[gn]

I agree with El Jefe. Think of it this way: Ultimately, the correction is about supply vs. demand.

Now, there are more than one way in which supply can overwhelm demand:

1. Massive job losses (early 1990s)
2. Easy credit & excessive speculation (currently)

So, it’s the SAME, as in the same pattern (supply overwhelms demand). But, it’s DIFFERENT, as in the mechanism that causes supply to overwhelm demand.

Of course, when the bulls say “it’s different this time”, they are hoping the the same PATTERN won’t be repeated. And that’s where the bulls are mistaken 🙂

[gn]

In the beginning of a downturn, there is always a “flight for quality” & the tendency to “dump the dumps”.

This is why the less desirable areas go down first. The more desirable areas only APPEAR to be “immune”. When, in reality, they are just lagging the less desirable areas.

If anything, people who want to buy into the more desirable areas have to wait longer for them to get to the “bottom”.

>> If you were to graph the pricing trends and put them up on
>> a map, I think you’d see the trends are progressing from
>> the outskirts to the center

This phenomenom is not unique to San Diego. For instance, in the greater SF Bay Area, the downturn encroach from Fresno/Merced to Valleyjo/Gilroy to South San Jose.

Similarly, in the greater LA area, it starts from the Inland Empire …

[gn]

winterpapa1,

Since you have seen a large number of short sale/loan modification requests come across your desk, I was wondering:

1. Are most of them for primary residences or investment properties ?
2. How bad do you think this wave of foreclosures will be ?

[gn]

winterpapa1,

You mentioned that “each investor has their own authority thresholds”. Roughly speaking:

– What percentage of investors give the servicer full autonomy in approving short sales/loan modifications ? i.e. 50% ?
– In the cases where the servicer does not have full autonomy, how complicated is the process of getting approval from the investors ?

Thanks.

[gn]

El Jefe & TemekuT,

Thanks so much for the explanation.

[gn]

“If it were an A paper portfolio we may simply look at their recent payment history to show that the borrower was maintaining the payments and then simply refer to the latest appraisals that dictate the current market values.”

I am assuming you are talking about “prime loans”. Are the lenders treating borrowers of prime loans differently b/c they are less likely to take advantage of the system ?

I recently read some articles about lenders/servicers agreeing to “restructuring” an ARM instead of letting it reset. Is this process similar to short-sale approval ?

[gn]

winterpapa1,

Thanks for sharing the info. Another question:

In the case where the loan has been securitized into MBS, how does short sale approval work ?

[gn]

I used the above link to look up a property for sale. It shows 4 parcels & the owner’s name is a trust.

– Why 4 parcels for one property ? (The lot size is about ~10k sq ft)
– What are the advantages of putting a house into a trust ?

[gn]

This provides further proof that, in a downturn, the builders lead the way in cutting prices. They basically destroy the resale market.

[gn]

This thread is great. When I read the first post by SD Realtor, I was puzzled by the lender’s action, too.

I learned so much. Thanks.

[gn]

sdrealtor,

“… A place full of people with negative views on housing”

I have to disagree with you. There are 2 kinds of optimism:

“Grounded optimism” – Based on knowledge and understanding
“Blind optimism” – self-explanatory

Most people at Piggington are not negative. Since they understand the state of today’s RE market, it’s impossible not to be weary of buying.

As case in point, people like Bugs & PerryChase know a lot more about real estate that most folks out there. Certainly a lot more than most realtors 🙂

[gn]

” … 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

[gn]

4Sbuyer2002,

In today’s market, where many resellers have problems selling. For every home sold by the builders, there is one home NOT being sold by a reseller. The builders are simply stealing sales away from the resale market. Every new home being built just add more the the supply side of the equation, making things worse for the market.

What’s going on is NOT a reflection of the market’s strength. It’s a reflection of the builders’ pricing strategies.

If you only look at new home sales, you see a rosy picture. But if you look at the entire market, you’ll see the opposite. 🙂

[gn]

23109VC,

“… some of you seem mad at me that I might buy …”

I don’t think anyone is mad at you. I think people are just amused/surprised at how torn you are about this decision.

At one point you said:

“if i buy NOW at $350..and the house falls to $325… i don’t care. if it falls to $250k…i’d be pretty bummed”

Because you said the above, people advised you against buying.

It goes w/o saying that no one is 100% certain about what the future brings. It’s just that with the magnitude of the current bubble, especially in Temecula, those who understand real estate understand that is a very good chance that there will be a big crash.

[gn]

23109VC,

From all of your previous posts (in another thread), it’s fair to say that the market price for that house is $380k – $400k. This means that you’re getting a $30k – $50k bargain, which, under normal circumstances, is not bad.

>> i don’t see these homes hitting high 200s. i think the worst it will get is 300-325k

Given the fact that there were a lot of recent RE fraud activities in Temecula/Murrieta & that the bubble is just starting to burst, it would be a big surprise in that house “bottom out” at $300k 🙂

Your “cushion” of $50k will last you until sometime in 2008.

Good luck ! You’ll need it.

[Author]

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