[Beach Rat]

The property is listed about fair market value. Subject = $358/sqft if it sells at list. Property is similar to 10976 Ivy hill dr. in SqFt and bedrooms which went for $557,000 and $355/Sq. Ft (02/21/06). I’m not an appraiser, but it doesn’t seem that far off from the other values.
On the more interesting side, it would appear this property is down about 9% from 2004, at list. This is a single data point and in no way reflects a 10% market drop. Maybe the people who purchased were taken advantage of by predators, or just made a purchase thinking that prices always go up. One way to tell if they got hosed on the purchase price would be to run comps from 2004. (any bored appraisers?)
Also this property was purchased with a 100% CLTV, $500K first and $125K second. New Century Mtg Corp holds the first, not sure about the second. It’ll be interesting to see what this sells for. Just knowing that the second lender is on the hook for 60K at list price, may promote low ball offers. Yes this is only one, but I smell blood in the water!!! (100% CLTV and motivated lenders!)
Side tracking, say the first lender holding the 500K note forecloses; do they have any legal responsibility to prevent them from dumping at 500K versus 550K to move it quickly? Effectively hosing the people holding the second?

[Beach Rat]

My bad missed in the archives. CLTV’s should be used instead of the LTV in calculating equity. I did like the graphical representations that were made. Even if the data is off the graphs made it easy to see different scenarios that may arise given different price fluctuations. Guess we just have to pray for “good” data next time.

[Beach Rat]

A 50% drop will happen for one reason and one reason alone! Appraisers!!! Say an initial decrease of 10-20% in home values hits over the next few years driven by natural fluctuations, a large portion of the 80% of non traditional loans that have been issued experiencing trouble and lack of demand caused by a declining market. Not to mention higher interest rates and the fed telling lenders they should make lending practices more stringent. Once prices have dropped 20% the market will change. Few people will be looking to sell because they just lost 20% of their homes value and it is no longer in their best interest. Also the people who choose to treat real estate as a home and not investment do not add to the stability of the market because they do not factor into the pricing of homes say 6 months after purchase. After a drop of 20% the market will stagnate for a while and the only people who will be selling are distressed owners and banks. This will prompt low ball offers from the people on the sidelines further driving down prices. If these low ball offers persist of the course of a few years this could drive the price greatly over time. Now comes the appraiser. The only thing they have to base home values off of are the comparable sales which a majority of will be distressed sales/REO’s. Depending on how bad the stagnation is they may not have many comps to choose from. Not to mention most appraisers fear getting sued and loosing their license so they will implement the “C.Y.A.” rule and go conservative on their prices and use a negative time adjustment factor. After all the market is declining! I believe that a 10-20% correction is just the start. Then we will be having the argument that the comparables don’t reflect my homes value, which is true as long as you aren’t forced to sell.

PS: I love Appraisers! They are an interesting group of people most of which I know go into business for themselves because they have a “problem” with voicing their opinions!

[Beach Rat]

Money has been too cheap to justify saving over the last few years. Why would a 20 something save for 3 plus years (2000K a month and about 70k down payment) to come up with a 20% down payment if they can walk out and get a 103% CLTV that will cover closing costs as well? After all saving takes sacrifice and discipline.

“Don’t panic” life has many cycles. Many problems tend to fix themselves, even without government intervention. 😉 Lenders will get tighter with their loans not because they want to. After all most get paid a percentage of the total loan so it is in their interest to qualify you for as much home as possible. They will tighten their practices because their financial liability is no longer being covered by skyrocketing price increases. I doubt that you will see 103% loans being offered in a declining market. Also as people realize that the SD RE market is no longer increasing and may possibly be decreasing, people are going to be less likely to leverage themselves so far out if they may loose 10% of the purchase price. At 360K on an entry level home that 10% is 36K which is one hell of a Vegas trip in a 20 something world.

As far as myself goes, I am a 20 something and am in the process of straighten out my finances. Now is a great time to start saving up money and if there is a down turn don’t worry about the people that may get trapped in a bad situation (unless the gov. uses your taxes to bail them out) The people whose credit gets flushed in the next few years will just take that much more purchasing power out of the market, especially in the entry level market. Even if there isn’t a crash and prices level you still won’t loose money and may even come out ahead if you invest your saved money into something that is appreciating say shorting bio-techs. Worst case scenario I’m going to rent a place near Swami’s, buy a long board and not have a 2-3k a month house payment to stress over… DAMN!

Patience….

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