X Files: Foreclosure Crisis Feed

Foreclosure Watch: It's a Great Time to Wait Before Buying a House

The Pacifica (Calif.) Tribune listed 47 foreclosures notices this week, up from 41 the week before. Foreclosure notices are filling almost four pages of the second section, twice as much space as is devoted to dwindling real estate ads.

Here’s one prediction based on a reliable index used to trade futures contracts that should give pause to anyone considering buying real estate:

Housing Prices Expected to Bottom in 2010, 21% Off '06 Highs

Bespoke Investment Group

"Based on the current prices of CME housing futures <http://housingrdc.cme.com/>  that track the S&P/Case-Shiller home price indices, the median home in the U.S. is now projected to fall 21% from its peak in 2006 to its expected trough in November 2010. The chart below highlights the historical Case-Shiller data as well as the CME housing futures that track the index.


Hey, look on the bright side -- at least the futures are predicting a bottom in 2010. By November 2011, the average home price is only expected to be down 18% from its peak." (courtesy seekingalpha.com via patrick.net)

What’s the current state of affairs in the Bay Area?

Bay Area housing prices hit hard

Carolyn Said, Chronicle Staff Writer csaid@sfchronicle.com

Friday, January 18, 2008

(01-17) 11:06 PST SAN FRANCISCO -- As foreclosures, scarcer mortgages and general uncertainty continue to pummel the real estate market, Bay Area median home prices and sales volumes experienced significant declines in December, according to a report released Thursday.

For the nine-county area, the median home price fell 4.9 percent and sales volume plummeted 43.2 percent to a record low in December - the 35th consecutive month of decreasing sales, said DataQuick Information Systems, a La Jolla (San Diego County) research firm.

-- Price. The median price for an existing, single-family home in the region was $620,000 in December, down 4.9 percent from $652,000 a year ago, DataQuick said. The resale median dropped in every county except Santa Clara, where it was up 4.6 percent.

Including condos and new homes, the median was $587,500, also a 4.9 percent drop from a year ago, when it stood at $618,000. It has now fallen 11.7 percent from the peak of $665,000 reached in July.

For all Bay Area home sales, the price drop was the largest year-over-year decline since February 1993, when the median fell 5.5 percent, according to DataQuick analyst Andrew LePage.

-- Sales. Even more striking was the plunge in sales volume. The end of the year is traditionally a slow time for real estate transactions, but last month stood out as the worst December since DataQuick started keeping records in 1988.

Just 3,049 existing homes changed hands in the nine-county area in December, down 43.2 percent from 5,366 last year. Including new homes and condos, a total of 5,065 properties were sold, down 39.5 percent from 8,372 in December 2006.

"December was extraordinarily weak," LePage said. "We have lower and lower sales, and a higher concentration of stressed sales - such as people who were in foreclosure, facing foreclosure, or lenders trying to sell houses they've taken back. The market can't seem to gain any traction here."

Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, said he thinks the 5 percent decline is just the beginning.

"Our outlook is, going forward, that this very tight credit will continue for at least six more months and might be there for longer," he said. "We'll see further corrections. A year from now, (the median) might look like minus 10 percent." (San Francisco Chronicle 1-18-08)



Foreclosure Watch: Where's the Spin Now?

The Pacifica (Calif.) Tribune listed 41 foreclosure sales in its January 9, 2008 edition. This is the highest weekly number of foreclosures since this crisis became visible last July. This most unfortunate record is almost 20% higher than the previous high of 35. Here’s an example of the sort of manure fed to the gullible public during the real estate speculative runup, with comment from blogster Dr. Wm. R. Swagell:

But special mention must be made of the doyen of "spin doctors," David Lereah who retired in March of 2007 as spokesman and chief economist for the National Association of Realtors. Wikipedia describes how "Lereah’s penchant for putting out positive spin on dismal housing numbers led critics to dub him the Baghdad Bob of real estate." As well as publishing "WHY THE REAL ESTATE BOOM WILL NOT BUST – And How You Can Profit From It" in 2006, some of his gems include:

"Spin": "If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years… (such action being) very unsophisticated." [Los Angeles Times, August 28, 2005]

"Spin"; "In October 2005 Lereah was busy calling the bubble believers ‘Chicken Littles.'" [Chicago Tribune, September 2006]

"Spin": "We need a price decline, we were overbloated… In 2007, it will be a flat year, maybe 1 percent (sales) drop, and that’s it. After 2007, we’ll be back to expansion again." [Realtor convention New Orleans, November 2006]

As it turned out, house prices slumped 12% in Miami and Tampa and 11% in Detroit in 2007, with Lehman Brothers economist Michelle Meyer saying… "I don’t think we’ve hit the bottom yet. The housing shock is only about halfway over and housing prices will continue to fall well into 2009."

Lereah also enlisted the support of then-Federal Reserve chairman Alan Greenspan during his last few presentations by showing a large slide of a beaming Greenspan, who was quoted as saying (October 2006):

"Spin": "Most of the negatives in housing are probably behind us. The fourth quarter should be reasonably good, certainly better than the third quarter."

But the "I So Wish I Hadn’t Said That Award" still goes to Anthony Hsieh, chief executive of Lending Tree Loans, an Internet-based mortgage company (are they still in business?), who was more disparaging;

"Spin": "If you own your own home free and clear, people will often refer to you as a fool. All that money sitting there, doing nothing." [Los Angeles Times, August, 2005]

Good call, Anthony!


Foreclosure Watch: Let's Call It What It Is

A recent column in our local newspaper (Pacifica [Calif.] Tribune) spoke about real estate prices "flattening." Flattening? Certainly more polite than "flat-lining." Or maybe less accurate than "prices are declining."

One can turn to page 6A of the very same edition of the paper and see an ad for an auction of a three-bedroom, two-bathroom house in Daly City for $493,415, "or best reasonable offer." There has already been a bank-owned house in the Fairmont district for sale at $550,000. How long will it be before we see a Linda Mar rancher come back down to earth in price?

Here are some charts of price declines from the Multiple Listing Service (MLS). Click the link:


(courtesy of patrick.net)

The silver lining in all of this turmoil is this: The more that housing prices decline, the more that working people will have a shot at buying a place.

How much will prices decline? In the last period of price decline (1991-1996), we saw 20-25 percent come off the price runup of the late 1980s here in Pacifica.

That isn’t an unrealistic guess.

Foreclosure notices in the Pacifica Tribune: Dec. 12 (28), Dec. 19 (32), Dec. 26 (27), Jan. 2 (30)

And as a past perspective, on July 26, 2006, there were a grand total of two (2) foreclosure notices in the Tribune.


Mortgage Meltdown: Assembly Democrats Help

Dear Neighbor,

Homeownership is a source of tremendous pride and an important milestone on the road to achieving the American Dream. Unfortunately, many Californians are facing the possibility of home foreclosure due to unforeseen circumstances and events. During this crisis, my office is committed to providing you with the most up-to-date information and resources. The Assembly Democrats are working on legislation to address the current mortgage crisis. For more information, please visit ASSEMBLY DEMOCRATS. The information and organizations listed on the website may help you, your family and friends through these difficult times. If you have any questions, please feel free to contact my district office at (650) 349-1900.


Assemblymember Gene Mullin


Capitol Office: State Capitol, P.O. Box 942849, Sacramento, CA 94249-0019
Phone (916) 319-2019
Fax (916) 319-2119

District Office: 1528 South El Camino Real, Suite 302, San Mateo, CA 94402
Phone (650) 349-1900
Fax (650) 341-4676


Foreclosure Watch: ARM Wrestling

"Housing Crisis or Opportunity, Only history will show" screams one headline in a newspaper ad that features a reassuring chart of the median price in San Mateo County rising dramatically. "Sensational newspaper articles are running headlines talking about the 319% increase in the foreclosures in San Mateo County. ...This is absolutely the time to be buying" shouts another ad in our local paper.

Is it really? I would have thought the larger crisis of credit tightening and financial giants teetering on the edge of bankruptcy would give pause. Well, let's look at the Bay Area in general :

"Home prices tumbled further during the month of October in Solano and Sonoma Counties. Alameda and Contra Costa also saw declines. Although median home prices were up in other areas, asking prices fell in every county within the nine-county region."

"Bay Area home sales fell once again during the month of October. The number of homes sold slipped 35.7 percent in a year-over-year comparison—the lowest level seen in decades. Including October, sales have decreased on a year-over-year basis for 33 months in a row."

"With the exception of San Francisco, every county within the nine-county Bay Area region saw a year-over-year sales decline of at least 28 percent. The largest declines occurred in Napa, Solano, and Contra Costa Counties."

"Fair market rents have changed very little in the last year. Average rents have increased slightly; however, it is still less costly to rent in the Bay Area than it is to buy. The average mortgage payment was $3,000 in October—much higher than average rents for homes and apartments in the same area."

(Source: DataQuick)

Our local real estate agent in her full-page ad in the Pacifica (Calif.) Tribune assures us: "According to a panel of sucessful REALTORS(r) speaking to other REALTORS(r) the advice is to buy now."

Talk about self-reinforcing logic! Truth to tell, though, if I saw my living evaporating in front of my eyes, I might panic as well. But listen to what a slightly less biased source says:

"Most experts believe that 2008 will be a tough year for the Bay Area housing market. Mortgage resets are expected to flood the market with more foreclosed properties. Sales and prices are likely to decrease as a result. At a recent real estate symposium hosted by the UC Berkeley Fisher Center for Real Estate and Urban Economics, economist Ken Rosen predicted price drops of 20 percent in some parts of the Bay Area. A rebound isn't expected until 2011." (Source: HomeGuide123)

Now what person would look at that and not want to wait for the possible fire sale prices in the next couple of years? And what about those darned "mortgage resets" that are going to cause loans to blow up in the faces of many parties who never should have been loaned the money in the first place?

Well, here's a chart put together by those nutty, madcap gnomes at Credit Suisse, which shows the timing and quantity of ARM resets for the next eight years. Kinda gives us a good idea why the turnaround in real estate prices isn't expected until 2011, or later:

(Courtesy of Mish's Global Economic Trend Analysis)

Number of foreclosures in the Pacifica Tribune this week: 29.


Foreclosure Watch: Exploding Mortgages

Foreclosure Watch: Exploding Mortgages

The Pacifica (Calif.) Tribune listed 35 foreclosure notices today. There had been a slow decline in the numbers over the past month, but unfortunately it didn't mean much. One reason to expect that we're at the beginning of the downward slide is that many of the IED-like mortgages foisted on people have yet to "adjust."

"As bad as the nation’s housing recession is, it’s probably going to get worse, says Randall Kroszner, a governor of the Federal Reserve Board. “Two considerations suggest that conditions for subprime borrowers have the potential to get worse before they get better,” he says in remarks Monday to the Consumer Bankers Association conference in Washington, D.C.   

“All indications are that housing activity is continuing to weaken. Incoming data in recent weeks show that sales and new residential construction have declined further. In such an environment, house prices in the aggregate are likely to remain sluggish for some time,” Mr. Kroszner says.   

“The bulk of resets is yet to come: On average, in each quarter from now until the end of next year, monthly payments for more than 400,000 subprime mortgages are scheduled to undergo their first interest rate reset,” he says “That number is up from roughly 200,000 per quarter during the first half of 2007. Delinquencies and foreclosures are therefore likely to continue to rise for a number of quarters.”   

Adding to the problem is an overall tightening of credit standards that could block some homeowners seeking to refinance."

(Central Valley Business Times, 11-05-07)


Affirmative Action for Morons: Monkframe Blogs on Patrick.net


Welcome to readers of Patrick.net who have been scanning Monkframe's Foreclosure Watch column here on Pacifica Riptide. It is our pleasure to publish Monkframe's insights on the housing crisis and crash, predatory lending practices, and mortgage meltdown taking place before our very eyes in this overextended wartime economy. If you haven't done so already, be sure to read Monkframe's latest installment, "Affirmative Action for Morons." It and all the other housing bubble news is in the Foreclosure Watch category on our right sidebar.

Foreclosure Watch: Affirmative Action for Morons

"Citigroup Inc. shareholders may have finally gotten what they wanted—the resignation of Chairman and Chief Executive Charles Prince—but Wall Street's worries are far from over. At an emergency meeting of the Citi board Sunday, the nation's largest bank announced Prince's widely expected departure, but also estimated it would take additional losses of $8 billion to $11 billion." (Associated Press, 11-05-07)

Well, the banking industry certainly takes its cues from the Bush administration, announcing these little CEO resignations on the weekend in an attempt to escape the news cycle. Last week it was Stan O'Neal of Merrill Lynch who "retired" after the company lost $8 billion in the 3rd quarter.

But this Charles Prince fellow: I was listening to a BBC business reporter question an American financial expert on Sunday when the resignation of Mr. Prince was announced and a little bombshell got dropped that Mr. Prince had never run a bank before being appointed to the CEO position of Citigroup! The incredulous reporter asked again to have that confirmed and the American analyst also said: "Investors were never happy with Mr. Prince's performance."

No kidding? Wow, hey honey, I think I want to be a brain surgeon, where's the nearest operating room? Are we performing yet?

And what's at the root of these behemoth banks' huge losses? Why, mortgage-backed derivatives, pieces of garbage that are proving to be worth nothing. But that doesn't stop them in the boardroom. You too can be a complete moron and be appointed CEO of the world's largest bank.

"Sir Win Bischoff, chairman of Citi Europe and a member of the Citi management and operating committees, will serve as interim CEO. 'There's no change of strategy that we see, actually, going forward,' Bischoff said, noting that the company still plans to focus on international expansion, at least until a new CEO is chosen." (Associated Press, 11-05-07)

Attaboy, Sir Win, chin up and march on with the same strategy, sort of like at Gallipoli.

In this week's Pacifica Tribune: 27 foreclosure notices.



Domino Theory: Cause and Effect in Real Estate

Click A Simple Graphic and all will be revealed about market manipulation.

Then click Another Simple Graphic for further clarification on how we got where we are.

Appraisal fraud? Been known about for years. Click link for CNN article on the history.

Empire of Lies, Land of Magical Thinking, a great series

And starting to get prosecuted (PDF file)

Foreclosure Watch: Empty House

A record 17.9 million U.S. homes stood empty in the third quarter. A mere 2.07 million empty homes were for sale. Let's do the math: 15.83 million vacant homes just sitting there. How long can that last? That is a huge potential supply of homes that for some reason or other is not listed yet. I suspect many of those are REOs (real estate owned) by banks and mortgage companies such as Countrywide. Every passing month that those REOs sit on the books waiting for higher prices means lost property taxes, upkeep costs, and balance sheet impairment.

Every month the figures get worse. For example, Countrywide has 13,000+- REOs for sale, but it also has 82,000 foreclosures. That alone represents significant pent-up supply as those foreclosures become REOs. See Option Arm & REO Problems At Countrywide OPTION ARM AND REO PROBLEMS AT COUNTRYWIDE for more information.

Add to that pent-up supply those with a second home who want to sell it as soon as they can "get even" on it. In the meantime, those people are "content" to rent. That contentment will turn to sour milk given enough time, or any problems necessitating a sale sooner rather than later. The siren song from Realtors is that now is the best time to buy ever. Straight up, it's easy to see that is a lie. The best time to buy was 10 or more years ago and the best time to sell was in 2005. It's still a long way down from here. Rising inventory, falling prices, and pent-up supply should be proof enough.

Mike Shedlock/Mish

In the Pacifica Tribune legals:

October 17: 33 foreclosures

October 25: 29         "

October 31: 28         "

And in San Mateo county in general: "Notices of default, which signal that a borrower has missed making payments, doubled from the third quarter of last year to the third quarter this year, according to a report released last week by a Southern California-based research firm. In the third quarter of this year, there were 581 such notices filed in San Mateo County compared to only 290 in the third quarter of 2006, according to the report from DataQuick Information Services. Loans in San Mateo County were among the least likely to go into default, along with those in San Francisco and Marin counties, according to the DataQuick report. Borrowers in Merced, San Joaquin and Riverside counties were most likely to default." (San Mateo Daily News, 10-30-07)


Mortgage Forgiveness Debt Relief Act of 2007

On September 25, 2007, Chairman of the House Ways & Means Committee, Rep. Rangel (D-NY), introduced his own mortgage cancellation relief bill, H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007. H.R. 3648 would remove taxes from mortgage cancellation relief provided on a mortgage on a primary residence. The tax relief would apply to the original purchase price, plus personal improvements of a primary residence and would not cover any amount over the original purchase price if a loan has been refinanced with a "cash out" option. The relief would also only apply to first mortgages, not second mortgages or home equity lines of credit. The relief would apply to any forgiveness given on or after January 1, 2007. H.R. 3648 passed the House on October 4 by a vote of 386-27.

This provision will help cover many struggling homeowners. This isn't only about those who are suffering through subprime or predatory loans. This helps homeowners who are struggling because of health issues, loss of a job, or another traumatic event that forces them to sell their houses for less than what they paid for it. Because Congress is under PAYGO rules, to offset the loss in revenue they modified the rules governing conversion of a second home to a primary residence. The capital gains exemption of $250,000/$500,000 is still allowed, but under H.R. 3648 the exemption qualifies only for the time when the house was a primary residence, which was the original intent of Congress. This rule will not be retroactive and will not count against any gain prior to January 1, 2008.

H.R. 3648 was marked to cost $2 billion over 10 years. Under PAYGO rules, to offset this lost in revenue, H.R. 3648 made changes to incorporate estimated tax rates and to rules governing second homes converted into primary residences. Currently, if a second home is converted to a primary residence and lived in for at least two out of the past five years, this home is allowed to use the $250,000/$500,000 capital gains exemption. H.R. 3648 would allow gain received once the house became a primary residence to be excluded from capital gains taxes (up to the same limits), but would tax gains attributed to the time when the house was not a primary residence, up to the previous 15 years. But this rule will not count against any gain prior to January 1, 2008.

(SAMCAR endorses and promotes this legislation.)

Foreclosure Watch: Off the Cliff and Down, Down, Down

This week's Pacifica (Calif.) Tribune lists 34 foreclosures in the legals, down one from last week's record high. The San Francisco Chronicle reported this morning that the California Association of Realtors is predicting a 4% decline in housing prices in California this coming year. If this is the prediction of the industry's shill group, imagine what reality is going to look like. Greed, greed, greed and the casino economy. You've just won a free home loan! Step right up, ladies and gentlemen, it costs nothing to sign on the dotted line and own* your own home.

*Subject to terms and conditions unknown and unread, licensed by the California Department of Obfuscation and Obscuration, APR: We'll tell you later.