santa Ana

3 bdr 2 ba 1290 sqft. On the market for $305,000. Sold for $587,000 in August 2005. 100% financing through New Century. Plus they got a $25,000 equity loan from BofA in 2006.

Bank Loses

Price difference     $ 282,000

Missed payments  $   17,000

Equity loan             $  25,000

Commission            $  18,000

                                 $352,000

Lenders are losing $352,000 on a $587,000 loan. That’s a 60% Hit!!!! That is a big fat red mark on the balance sheet and there are hundreds more in Santa Ana.

You can go back and read my initial interview with Chuck Ponzi (then known as John Doe) about my We Help-U-Buy Realty concept from June 2006 and see my thoughts from then on “The Bubble”. I prefer my crow medium well please, because I was wrong , wrong, wrong. I knew the market couldn’t keep going up and that there would be a correction but I didn’t understand the implications of the ridiculously lax credit standards and what would happen when banks stopped handing out free money. At the time I thought there would be a softer landing.

The Option ARM loans made me see the light. I was still dabbling in the lending business 18 months ago and when the lenders started offering up to 4% commissions to sell people negative amortization loans I could smell trouble. By last summer, before the credit crisis, I was telling clients to not buy houses. It tends to have a significant impact on sales when you start telling your clients not to buy what you sell. However, I sleep very well at night and have a very loyal client base.

There are still storm clouds on the horizon as foreclosures continue to rise, the median price continues to fall and sales gains are driven by low priced bank owned properties. I do see some stability in prices at the levels at which banks are selling their REO properties. People are lining up to buy the REO’s and if they continue to show up and buy these properties a base will be established. If sales die off, as they usually do at the end of summer, inventory will rise again and prices could fall some more.

With the banks foreclosing on over 2,000 Orange County properties in May and June, REO’s are piling up in the banks inventories faster than they can be sold. Even though I see considerable pent up demand, and I’m busier than I’ve ever been, prices will be stagnant at best through next year.  It’s going to take at least that long to work through all the distressed properties that will come onto the market.

I hope I’m better with my predictions in June 2008 than I was in June 2006. These are very interesting times and I look forward to passing along what I see in the marketplace and getting your opinions about real estate in Southern California.