[PerryChase]

Thanks for posting. Great video, good watch at lunch time. It’s a circumspect but very realistic speech by Dr. Susan Bies, a Federal Reserve Board member.

Some points to underscores (with my editorials).
– 1 out of 6 loans are made to Subprime ARM borrowers. Does not address fixed rate subprime or conventional market (which I think will be in trouble also).
– MBS market developed in 1990s so that credit risk is borne by MBS market.
– Mortgage industry bacame fragmented into lenders, securitizers, servicers.
– “People tend to think of their homes as a way to build wealth.” (therefore they are not saving thus have no staying power when prices drop).
– Lenders not requiring proof of income — no testing and validation.
– Lenders not using good underwriting practice such as debt to income ratio.
– Transaction based mentality. Lenders must generate transactions to earn income.
– 2/28 mortgages have high deliquency rate. Interest payments double in 2 years.
– Borrowers did not understand that payments could double.
– Fragmented mortgage business means that there’s a transaction based mentality. Lenders don’t earn anything if there’s no transaction.
– Improper appraisal of properties.
– Investor appetite in real estate as exploded. 7-8% is normally investment properties. Abnormally low interest rates caused investor purchases to reach 25% to 40% of sales, in some markets.
– Statistics don’t reflect cancellations. Sales cancellations have exploded.
– There’s extra supply of houses for sale by people who are waiting to list.
– Record level of vacant homes.
– People with ARMs are mislead that they can refinance after teaser rate. Borrowers did not realize that there are prepayment penalties.
– If houses don’t appreciate there’s “equity stripping” when time comes to refinance. Prepayment penalties may cause borrowers to bring cash to refinance.
– Early payment defaults. Lenders have to buy back early default mortgages from MBS. Early delinquencies have risen dramatically and that’s a sign of deterioration of asset quality. People don’t normally default early. Defaults normally peak 2 years into the mortgage.
– Early delinquencies for 2006 pivots up to 10% of subprime ARM mortgages.
– In 2006 lenders made loans they shouldn’t have made while chasing origination earnings. (even higher early delinquencies will occur in the next couple of years).
– Not enough or no regulations of the mortgage industry.
– Fed writes regulations, Reg Z, doesn’t have enforcement authority.
– Credit allocation should remain market based. Don’t want to hamstring innovation.
– Compensation to brokers is tied to closing a mortgage. Need detections mechanics to manage risk.
– You should save and then buy, not buy then pay it off.
– While the savings rate is negative but net worth is going up more. (I wonder what will happen if housing and the stock market crash. Was talking to an old man today who wants to net $100k out of is SD to retire in Pahrump. I’m afraid he won’t get to retire at all).

[PerryChase]

jg recently posted a great graph using national numbers. You can search for it on the forums.

[PerryChase]

I think that there’s a coastal, premium, superior property myth. Sure the best houses in the best areas are always more expensive.

I’ve seen houses triple in prices, since 2000, in the not-so-nice areas. But they only double in “superior” areas.

The rate of depreciation is market-based in my view. If well-to-do folks get hammered during the coming recession, prices will drop accordingly. My sense is that a whole class of people became prosperous thanks to easy-money leverage in the last 10 years. Leverage can very quickly bring people from uppper-middle back down to middle-middle or lower-middle.

Look at this La Jolla house. It doubled in value since 2000. In the same period, houses in Clairemont or Mira Mesa or La Mesa or North Park have tripled. Does that mean that this La Jolla house is a relatively better deal? I think not. This area got overpriced earlier in the cycle (1997-2000). This house increased less since 2000, so when it drops in value, it might appear as though it’s holding value better, if the base year is 2000.

Unlike the stock market where the value is “virtual,” real estate is different. You have to be intimately familiar with the neighborhoods in order to spot the value buys — the stats are only a guideline.

http://sdlookup.com/PropertyDetails/tabid/53/forumid/1/view/topics/pid/3D0B0B27/Default.aspx
http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=076014143&page=1&property_type=SFR&mls=mls_sandiego&cKey=wj9fr6p6&source=SANDICOR

List Price: $1,099,000 – $1,099,000
2785 RIDGEGATE ROW, La Jolla, CA 92037**
Bedrooms: 3
Full Baths: 2
Partial Baths: 1
Square Feet: 2,581
Lot Size: 5,719 Sq. Ft.
Year Built: 2001
Listing Date: 02/19/07
On Market: 1 day
Type: SFR
Status: ACTIVE
MLS #: 076014143

[PerryChase]

You sound like a single professional. I assume you have no wife or family. You’re renting in La Jolla/UTC so I assume that you work around that area as well.

Don’t buy in SEH because:

1. The commute will be a nightmare.
2. SEH will become foreclosure central and prices have a ways to drop.
3. HOA/Mellos Roos are high.
4. SEH is really a “low-brow” neighborhood desguised as “high-brow.” Not worth the money in my view.

Rent a nice house for $2500 so you can get used to the payments (interest that would be out-the-window anyway if you bought) and enjoy it. Get familiar with different neighborhoods for the next 4-5 years. At that time you’ll find a better environment to buy.

I recommend you buy an older house near your place of work. Choose a place without HOA or Mello Roos and use the savings to fix-up the house nicely before you move in.

Don’t buy at SEH. You’ll regret it.

[PerryChase]

Can someone who has access to mortgage information tell us if this was a short-sale, foreclosure, or simply a sale to a related party?

[PerryChase]

Global warming or not, it’s a good idea to be environmentally conscious, if only so we have a more pleasant, beautiful and enjoyable environment to live in.

If the threat of global warming spurs us to do things cleanly, then all the better.

The treat of terrorism is causing us to watch out backs. Global warming can likewise cause us to be clean and tidy with our “waste.”

I agree with juice that we need to watch how we pollute our bodies with all kinds of chemicals.

[PerryChase]

In support of the realty company, the agents are independent contractors. Contractor should have no expectations of long term work. That’s why they get paid more. Plus they have the flexibity to create their own work schedules and work how they see fit.

Our economy is resilient and flexible because of the employers’ abilities to expand and contract quickly depending on the business climate.

[PerryChase]

6667 CAMINITO LINDRICK, La Jolla, CA 92037
Here’s the sale history

09/21/2006: $950,000
02/26/2003: $1,280,000

SDlookup is way behind Zillow in providing sales info. However, SDlookup does provide non MLS sales such as sales from builders.

http://www.zillow.com/HomeDetails.htm?o=North&zprop=16852588
http://sdlookup.com/PropertyDetails/tabid/53/forumid/1/view/topics/pid/76BCACE4/Default.aspx

[PerryChase]

Since I am single its easy and the thing is, dating sucks for single men unless you are loaded with millions of dollars and good looking.

Is the dating scene any better in South Carolina?   I wonder if the Southern Belles are as sweet as they say.  

[PerryChase]

at home in so cal, are there really no fresh fruits in Chicago? The cherries and peaches from Chile are not imported to Chicago in the winter?

A good buddy of mine lives in Chicago. It’s no wonder he keeps putting on weight.

I agree with cardiffbaseball that Californians are a little plastic.

[PerryChase]

Retiring is the urban core of a city such as San Francisco is ideal, IMHO. You can get rid of the car and the insurance that you seldom use. That leaves more money for personal spending.

[PerryChase]

… their brains will be fried from living under the power lines. So much for a good education.

Yeah, put the poor folks under the power lines, on the super fund sites and by the train tracks. Of course, the churches get the hill top sites, and no property taxes. What’s new? That’s the way it’s always been.

[PerryChase]

I’m going to go out on a limb and say that the bottom will be 2001 prices. Those prices were already high fueled by dot-com portfolios.

In reviewing sales histories, I noticed that high-end homes already appreciated enormously from 1997 to 2001. Then when the Fed lowered rates as a result of 9/11, the speculative mania became mainstream.

[PerryChase]

There’s a possibility that $800k houses will go down to $400k. You’ll be able to live the lifestyle you want. 🙂

A more likely event would be $800k houses dropping to $550k (about 30%) and stagnating there for a long time. At that time, you’ll have many choices to pick from — perhaps that amazing deal at $500k. Save your pennies now so you can get what you want when prices drop.

That’s what happened the last time and I’m willing to bet that it’ll happen again.

[PerryChase]

Nor_LA-Temcu-SD-Guy, same here. Would like to move to better digs but have plenty of patience. If needs be I can remain in my current home forever. I’ll wait ’til you buy first. 🙂

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