San Diego Housing Bubble News and Analysis

I would welcome the foreclosure wave around my neighborhood (Diamond Bar, eastern LA county). There's only one foreclosure listed in a neighborhood of over 700 homes. This explains why prices are holding firm near all time highs. Meanwhile I rent and wait, and wait....

Already posted by Rockemsock in this thread here:

http://piggington.com/march_nod_and_not

But definitely worth a read for those that haven't seen it.

Although I'm not too familiar with your neck of the woods, if you really want to get in on a good deal, you might want to look in Riverside County. Places like Lake Elsinore, Murrieta, Temecula, and Menifee continue to have more than the average share of foreclosures compared to the rest of Southern California. And if this article turns out to be accurate, the entire region will have an increased supply in the coming months.

Don't worry - your wait would surely give you some meaningful yield, however you need to be firm on the wait - don't even get into these cheap tricks giving to us these days as 8K bonanaza etc. The plenty of drops and heavy downturn is ahead

Govt intervention may stall this once again.

The gov is already trying to take care of seconds, as was posted on this thread

Also - it would have been nice if Mr. Mortgage would have mentioned SBX2 7 Senate Bill in California (especially since I emailed him)

Excerpt:

SB 7, Corbett. Residential mortgage loans: foreclosure.
Existing law requires that, upon a breach of the obligation of a
mortgage or transfer of an interest in property, the trustee,
mortgagee, or beneficiary record a notice of default in the office of
the county recorder where the mortgaged or trust property is
situated and mail the notice of default to the mortgagor or trustor.
Existing law provides that, after not less than 3 months after the
filing of the notice of default, the parties described above may give
notice of sale, stating the time and place of the sale, as
specified.
This bill, until January 1, 2011, and only with respect to
specified loans that were recorded between January 1, 2003, to
January 1, 2008, would prohibit a mortgagee, trustee, or other person
authorized to take sale from giving a notice of sale for an
additional 90 days if the loan at issue is the first mortgage or deed
of trust that the property secures, the borrower occupied the
property as his or her principal residence at the time the loan
became delinquent, and the notice of default has been filed

So in conclusion, though I know there's a tsunami of foreclosures on the horizon and we're already thrashing about in the surf, it remains to be seen. I'll just keep monitoring my little corner of the world.

Edit - I was trying to find the thread here on Piggington about this bill.

Other excertps:

Lowers rates AND
(D) Reduction of principal.

This section shall remain in effect only until January 1, 2011, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2011, deletes or extends that date.

The saving grace:

Nothing in this section or Section 2923.52 shall require a servicer to violate contractual agreements for investor-owned loans
or provide a modification to a borrower who is not willing or able to pay under the modification.

As if someone won't lie and say they are not investors - and who the heck won't be able to pay if their principle and interest is reduced.

I'm sorry that you live in Diamond Bar. I grew up there....it sucks. If you want to do anything fun you have to leave the city. They missed the boat while Chino Hills and Brea grew. Congrats on finally getting a Target and Chili's. It's about 20 years overdue.

I'm not here to defend Mr.Mortgage, but I believe his predictions regarding the next foreclosure wave includes the entire country, not just California. And the California bill "SBX2 7" doesn't go into effect until July 1st, which means it will have little, or no, influence on foreclosures already in the pipeline that should hit the market this spring/summer. In fact, the California bill will only repeat what an earlier version did, which was to delay the inevitable.

A far more important modification program that could put a serious dent in future foreclosures is the Obama plan to modify 2'nds. If servicers go along with the bribes, sorry, I mean "plan", that could slow the foreclosure market to the point of being irrelevant.

April, May and June...then the moratorium stops the hemmoraging. Should be interesting to see how many actually hit the market. I guess the telling tale will be the number of NOT's on the courthouse steps. If MM is right, that number should be quite large.

Chicobeaks, you're right that there isn't much to do in Diamond Bar, however it is very centrally located for my job with great access to LA, OC, SB and RIV counties via nearby crisscrossing freeways. I'm a field service engineer which requires me to travel all over the damn place. What pisses me off is how the home prices refuse to go down here due to lack of foreclosures. I just looked on Redfin, and they list all of 4 foreclosures on the market for a city of 58,000. I live in a gated community of about 700 homes, and there is one foreclosed vacant lot only. There is only one home listed for under 1 million. People are still asking 2006 prices. It's very frustrating to me, since I sold my home in late 2005, and have been renting ever since. Patience is truly a virtue.

Pretty pathetic that we are all reduced to guessing how distorted the market will be due to intervention.

Ok. That's true that the bill won't commence until June. Guess we'll have to wait and see what happens. I can say that many of the NODs that I noted in January have foreclosure dates scheduled in April/May. The ones in December I've seen now listed for sale bank owned.

So banks seem to be moving quicker at least in that respect. Though as I've stated on other threads MANY of these places were not even listed for sale, attempting short sale. I don't know if that's a factor.

Ain't that the truth. The wildcard in all of this will be future interest rates. Its my best guess that most of San Diego County (not including CV,Oceanside) will continue to drop in price for the remainder of the year, even with the currently low mortgage rates. When rates go up the question will be, how high will they go ? The Federal Reserve can intervene for only so long before they create hyperinflation, so at some point the Feds will back off and mortgage rates will spike. Only then will we see what the true bottom really looks like.

Sure looks like the govt is trying to make the train wreck a slow and somewhat managed crash. Instead of one huge and devistating drop to the floor. Hence the low interest, low down payment loans and stalling the foreclosure process.

Give away funding and dribble out the inventory. Fired-up demand and supressed supply. I guess it's one way to attmept to control a market. But one must consider how long this can be continued? Sounds like a methodology to keep the market in kind of limbo for a long time.
Strange days, indeed.

The problem with their method is that they are setting up the next wave of foreclosures. If we don't get to cleanse all the weak hands out of the market, then it's only a matter of time before they fail. The longer they drag this out, the longer we will have to deal with higher unemployment and unbearable debt loads.

The solution to the credit bubble is debt repudiation.

We can do this via everyone walking away, letting the debt holders fail (a good thing, since they need to learn NEVER to make the same mistakes again), OR we can inflate our way out. If we inflate, then the gamblers are made whole at the expense of those who were responsible and did the right thing. The responsible people will have learned a lesson here, too. If the FBs are bailed out, we will have no option but to game the system in the future as well. High credit scores and living below one's means will become meaningless, as we all gamble away, expecting the govt/taxpayers to bail us out of all our messes.

Moral hazard, indeed.

LOL, here come's the shadow inventory/REO's, finally...

http://piggington.com/spike_up_in_median...

As unemployment persists and the news gets out that the banks will negotiate if you go into NOD status may create a lot of pressure on the system. If nothing else, everyone keeps hearing how you can stay in your house without paying your mortgage for a long time. The free market does not want to be denied.

"The free market does not want to be denied."

Real estate ceased to be a free market quite awhile ago. If it was a free market prices would be a whole lot different then they are now.

What happens after this wave? There's no talk about another wave beyond this one. I failed to realize this until now as the excitement on the boards builds about the release of the phantom inventory to the public, what about the third wave, is there one? Will the mouse have passed through the snake already, is there no third wave and the frenzy that will be created because it is the last wave be enough to swallow it? I know everyone will disagree but the stock market usually recovers before markets do and the homebuilders have been on fire. I left thousands on table not acting on my March 6th pick of hovananian (HOV) which hit 7x it's march low today, so I looked at the others, all up 2x, 3x, 4x, 5x, 6x and 7x from their lows. Lennar, centex, standard pacific, dr horton and hovnanian, the worst you could have done was double your money and at best, lotto style. What do billions of dollars know that we don't, why are investors picking up national builders from the scrap heap? Do they think that after this wave is sold off that will be the end of it and the surviving builders will feast on the wreckage. It feels like the fix is in, I'm so mad at myself I didn't see the big picture because I did notice the small picture. The powers that be orchestrated this, the last big batch of repos will hit during the height of the season, with record low interest rates and record tax incentives and released into an inventory starved market, coupled with intense media coverage. Joe six pack is gonna feel like it's his last and best chance. piggys are supposed to know what joe six pack thinks before he thinks it. I think the power brokers have done a fantastic job, we should have seen it coming, we are smart enough to. While it's readily apparent that i switched camps, from bear to bull in recent months, I'm afraid I switched too slowly, the bear koolaid was still in my system just enough to scare me, I waited for data and data always comes too late, obi wan would be dissapointed in me. Exactly two months ago I sat in my backyard, drinking a 30 year old port, smoking a macanudo with some buddies and talked about my theories that i need to place my bets before this thing turns around, my tax refund was in an account and I talked about buying a cash flow rental or six carefully selected stocks, Ford was a buck and Hovnanian was fifty one cents. So I just drank and enjoyed the evening and in the end i thought there is more trouble on the horizon, I'll just stockpile the cash, maybe increase my canned goods and ammo. Genius move on my part, staying behind the curve, so now I'm out sonewhere between 30 and 40k, a mid 1960's convertable porsche 356 could be completely paid for and in my driveway, but it's not. I stopped thinking about the amount and caliber of ass i could pull rolling in a sled like that, I'm all cried out, I have no tears left.

So here we are, the phantom inventory is supposed to hit soon, do you have your money ready, do you have pre approval, are you certain as to the location of your testicles. I'm not saying it is your last shot but now that i think about it, I kinda feel it is, it's what the tea leaves are telling me. many people will constantly remind me in 2010 and 2011 if I'm wrong, but if I'm not and 2009 goes down as the over correction, I'll ride that horse till she drops, but I'll always wish I bet on my own advice and i'll just have to find another way to get that sled. Or I can switch gears from cougar hunting to saber tooth tiger hunting, same hunt, except the prey is more ancient and longer in the tooth.

At least the lakers won and fish put scola on the deck, the earth will still rotate.

Yup, it's a bottom, no doubt in my mind. Get out there and buy, buy, buy.
Leverage long on an illiquid asset. Great way to really make a killing. Or be killed.
Place your bets.

"What that chart shows is that the foreclosure problem is about to get a lot worse. Two more huge waves of "resets" are coming. Many, many, many more homes are about to reach a point of unaffordability for a lot of their owners, one way or another those homes will also be for sale, on top of the huge inventory that already sits unsold, and this will drive prices down even further, which will trigger even more problems."
http://www.huffingtonpost.com/dave-johns...
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Second wave of foreclosures coming to Inland SoCal region
By BizPresson April 6, 2009 9:31 AM | Permalink | Comments (0)
From The Californian. Another wave of house foreclosures is poised to rumble through Southwest County, further disrupting an economy already trying to absorb the first wave of foreclosures and deal with a growing jobless rate.

'We have unsustainable debt taken out during the housing bubble and it hasn't popped yet,' said Chris Sorensen, a Temecula-based mortgage and real estate expert retained by the county to lead a series of classes on avoiding foreclosure
http://blogs.pe.com/bizpress/2009/04/cru...

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As did the first wave of foreclosures, the next wave will reverberate through the economy ---- but the impact likely will be greater.

"The jobless rate will be a big factor," said Bruce Norris, founder of the Norris Group in Riverside, a real estate investment and training company.

The unemployment rate is almost 12 percent in the Riverside-San Bernardino county area.

Nationally, a banking and mortgage system already choking on hundreds of thousands of foreclosures soon will be forced to take in more. Figures compiled by the group show that some 700,000 homes across the country stand in what's called a "shadow inventory," dwellings that have been taken back by banks but not yet given to an agent.

"When you have an adjustable rate and lose your job, ... we will have a lot more foreclosures and people leaving the state to find jobs," Norris said.
http://www.nctimes.com/articles/2009/04/...
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A Second Mortgage Disaster On The Horizon
"It was data we'd never seen before and that's what made us realize, 'Holy cow, things are gonna be much worse than anyone anticipates,'" Tilson says.

The trouble now is that the insanity didn't end with sub-primes. There were two other kinds of exotic mortgages that became popular, called "Alt-A" and "option ARM." The option ARMs, in particular, lured borrowers in with low initial interest rates - so-called teaser rates - sometimes as low as one percent. But after two, three or five years those rates "reset." They went up. And so did the monthly payment. A mortgage of $800 dollars a month could easily jump to $1,500.

Now the Alt-A and option ARM loans made back in the heyday are starting to reset, causing the mortgage payments to go up and homeowners to default.

"The defaults right now are incredibly high. At unprecedented levels. And there’s no evidence that the default rate is tapering off. Those defaults almost inevitably are leading to foreclosures, and homes being auctioned, and home prices continuing to fall," Tilson explains.

"What you seem to be saying is that there is a very predictable time bomb effect here?" Pelley asks.

"Exactly. I mean, you can look back at what was written in '05 and '07. You can look at the reset dates. You can look at the current default rates, and it's really very clear and predictable what's gonna happen here," Tilson says.

Just look at a projection from the investment bank of Credit Suisse: there are the billions of dollars in sub-prime mortgages that reset last year and this year. But what hasn't hit yet are Alt-A and option ARM resets, when homeowners will pay higher interest rates in the next three years. We're at the beginning of a second wave.

"How big is the potential damage from the Alt As compared to what we just saw in the sub-primes?" Pelley asks.

"Well, the sub-prime is, was approaching $1 trillion, the Alt-A is about $1 trillion. And then you have option ARMs on top of that. That's probably another $500 billion to $600 billion on top of that," Tilson says.

Asked how many of these option ARMs he imagines are going to fail, Tilson says, "Well north of 50 percent. My gut would be 70 percent of these option ARMs will default."

"How do you know that?" Pelley asks.

"Well we know it based on current default rates. And this is before the reset. So people are defaulting even on the little three percent teaser interest-only rates they're being asked to pay today," Tilson says.
http://www.cbsnews.com/stories/2008/12/1...
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By LESLIE BERKMAN
The Press-Enterprise

Lenders for months have been holding back a high volume of homes in the foreclosure pipeline that could further depress home values if they are released at once into the market, industry experts say.

The artificially created shortage of foreclosed homes for sale comes when there is a strong resurgence of home buying, with consumers finding, often to their surprise, that they must make multiple offers to compete for a diminished supply of bargain homes.

Meanwhile, financial institutions have been encouraged by federal and state lawmakers to slow the foreclosure process to provide more time to work with borrowers on mortgage modifications in an effort to reduce foreclosures.

Scott Anderson, vice president and senior economist with Wells Fargo, said also by withholding a portion of foreclosed properties from the market, lenders may deliberately be preventing home prices from falling as fast as they otherwise would.

A tally by one company that closely monitors foreclosures showed only about a third of repossessed houses are being actively marketed. If this "phantom supply" of bank-owned houses is put up for sale at once, Anderson said, it would probably prompt another steep plunge in property values.

http://www.pe.com/localnews/inland/stori...

An economist in the Kansas City said this Thursday that a second grueling wave of the house foreclosure is perched to hit as the subprime mortgage chaos recedes.

Senior economist of the Federal Research Bank of Kansas City, Kelly Edmiston crashed that unwanted prediction at the Fed’s Money Smart program.

“I don’t expect the foreclosure problem to get much better in the next couple of years. In fact, it may well get worse,” Edmiston told.

Subprime mortgages stimulated their personal foreclosure catastrophe before because their expenses naturally rearrange after two years rather than five.

As said by Edmiston, such next mortgage rearranges will denote even bigger jumps in house costs than subprime mortgage retunes that compelled one in every five borrowers with changeable interest rates to foreclosure
http://www.foreclosurewarehouse.com/blog...
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Mortgage Modifications Fail, Huge Foreclosure Wave Coming
http://www.businessinsider.com/mortgage-...
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The Next Wave Of Foreclosures
Maurna Desmond, 04.22.09, 12:01 AM EDT
Falling home prices and rising unemployment are set to spread the pain.

Moody's estimates that if the Obama administration's two-pronged anti-foreclosure effort gets going, there will still be more than 5 million foreclosures over the next three years. "At the moment, that feels optimistic to me," Zandi says.
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Coming Wave of Resets - Is there a Simple Answer?

According to an article written last week by Eric Uhlfelder, Credit Suisse maintains that about $1 trillion in Alt-A and option payment mortgages are scheduled to have rate resets in the next 30 months. These resets, the bank says, could cause as much future damage as the subprime crisis has already inflicted.

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4-10 Forward Look at Defaults, Foreclosures, Banks and Housing
Saturday, April 11th, 2009 | By Mr. Mortgage

But coming down the pipe is a massive wave of mortgage Notice-of-Defaults (NOD) that dwarfs the highs we saw when things began to get really out of control in Q1 2008.

Over 20 million homeowners underwater. 67% of mortgage holders have less than 15% equity. We are going to lose about 6-10 million jobs this year. There are literally millions of foreclosures coming. Millions.... And credit is still contracting. Of course, we should expect a fierce overcorrection, yet we don't even have a mean to revert to because of the deflation. That light at the end of the tunnel is a train.

Hey, RT, what were those same economist folk saying back in 2005? They were for the most part as rosy as they are now bearish. Imo if you listen to the national pundits rather than focusing on what is right in front of you in the market you are interested in and you are somewhat picky about the features you want in the house you are looking for...
you end up missing the so called "bottom". The real collapse, if it comes, will be in 2011 or 2012 when and if all the stimulus fails.

What is "right in front" of EVERY market I have looked at is a buttload of foreclosures sitting in shadow inventory AND a MASSIVE wave of Foreclosures getting ready to hit.

If that signals a buying opportunity to you then by all means jump in.

I challenge anyone to post a Foreclosure map of a hood they are interested in that does not scream WAIT!

"If that signals a buying opportunity to you then by all means jump in."
I WILL, as soon as some of that "massive shadow inventory" to be released includes a 4/3 house w/ a nice view in SEH for 180/sq. foot or less preferably on Genoa, Milan, Glencrest or Stargaze. I don't like any of the featureless junk(sorry homeowners) for sale now for <625K..Btw, have you followed the inventory for single family detached in South San Marcos?

http://www.sdlookup.com/Market-92078-San...

RT - I definitely agree there are a boatload for NODs out there. BUT - what if they do re-work a high percentage of them by reducing interest rates and/or principle or both? This will allow a high percentage to stay in their homes and thus many of those NODs will never hit the market.

Just trying to figure out the direction this is going. Banks have been sitting on these places for a long time. They have the government bailout. You would think during the spring season they would unload them, yet they trickle in. Are they still not wanting to take the loss or are they in negotiations w/the buyers?

Obviously if the re-work a high percentage of the loans, it will effect the direction of the market and outcome could be much different than we're thinking.

la times:

on Thursday that found that nearly 12% of U.S. homeowners were in arrears on their loans or in foreclosure. The numbers were even worse in battered states such as California, where 13% of homeowners were behind on their payments, and Florida, where 20% were late.<----That will keep rising.

It was the highest level of distress ever recorded by the trade group, whose numbers go back to 1972. <---That means no historical precedence.

The Obama administration's plan to stave off foreclosures could fall flat in California, where nearly one-third of mortgage holders are underwater on their loans -- many of them by amounts that would disqualify them for government-sponsored refinancing.

The problem is likely to be especially acute in areas like the Inland Empire, where homes have lost more than 40% of their value in the last year and nearly half the homeowners owe more on their loans than the properties are worth.

Real Estate is no longer local when you have numbers like these.

I'm not arguing that people are not upside down and in arrears. I agree. I see the NODs and it's massive.

trex just stated on the adjusted median thread that his sister just got an 80k write down from Wells Fargo. That's significant. I mean, 80k could buy you a place in some parts.

If banks follow suit, some of these NODs will never hit the market.

Some will never hit the market and some will and trying to figure out the percentage that will verse wont is impossible. Thinking it won't be significant is not rational. Lots more credit contracting which leads to lots of more job losses and lots more wage deflation. Which is a feedback loop to foreclosures that cant be stopped and rents going down.

Maybe the should just call for a price decline moratorium. Save us some money.