San Diego Housing Bubble News and Analysis

deleted

Interesting perspective. Are there any statistics on this? Another important but often forgotten fact is that most of the jobs created nationally in recent times are not family or living wage jobs that allow for purchase of a house, at least the good kind. Thus, we should expect a rise in the number of involuntary renters.

I doubt it's the lowest... Prior to the change in lending requirements you needed good credit and a good down payment (plus the income to meet the payments.) 20% down was minimum. We still have programs that let you put very little down - so there are more people that qualify now than did 30 or so years ago.

Factor in the fact that banks used to redline black neighborhoods - so that also reduced the number of people who qualified for loans. (It's where the term redlining comes from - the maps banks had that showed where not to make mortgages because of the demographic makeup. The areas that were unloanable were colored in red.)

I don't want to see redlining return. But I am very much in favor of bringing back the underwriting standards of old - you needed to save (a LOT) for a downpayment. You had to have a good, long term, career/income and you had to have very good credit.

"I believe that the % of the population that can qualify for a loan is possibly the lowest that it has ever been."

Not if Barney Frank and the rest of the clown squad in Washington can help it.

Do you honestly think they will sit idle?

I just noticed that it was Sheldon that posted the OP.

I realize you probably are comparing todays data to the previous 10 years or so. But, since you're in the business... do you think it's a good thing or bad thing that lending standards are tightening up? You're on the frontline. Obviously you can make more commissions if more people qualify - but the previous standards were so lax that people were put into homes they couldn't afford.

Personally I'd rather have more underwriting (even if it means more hoops and stress like in my case) and stricter standards for lending.

(disclaimer to the Piggs - I refinanced with HLS recently. He's a good mortgage broker, knows his stuff. And my loan did face some extra underwriting scrutiny due to the nature of my property.)

Perhaps you misunderstood my statement..

Many people who already have a mortgage cannot qualify for a second one. Millions of people have 6%+ mortgages and cannot qualify for a refi for various reasons.
Many others have no chance of qualifying.
Anyone with a recent foreclosure or late mortgage payments in the past year cannot qualify either.

20% down has not been the only option. I bought my first property in 1980 with 10% down.

FHA has become the new subprime lender by allowing 3.50% down but charging a funding fee to do it.
They are losing billions...

The % of the population that can get a loan today is probably the lowest % in a long time if not in history.

I believe that 10% should be the minimum requirement. 20% would result in lower home prices.

I would rather have a market with 20%+ down and deal with qualified buyers.
I'm not interested in making money off of ignorant people.
I have told plenty of people that they couldn't afford to buy a house. If they ended up with a FHA loan it wasn't from me.

UCG...
For the record, I don't get a commission for what I do. I charge a fee for my service and offer wholesale rates. There's a HUGE difference.
I don't get a penny from the lender unless the borrower decides they want a higher rate and higher monthly payment for the life of the loan instead of paying a fee.

This week, the national average rates are about 5.50%... I have 5.00% rate that comes with a fee.
At 5.50% I could get a commission but it's not in the borrower's best interest if they plan on staying in the loan for a few years..

People falling for no cost loans at higher rates will result in thousands of dollars of wasted money over time, through foolishness.
It's a decision that most people never get to make.

The wave of defaults crested 1000/month in September '06 and 2000/month in July '07.

How many of those who walked away from their mortgage in July '07 are eligible to buy a house today, under any reasonable terms (say, FHA)?

How many will be eligible a year from today?

HLS,

Thanks, as always, for your perspective.

Perhaps many of us are just bitter bears, but it seems to me that there is still plenty of money floating around. The RE market today is just as hot as it was during the boom, from what I can tell -- and we're out hitting the streets all the time. There appears to be no shortage of other buyers.

Are you turning more people away right now than before? Did you notice a particular change in the mortgage market recently, and if so, when did it happen?

Thanks!

Sorry Sheldon - Fee, not commisssion.
(and in my opinion you definitely earned it on our refi. thanks!)

There is plenty of money floating around ONLY because of govt programs. FNMA FHA etc. Did you see the recent multi billion dollar quarterly loss reported by FNMA ? How long will this be allowed to go on ??

Inflated housing is a ponzi scheme that will come to an UGLY end if the govt intervention stops.
Barney Frank, Up-Chuck Schumer, Carolyn Baloney, Christopher Dodd, Maxine Muddy-Waters all have blood on their hands in the housing bubble yet nobody confronts them.

As far as turning people away, they just don't qualify, the rate doesn't matter.
When subprime was around, if someone didn't qualify for a 6% loan, there was an 8%+ available.
Today if you don't qualify, there really is no alternative, other than hard money.

FHA wasn't needed a few years ago when 100% financing was available via subprime OR 80/20 loans. It is the new subprime. It allows people to buy houses with a low down. It artificially supports the market for now.

I think that it is fair to say that the vast majority of people who want a house already have one OR they cannot qualify to buy one.

Because a few people are chasing houses at the moment doesn't create a hot market like 2002-2005. The market is not as hot as it was during the boom when you realize that the availability of financing is 180 degrees different than it was during the bubble. The current demand is thin.
It only takes 2 fools bidding against each other to run prices up.

This is simply the greater fool theory at work.
VERY few ppl are buying second homes today.

The real question is whether the pool of qualified buyers disappears before the supply of available homes does. The govt cannot control the price of homes. They CAN control the availability of financing, tax credits and incentives which only artificially manipulates the market.

For every qualified buyer who buys a house today, that is one less in the pool. I think that pool is shrinking faster than most people realize.

Like you said HLS, those with blood on thier hands cannot turn back nor will they turn back. IMO they will continue to do "whatever it takes".

I am 50/50 on wagering that before the end of the current administration there will be some sort of direct lending program set up.

Furthermore all of the blame has been and will continue to be passed off to the current administration even though these guys were the ones in place pushing those policies through during that and this administration.

I'm a little confused HLS. Are you saying that the current rate is HIGHER than 5.50% if you don't get a commission?

I think he's saying he gets a fee with both rates - but if he were to push a buyer into a 5.5% - he'd also get a commission... But, having worked with him, he doesn't do that type of thing.

Murf..
At 5.50% NO fee is charged because the lender will pay.....
5.50% pays a commission. 5.00% does not
This weeks "average" rates were 5.50%
The point is that a lower rate is really available, but it comes with an upfront cost.
(Rates change daily)

Putting a borrower into the higher rate gets a commission from the lender. The higher the rate the higher the commission. It's a reward from the lender for screwing a borrower. (Not what I do)
If kept for many years, the borrower will pay thousands of dollars more in the long run.

The alternative is paying a fee up front and getting a lower rate/lower payment. It's a detailed explanation that most ppl don't understand, including those pushing loans.

There is no such thing as a "no cost" loan. IF there is no cost up front, it will cost a fortune in the long run. Usually the break even point is 2-3 years. Depends on individual circumstances.

I hope this makes sense.

Sheldon,

I sent you an e-mail at HLSloans [at] yahoo [dot] com earlier today.

Thanks for all your help,
Daniel

VERY few ppl are buying second homes today.

Good. You can only live in one house after all. Well, at least until you get divorced!

Perhaps fewer people can qualify for financing ... but I'd argue that of the people who qualify, more of them can afford a house.

BTW, thanks for the back-of-the-envelope analysis of a 10/1 IO ARM you did a few months back. I ran the numbers in detail and found out the payments will nearly triple if the 1-year LIBOR goes back to anything near historical norms!

So I take it points are also known as fees. I was always a little confused when I got my loan online from countrywide and was not sure where that half point went to, now I think I understand it went to the guy on the phones commission. Isn't it interesting how all these terms can be twisted around. I got a good deal, so I'm happy, the wife's happy so it's a win-win scenario.- Now about the government propping up prices and HLS saying people should put 20% down. Now that just doesn't make sense, if we are in an artificial price bubble the market could/should drop a lot more(when the government stops printing money) in that case who wants to be the smuck that put 20% down? If we are headed toward a Depression then it's smarter to save money than spend it on a down payment.

HLS

You wrote:

"Barney Frank, Up-Chuck Schumer, Carolyn Baloney, Christopher Dodd, Maxine Muddy-Waters all have blood on their hands in the housing bubble yet nobody confronts them."

Could you please elaborate on this a little? I'll be grateful. What did they do to bloody their hands?

Thanx

"who wants to be the smuck that put 20% down?"

As a taxpayer, I don't want to be that smuck [sic]. So I'd actually like the minimum downpayment on govt-supported loans to be 30-40% until market prices come down closer to stable levels. If we did that, they'd come down in a hurry, and we could move back to 20% quickly, but at a whole new sustainable price level. Yeah, I know, I'll just dream on. Barney Frank and Dodd and Schumer would never permit it.

Frank, Dodd and Schumer are the guardian angels of the easy housing money industry. As you know, the laws are made in Congress, and these guys made sure that vast amounts of poorly underwritten loans were made through the laws they supported and their power over regulators and companies like Fannie Mae and Freddie Mac. Others in power just went along, or were luke-warm, or are less powerful, but these guys fought like big feral cats for more liberal lending.

Pert..
See links below.. plenty of others avaialble.

These overpaid people have been influenced by lobbyists and been financially rewarded for their decisions.
There is plenty of information available on each of these people and their lack of ethics.
Oversight committees provide no oversight.
Ethics committees have no ethics.
We have some of the best people in govt that money can buy!

http://www.boston.com/bostonglobe/editor...

http://www.opensecrets.org/news/2008/07/...

http://americaswatchtower.com/2008/09/17...

This may explain why the low end segment has been selling well lately.

HLS, in your opinion, how much (percentage wise) of the buying activities at $300k or less can be attributed to FHA loans ?

pr I believe the spelling is shmuck.

Say it like you mean it man!!

Not HLS, nor pretend to be. But that is a thought nagging me. The FHA loan amount limit is what? And coincidentally, that's what's selling easily while the higher end languishes.

Hey, maybe they'll raise the FHA loan limit to 800k. Never say never. These rules change at whim and get crazier by the day.

Actually, I think it's spelled "schmuck", SDR. Sorry to be so pedantic, but I was a fanatical speller as a kid, and some things are hard to shake completely as an adult. However we spell the words, I think we feel about the same about the government intervention in the market for homes. It's kinda odd, because you probably get a net personal benefit from the intervention through your job (as a RE agent), and I probably do also, through my job in financial services.

But that doesn't compensate me for what I feel is the long term damage done to the economy, for the unfairness of rewarding irresponsibility over responsibility, and for the higher price I will have to pay for the place I live in next.

AN is correct $697,500 for San Diego county limit for a single family home/condo.
2 to 4 unit properties have higher limits.

LA-ORANGE county are $729,750 and higher for multi unit..as well as other counties.

I dont have the exact stats, but recall reading that something like 50% of recent CA purchases are FHA...it's pathetic!
Some people are foolishly getting FHA loans when they qualify for better/cheaper financing.
Others are being pushed into FHA on the advice of a realtor/mortgage salesperson, when they should be told that they shouldn't be buying a house.

The losses from FHA may be beyond belief. They are disguising the fraud by refinancing homes without appraisals. (If they can keep a borrower paying, they don't care how much they owe OR how upside down they are)

When 100% financing was available a few years ago via 80/20, FHA loans weren't very popular. They have skyrocketed the past couple of years as the market has declined. It's a recipe for disaster that the taxpayer will be picking up the tab for.

FHA is the new subprime that may implode.

But at least there are some qualifications to meet. They actually verify income with FHA, I assume. It's bad, but it's been much worse.

HLS,
What is the differences between FHA and California Housing fiinance Authority? Do you see one being more adventagous that the other?