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asragov.
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April 22, 2007 at 12:56 AM #8900April 22, 2007 at 7:17 AM #50763
lendingbubblecontinues
ParticipantC’mon. This is what you would expect, isn’t it?
Far more sub-prime (read: poor credit) borrowers exist in San Ysidro and Chula Vista SE than in places like Poway and Carlsbad.
It will be the sub-prime mess “spillover” that spoils the party for “desirable areas of San Diego North County.”
Patience will be rewarded.
April 22, 2007 at 7:50 AM #50766Anonymous
GuestI agree with lbc; patience, grasshopper.
April 22, 2007 at 8:03 AM #50769sdrealtor
ParticipantPatience and double inverse funds;)
April 22, 2007 at 9:39 AM #50776Bugs
ParticipantI disagree. The reason the subprime problems have started in those areas is because those are the weakest borrowers relative to the amounts they’ve borrowed. When subprime gets turned off the middle can move down in their expectations; the bottom has nowhere in the market to go but out.
There are just about as many NINJA deals floating around in the North County area as anywhere else. Right now, I’d say the only areas that are not as significantly effected by subprimes are the upper price ranges. However, all these market segments are ultimately connected, and what happens on the bottom will eventually make itself felt – albeit to a lesser degree – at the top.
Witness the pricing trends. When the market started to turn it was spotty and inconsistent. As the cycle has progressed that trend has spread to pretty much everywhere. Even the number of ultra-lux homes being sold has dropped off a cliff.
The effects of the subprime loans extended far beyond just the borrowers who used them on the way up; I see no reason why that would change on the way down.
April 22, 2007 at 9:51 AM #50777Participantsdr,
that double-inverse fund comment wasn’t for me, right? I’ve never mentioned anything like that.
Bugs, I’m glad you disagree as I am happy to hear that maybe things are already worse than I have supposed.
April 22, 2007 at 12:41 PM #507884runner
ParticipantI don’t think that it is “desirability” that makes a neighborhood a leading indicator. Instead, I think that it is the amount of mortgage activity in that neighborhood over the last 6-7 years. For the most part, this should reflect how “new” the housing is.
Look at it this way:
El Cajon: over the last 7 year, say 10% of the houses change hands/are used as ATM’s. At a 1% default rate, one home in 1000 enters the “must sell” inventory.
Chula Vista: over the last 7 years, say 80% of the houses change hands/are used as ATM’s. Even at the same default rate, eight homes in 1000 enter the “must sell” inventory.
Prices are going to be pushed down sooner in the newer neighborhoods like Chula Vista than the “less desirable” neighborhoods like El Cajon.
The neighborhoods that you think of as more desirable (La Jolla, Del Mar, etc) are just more developed and have a larger percentage of owners who don’t need to sell. However, I would expect the same to be other older neighborhoods, like Clairemont.
April 22, 2007 at 6:19 PM #50806ParticipantCorrect LBC,
That one was a tongue in cheek poke for our resident uberbear JG.sdiablo
April 22, 2007 at 10:03 PM #50819capeman
ParticipantDoes the sub-prime mess really matter in San Diego? This whole bubble mess is just getting started. What the sub-prime resets don’t do to more desirable areas the Alt-A and ARMs that Prime borrowers took out to ATM their house for toys will start nicking away at the market soon enough.
April 22, 2007 at 10:48 PM #5082123109VC
Participantexplain to me why the subprime melt down will hurt nice areas?
in the neighborhood where you have upper income people, who have good jobs, high incomes, …money…. when prices go down, they just sit tight, make their payments, and ride it out. they don’t have an ARM…they have a 30 year fixed and put down 10-20%..and have payments they are fine with. these people don’t drive the market down. yo may have the divorces, deaths, relocations, etc that force them to sell…but the majority just sit tight.
the nasty dirty areas where the gardner did a stated income loan and bought the 500k house he/she had no business even looking at…. now goes into foreclosure b/c they no longer can afford their neg am loan that reset…and the house goes short sale or foreclosure. you have piles of these in lower income areas….wherease you have less of these in nice areas.
if you have piles of forced sales, in less desirable areas, i see how prices go down. lots of inventory, maybe no to little demand..and prices drop.
but in a nice area, with well off people – how does the subprime market drops hurt these areas? i don’t see the connection? if the whole street were realtors, loan agents and roofers…maybe the housing slowdown hurts the street…but if you hve a doctor, lawyer, stockbroker, etc… all with good jobs/loans who can ride the storm out… why does their neighborhood go down?
April 22, 2007 at 11:30 PM #50824gn
Participant” … they don’t have an ARM…they have a 30 year fixed”
ARMs were used by people at all levels of incomes and credit scores. A quote from Business Week:
” Stories like these can be found across the socioeconomic spectrum, says Allen J. Fishbein, director of Housing & Credit Policy for the Consumer Federation of America. In a May focus group, the CFA found that option ARM customers at all income levels said the loans were the only way they could afford their homes. While many recognized that their mortgages could increase, “they professed complete surprise that they could increase as much as they could,” says Fishbein. That lack of diligence will cost them over time”
23109VC, you didn’t know this ? Where have you been ? 🙂
If you want to read the entire article:
http://www.businessweek.com/magazine/content/06_37/b4000001.htm
April 23, 2007 at 8:48 AM #50843Participanti’m not saying there are NO homeowners with ARMS or other toxic loans in nicer areas… I’m just saying that I personally think it is less common.
i think that as you get to nicer areas, that attract higher income people, they are in general SMARTER…and more financially savvy…which is why they HAVE good jobs, and have some money – they aren’t stupid.
of course you have people who will stretch their income at every level…so you will have the person who stretches and makes poor choices to buy that 750k or 1 million dollar house… but do you really think EVERYONE has an ARM in the nice areas?
too bad people wouldn’t put their loan type, amount financed, and interst rate on their garage door.so you could just driv ethe neighborhood and see who is about to go down the tubes…
my main point was in general, as people get smarter, they tend to on average make less stupid decisions. just b/c people live in an ice area or have money does NOT make them smart..but if you generalize on al arge scale…i would dare to bet that the average IQ of a person in a nice part of Temecula is just a TAD bit higher than the average dumpy area of Perris…where you probably have ARMS on every house….
just a thought… c’mon.. is RAncho Santa Fe gonna go down the tubes too??
April 23, 2007 at 9:38 AM #50847Participantre: smarter owners in more desirable areas
At some point, NOT walking away from your mortgage is stupid. Suppose you buy a condo in Del Mar or La Jolla for 500k$ w/ 5% down and an interest-only loan. With California foreclosure laws, you can look at this like a put option with a 475k$ strike. If the price of the units in the building drops to say, 400k$, you have two options:
1) Keep paying on your I/O mortgage on the full 475k$ amount of your loan.
2) Let the lender foreclose your unit and sell it for 400k$. You realize 75k$ in debt-forgiveness income (25k$ in taxes) and have your credit rating ruined. Once the smoke has cleared (or using a related party, or if you have enough bank to pay cash), you buy the unit nextdoor for 400k$.
If the damage to your credit rating is worth less than 50k$, option 2) is the better choice.
April 23, 2007 at 10:39 AM #50855Participanti agree that there comes a point in property values where it’s cheaper to walk away.
if prices in CA fell 50% state wide – this would be epidemic. People would be walking left and right.
imagine you have an IO loan for $500k, and then prices hit $250k….. do you keep paying for something worth half what you paid or just walk and become a renter. it would almost make sense to just rent at that point….
if people walked at this rate – yeah, prices would go down the tubes… i just dno’t see it happening.
we don’t have job losses in so cal like we did in the late 80s….
did the late 80s job loss/housing crash affect SO CAL, or did if affect ALL of CA?
April 23, 2007 at 10:43 AM #50857hipmatt
Participantwe don't have job losses in so cal like we did in the late 80s….
Not yet at least.  BTW, I think we have just seen the tip of the iceberg when it comes to walking away from a mortgage. They will do it in masses as this unfolds.
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