Housing Market – Pow wow

[SD Transplant]

State of the Housing Market thanks to Bruce Norris http://www.thenorrisgroup.com/

These are notes and take aways by a SDCIA forum member that participated to Bruce’s pow wow.

source: http://sdcia.websitetoolbox.com/post?id=5012214

* If foreclosures followed delinquencies, we’d have about 4x as many REO’s on the market as we currently do. (I’m referring to the graph showing that while delinquencies are higher then ever, actual foreclosures are at the same level as when delinquencies were much lower.

This was by far the most interesting topic/graph of the night in my opinion. We had previously heard respected members of our community mention that banks were holding back inventory, but it was hard to prove the shadow inventory existed based strictly on comparing foreclosures to REO sales (most foreclosures could be tracked to the REO process). However, when you look at how few foreclosures and NOD’s are being filed compared to how many homeowners are late…the numbers are quite scary.

* Will their be a buyer shortage? Bruce again mentioned what many of us had discussed here: 1. Many buyers “moved up” their purchase to take advantage of the tax credit. 2. Most buyers do not have 20% down. 3. Many buyers cannot qualify for high end properties. 4. Many buyers cannot buy because they just foreclosed.

I thought his ideas of assuming loans, opening auctions at the unpaid balance (not principal), and offering new government programs were a bit ambitious and perhaps unrealistic…but who knows. If the government can work with the banks to “rig” the foreclosure process, who knows what else they will come up with.

* Buy now if you can cashflow. We have heard this all before, but it makes sense. Who cares if prices drop if you can cashflow and enjoy the tax benefits and amortization.

I think perhaps this is more relevant to places like Riverside and perhaps some areas in North County, but for many of us in San Diego, I think it is difficult to cashflow homes even at these low interest rates.

* Most deals are coming from Trustee sales and REO’s. Very few deals are coming from private sellers. More deals are coming from short sales.

* Just because rates go up, does not mean prices go down. This has been greatly debated here in the inflation/deflation thread. Some think higher rates and inflation are on the way. Others think that we will continue to see a decline in prices and rents.

I’m torn what to believe here. I have seen signs of both inflation and deflation.

* Affordability in California is at an all time high. I thought this was a VERY interesting statistic.

The thing that stuck me most about his presentation is that he did not say one way or the other if we have hit bottom. I guess the bottom is hard to predict with such extreme government involvement and manipulation. Bruce seemed to hint that he thought the feds would step in to keep the market “right side up” but modest declines could still be realized. Hence him saying that being able to cashflow a property was crucial should be experience another leg down.

The main takeaway:

If you look at the market strictly based on supply and demand, things look ugly as the demand (people who can actually qualify to buy that have not already bought) will not support the supply (if you include the tremendous “shadow inventory” of delinquent buyers. BUT, the Government is determined to manipulate the market in a way to keep a major collapse from falling. Therefore we must closely follow the governments actions.

Interesting times we live in. I was taught in school that we had a free market economy in America. I’m starting to think my teachers were wrong.

[JBurkett19]

I agree that the gov’t will continue to be involved. But, with that said, the banks are borrowing from the Fed at near zero percent, and lending it bank to us at 2-3% by buying treasuries. Since this is being done on purpose, I think the banks should take all losses associated with the housing problem. The Fed should also charge them interest on the money they have sitting at the Fed. The banks didn’t do proper diligence when lending the money in the first place and they misrepresented their offerings to invenstors in Mortgage Backed Securities, so they’re ultimately to blame. The Banksters are filling in their financial gaps with our money, and the Fed is allowing it to happen by design. Folks should be outraged if the banks don’t absorb the housing losses and contribute more to fixing the probelm.

[JBurkett19]

I agree that the gov’t will continue to be involved. But, with that said, the banks are borrowing from the Fed at near zero percent, and lending it bank to us at 2-3% by buying treasuries. Since this is being done on purpose, I think the banks should take all losses associated with the housing problem. The Fed should also charge them interest on the money they have sitting at the Fed. The banks didn’t do proper diligence when lending the money in the first place and they misrepresented their offerings to invenstors in Mortgage Backed Securities, so they’re ultimately to blame. The Banksters are filling in their financial gaps with our money, and the Fed is allowing it to happen by design. Folks should be outraged if the banks don’t absorb the housing losses and contribute more to fixing the probelm.

[JBurkett19]

I agree that the gov’t will continue to be involved. But, with that said, the banks are borrowing from the Fed at near zero percent, and lending it bank to us at 2-3% by buying treasuries. Since this is being done on purpose, I think the banks should take all losses associated with the housing problem. The Fed should also charge them interest on the money they have sitting at the Fed. The banks didn’t do proper diligence when lending the money in the first place and they misrepresented their offerings to invenstors in Mortgage Backed Securities, so they’re ultimately to blame. The Banksters are filling in their financial gaps with our money, and the Fed is allowing it to happen by design. Folks should be outraged if the banks don’t absorb the housing losses and contribute more to fixing the probelm.

[JBurkett19]

I agree that the gov’t will continue to be involved. But, with that said, the banks are borrowing from the Fed at near zero percent, and lending it bank to us at 2-3% by buying treasuries. Since this is being done on purpose, I think the banks should take all losses associated with the housing problem. The Fed should also charge them interest on the money they have sitting at the Fed. The banks didn’t do proper diligence when lending the money in the first place and they misrepresented their offerings to invenstors in Mortgage Backed Securities, so they’re ultimately to blame. The Banksters are filling in their financial gaps with our money, and the Fed is allowing it to happen by design. Folks should be outraged if the banks don’t absorb the housing losses and contribute more to fixing the probelm.

[JBurkett19]

I agree that the gov’t will continue to be involved. But, with that said, the banks are borrowing from the Fed at near zero percent, and lending it bank to us at 2-3% by buying treasuries. Since this is being done on purpose, I think the banks should take all losses associated with the housing problem. The Fed should also charge them interest on the money they have sitting at the Fed. The banks didn’t do proper diligence when lending the money in the first place and they misrepresented their offerings to invenstors in Mortgage Backed Securities, so they’re ultimately to blame. The Banksters are filling in their financial gaps with our money, and the Fed is allowing it to happen by design. Folks should be outraged if the banks don’t absorb the housing losses and contribute more to fixing the probelm.

[sdrealtor]

Of course we are all outraged. There just isnt a damn thing we can do about it. The best we can do is look to take advantage of the cards that have been dealt us to the best of our ability.

[sdrealtor]

Of course we are all outraged. There just isnt a damn thing we can do about it. The best we can do is look to take advantage of the cards that have been dealt us to the best of our ability.

[sdrealtor]

Of course we are all outraged. There just isnt a damn thing we can do about it. The best we can do is look to take advantage of the cards that have been dealt us to the best of our ability.

[sdrealtor]

Of course we are all outraged. There just isnt a damn thing we can do about it. The best we can do is look to take advantage of the cards that have been dealt us to the best of our ability.

[sdrealtor]

Of course we are all outraged. There just isnt a damn thing we can do about it. The best we can do is look to take advantage of the cards that have been dealt us to the best of our ability.

[permabear]

Thanks for the great summary and comments!

I agree with sdr about what we should do as individuals short-term.

In the LONG TERM, the best bet we have of reining in casino capitalism is supporting Ron Paul’s campaign to end the Fed. It should be closed due to its rampant corruption and banker bailouts – the same reasons the previous 2 central banks in the U.S. were closed.

[permabear]

Thanks for the great summary and comments!

I agree with sdr about what we should do as individuals short-term.

In the LONG TERM, the best bet we have of reining in casino capitalism is supporting Ron Paul’s campaign to end the Fed. It should be closed due to its rampant corruption and banker bailouts – the same reasons the previous 2 central banks in the U.S. were closed.

[permabear]

Thanks for the great summary and comments!

I agree with sdr about what we should do as individuals short-term.

In the LONG TERM, the best bet we have of reining in casino capitalism is supporting Ron Paul’s campaign to end the Fed. It should be closed due to its rampant corruption and banker bailouts – the same reasons the previous 2 central banks in the U.S. were closed.

[permabear]

Thanks for the great summary and comments!

I agree with sdr about what we should do as individuals short-term.

In the LONG TERM, the best bet we have of reining in casino capitalism is supporting Ron Paul’s campaign to end the Fed. It should be closed due to its rampant corruption and banker bailouts – the same reasons the previous 2 central banks in the U.S. were closed.

[Author]

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