Correction: Foreclosures up 435% in the Valley

Blogger's note: Several commenters pointed out a mistake in the original post. The Realtor's mortgage payment increased by $1,200, to $5,000 -- it did not increase from $1,200 to $5,000, as originally, and erroneously reported. The Daily News article was correct and clear; my summary of it was mistaken. This updated version of the post corrects the original mistake.

News item from today's L.A. Daily News: "Foreclosures soared 435.5 percent in the San Fernando Valley last year as nearly 3,000 homeowners surrendered to higher monthly house payments brought on by rising adjustable rate loans, a research center said Tuesday."

More: "A whopping 2,988 families lost their homes in 2007, up from just 558 in 2006, said the San Fernando Valley Economic Research Center at California State University, Northridge."

Story quotes a Realtor -- yes, a Realtor -- who can't afford her mortgage payments, can't refinance, and is "desperate to sell" her own home. Details: Realtor bought 2 1/2 years ago in Porter Ranch for $620,000, her monthly payment has jumped by $1,200 to $5,000, originally listed the home for $765,000, has dropped the price to $719,000.

Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com
Hat tip: Daily News via KNX radio
Photo credit: L.A. Times

Comments

[Rob]

Hmmm, I guess Desperate is relative. The learning curve is pretty steep around here. I see unoccupied homes popping up here and there. I am also seeing some 40% off peaks as well, but not as many as desperate would warrant.

[Sam]

i think the peak of the bubble was when a good friend of mine who is a waiter in a restaurant told me in fall of 2006 that ha had bought a house in SF Valley with a 5yr ARM and No downpayment....
My wife argues with me in the car, on the way back to our rental, as to why can't I learn from my friend and take some risks and buy a house....

[JGW]

I am confused. Why is a house that sold for $620,000 2 years ago worth 15% more today? Is it any wonder the sales market has completely stalled? Every ponzi scheme can only last as long as greater fools keep coming along. Guess what? There aren't any more greater fools. This is now a battle of wills between buyers and sellers, and sorry, the sellers aren't going to win.

[xtine]

She's lising the house for 100K more than she bought it for in 2005?
Is she out of her mind?
What entitled her to that kind of profit?

That's hardly desperate. Desperate is 600K (not that she's going to get that either).

[Laker]

My main area of interest is the valley so i can agree with most of the info.
"And some say the worst is yet to come" That is a true statement.
Now dear Patricia Beltran, What are you smoking??? Your house is now worth maybe $550,000-600,000. However, if you really want to sell it as you said your are desperate, you need to lower the price to $450,000. I think you should do it since if you hold on on your price another year, you will NOT get even that!
To summarize your great intelligence and knowledge, you started by paying $1200 on a $620,000 loan and was expecting to refinance to get a LOWER payment. THIS IS BEYOND SMOKING SOMETHING, BEYOND STUPIDITY.
Give me a break pleaaaase. If your initial payment were $1200 for a $620,000 loan, you had to estimate a normal payment of $4000 after a good refinancing. And you were actually hoping to refinance and pay what $900 per month? or $500? Go rent and send the keys to your bank please. What a Joke...

[lefty]

some are illegals losing their construction jobs and leaving after immigration crackdowns. conclusion: construction and remodeling are soon going to cost you much more, believe it!! this will raise home prices fast. in other words, this is clearly the best time to buy metro L.A.!!

[Laker]

Daniel Blake in the article said: "But even with the kind of market distress we are seeing now, percentage price declines won't match sales declines.
"Prices would have to fall by half to even get to the 2001 (level) and that's a huge drop. I don't think it's going to go that far,"

Reading between the lines: sales figures dropped 50% in the valley but price thus far dropped 12%. He is saying that the convergence (end point- goal) is that prices will also drop 50% from peak. He also mentions 2001 price level! This is exactly what i was telling for the last year...
The only point were we disagree is that he does not think it will go thus far....oohhhh yeah mister. It will go thus far Sit down buckle your seat belt and enjoy the show!

[Nancy]

Apparently realtors don't need to understand basic economics or the rule of supply and demand either...

[JohnnyB]

...the article continues:

..."But she won't give up on the business. 'I see it already turning around, although slowly,' she said of the market."

I guess some folks (i.e. idiots) see what they want to see.

SFV (San Flipper Valley) is an over-priced mess... thousands of little cracker-jack boxes with balsa wood walls and creaky foors selling for $400K+ and that should be selling for under $175K.

I spent a while looking around them parts in the 2nd half of 2004. Quite an eye-opener.

[Cal]

Desperate yet trying to make 100k above her last sale. She wants someone else to pay for her mistakes and bail her out. Sickening.

Reality will be harsh for these people. What is interesting is the true opportunity they could be seeing if they just dealt with reality. But instead they choose to ignore reality and fight the tide.

[firesale]

"DESPERATE TO SELL ?????"
$99,000 more than she paid 2.5 years ago!!!
You must be joking, honey. That's not
desperate. That's just your continuing greed
and stupidity in action.

I am happy to see she was trapped by some
of the BS she was handing out to others.
Yeah, a realtor is a professional idiot who knows...

Try $550,000 for openers and drop it 2% per week
until somebody calls. LOL

[mattress man]

Sam, you need a new wife !

I know of a half-dozen marriages where
her "nesting instinct" won out over his
superior "logic". Now that the house is
unaffordable, three of these couples are
headed for divorce. Funny how love goes
out the window when poverty comes in the
door.

"Good on you" for standing your ground.
Rub her face in it anytime she tells you
you need to be a lunatic risk taker to make
her happy. She should have married a realtor.
She deserves one.

[Andy Pandy]

Sam -
I hope your wife appreciates what a smart husband she has.

[RobV]

Seriously, if anyone has the lack of risk aversion or understanding to sign up for a contract that lets them pay $1200/month for a 620k mortgage deserves to be in the situation they find themselves. And to even attempt an appreciated sale in such conditions further indicates to me an uneducated individual that is partly to blame for the situation we/our economy finds itself in. Advice? Cut your loses, bite the bullet you shot yourself with, sell short or default. Deal with the seven years of bad credit and take that time to educate yourself on the fundamentals of economics.

[Ace]

Here is how she came up with her asking price of $719k:

She bought the home for $620k with 0 down and a negative amortization loan. Her mortgage balance was probably growing by $3500 per month over the last 2 and a half years (adding $105k to her mortage balance). She probably owes about $725k on a house that is probably worth $550k (assuming only a 10% decrease since she bought).

She needs to call Condoblue TODAY and find out how to walk away.... I mean RUN away.

[Cal]

One interesting note, I took my weekly stats measurements this morning for my local area. The pending to inventory ratio was the best its been since mid-august. A lot of people were out shopping this last week apparently. I think the rate cuts last week gave some really good 30 yr fixed rate locks, but then the 30 yr fixed bounced back and there are some people with a use it or lose it lock. I will see if the trend continues.

[Chris]

Lefty, your argument doesn't hold, at least in the near-term. If the cost of construction and remodeling does in fact go up, people will be willing to pay less and less toward an initial purchase, meaning pressure on housing prices is downward.

[KCLA]

Actually Peter V paraphrased the article incorrectly -- the realtor, Patricia Beltran, was paying about $3800 per month and her payments increased by $1200 to $5000 per month ("three bathroom home in Porter Ranch has jumped $1,200 to about $5,000 a month").

So she was already paying almost $4000 per month. The article does not say if $4000 per month was affordable for Beltran, just that the new adjusted $5000 monthly payment is not.

[caliguy2699]

"Guess what? There aren't any more greater fools. "

I disagree. There are still plenty of GFs around. They just can't get financing anymore.

[GDC]

The bigger idiot is the lender who gave her the money to do this. The bigger idiot than the lender is the Wall Street bank that bought these loans. The bigger idiot than the Wall Street bank is the mutual fund bond manager who bought these repackaged bonds. The bigger idiot than the mutual fund manager the investor in these funds (including those with bond funds in their 401k). Wait, that's me. My bond fund returned a paltry 1% last year when based on interest rates, it should have returned 7%.

What's wrong with this picture: everyone in the chain made crazy money the past few years except the one holding the bag at the end: you, me, pension funds.

[Nancy]

"She needs to call Condoblue TODAY and find out how to walk away.... I mean RUN"

Yeah, maybe Condoblue can teach her how to simultaneously destroy her credit, buy house #2, and help keep prices artificially high! Yay!

[Laker]

JohnnyB ,
That San Flipper Valley cracker box was going for about $160,000 in 2000. So you are actually bullseye on target. However, please allow some inflation of the dollar to account here so $170,000-200,000 is a good figure. (2001 prices) Now today it is $400,000 (asking price) Get your calculators since the math is really ugly.

[dwr]

The article clearly says her payment has "jumped $1200 to $5000", not jumped FROM $1200 to $5000. Nice reading comprehension.

[JT Salinger]

Should have bought in San Fernando or Pacoima instead of Porter Ranch. Stay within your reach.

[dwr]

Apparently my first attempt didn't work, but please re-read the article, it clearly states her payment "jumped $1200 to $5000", not jumped FROM $1200 to $5000.

[Jonah1979]

Ahhh ACE you beat me to it! You're right...she's asking over 700k because that's what she owes. For a house in the valley right now I'd be hard pressed to buy anything for over 400k.

[ART]

Correction: Her monthly mortgage payment increased by $1200; it did not increase from $1200.

[dudeman1961]

I bet she is still able to make payments on her Lexus or SUV that she shows off ferrying her clients in.

Maybe the bank can repo that, too!

Implode, baby, inplode!!

[the terminator]

to mattress man, thank you thank you thank you, you hit the nail on the head with me. exwife had to have home, i said we cant afford, ex wife said but we can grow into it and its so nice and my sisters like it to, i said we will go broker if I dont increase salary by 30% over 2 years. guess what??? notice she is called an exwife and yes the house is bank in the warm graces of the bank. folks a home is an emotional purchase if its in the price range you can afford long term. if not then take a pill or somthing and quit getting goo-goo an ga-ga and leave your sisters home unless they plan to help pay. and of course i am the "non providing ex husband bum who couldnt take care of there sisters needs"

[adoptive father]

".........This is now a battle of wills between buyers and sellers, and sorry, the sellers aren't going to win."

Don't underestimate the will of your government to keep this ponzi scheme moving ahead. 1.25% cut in 8 days and cash coming in the mail.

YEAH!!!!!!!!!!!!!!

[Cal]

i'd post a link to the ladies listing but it wouldnt get through the filter ;)

The place is a complete dump on the outside right next to the freeway, a flip that house interior on the inside with cheap cabinets in the kitchen and uber expensive stove. I hope every time she boils water for her ramen on the stove she realizes what all of the really cost her.

I apologize for my schaudenfraude, it isnt healthy, but seeing dumb people doing dumb things that result in me having to pay for their dumb decisions doesnt exactly get on my humanistic side. It is really nice to see that people are having to to deal with their decisions. Heck, I have to deal with their decisions so they should have to as well.

[adoptive father]

Anybody care to comment whether the Feds now forgiving the tax liability on short sales will increase or decrease the likelihood that owners will walk away from homes causing even more downward pressure and more losses in the mortgage business.

Also, isn't this a back door tax increase on those that don't have short sales since the mortgage companies get to write off the losses but the Feds don't collect from the borrowers? Somebody gets the bill.

[ADG79]

Come on, you guys are harsh. These realtors have feelings too. This greedy, irresponsible, incompassionate, money hungry, vile bastard needs to feel the love from time too, just like the rest of us. She needs to be hung too, by her big toe, over a pool of hungry alligators. I wonder what her pecentage of the 3000 foreclosures she has hanging her head. Let the Babe In Total Control of Herself deal with it Herself.

[Laker]

Ace,
I think you actually got it right. Thank you.
Why don't we let that poor Realtor go and leave her alone. There is no stimulus or GSE conforming loan increase that will help her keep the house. (well she can win the lottery but that's about all she can do)
I was thinking about the current foreclosures and the future trends and i came up to pretty scary understanding of what is happening and why the FED and the government will do anything they can to limit foreclosures/stop price declines.
Look, right now REO are being added almost exponentially. There amount of NOD is accelerating. The REOs listed today are not moving. (most are listed 20-30% below last sale price) Do you realize that the simple fact that REOs are not selling and just being piled up will create much larger decline for prices. You see, if banks will be smart and liquidate REOs fast the market will probably leveled off at 30% less than peak by reasoning of low inventory. You keep inventory low, the low demand will be met with low supply. On the other hand, with so much inventory (inventory bubble) it will burst as banks will need to liquidate it at some point. Then, huge supply will need to match demand. Prices will need to be undershoot BELOW normal levels to clean house. I know it might sound crazy, but when you really think about it, it will make a lot of sense. The only unknown is the timing. When will the inventory peak. That will be the true BEGINNING of the bottom

[Martin]

Again, the stream of comments here are so aggressive. What's the point?

We bloggers here and many others are following this real estate market continually. Some aren't.

The shock value to this blog item is this realtor is part of the "aren't" group. She should know better. But she doesn't. And she's now paying a high price for her limited intelligence. I feel somewhat sorry for her.

I still blame the banks who created these ridiculous loans.

[Kathryn]

If you're desperate & still listing your house for nearly 100K more then you paid, I'm guessing this realtor took out a loan for more than what she paid and can't do a short sale. That or she's not that desperate and just trying to bail before things get really ugly. After 2.5 years, you should be lucky just to break not make a huge profit.

I really question the value of using a Realtor, when it's so common to see realtors in this type of mess, upside down in their mortgage and unable to sell. If this realtor was willing to do this with her own money, what on earth was she advising other people to do? No wonder there's a bubble bursting with realtors like this. If you're a professional, act like a professional, not a cheerleader for buying real estate, regardless if buyers can actually make the actual payment, not just the teaser rate with negative amortization

[Hula Girl]

This agent, much like others I've encountered,is probably pressuring her clients to reduce their prices so she can close a deal.

I wonder if her clients are as deluded as their agent. She's not exactly leading by example and she'll lose out on her commissions and her house.

Nothing X Nothing = Supersize my fries.

[Lou]

"Apparently realtors don't need to understand basic economics or the rule of supply and demand either..."

Well considering the highest level of education for most real estate people is a GED.

[SReno]

REO

[andee]

I think this one is in lala land. LOL. trying to sell for more in this real market is hard baby!!. Wake up and walk away, that is only option left.

[SReno]

I have a house in the High Desert I paid $565,000 for, I am desperate my 1% loan reset to 5% and I can't afford the payments. I'm asking $3,400,000,000 but I may take a little less or carry a second with 20% down. Waiting for you to help me out, you don't even have to write a letter or send me cookies asking me to "Please sell me your house, I have a great family", I'll trust you. Hurry, get those offers in, I'm waiting.

[SReno]

On a more serious note, I'm turning her into the Dept. of Real Estate. The department is looking to weed out this type of incompetence. She has no business or qualification to hold a license in this field.

[mbob]

Fresno could have a whopper of a West Nile problem this coming summer, what with abandoned homes w/swimming pools, mosquitos doing what comes naturally and cutbacks in city agencies never meant to take on full time property management.

How long before that deal unfolds for us here in the City of Angels? It's cold right now but.....

[Todd]

In 1999 thru 2001 my wife and I were buying those nice small houses around the Birmingham High School area to maintain as rentals. Cute 2bed/1bath houses for $119,000 to $129,000. To this day, I have no idea how in the world by 2005 these same 800sf houses were moving for $450,000 to $499,000 in the same area.

Then I saw how my old Encino neighborhood, south of Ventura skyrocketed. Just as I was making enough money in life to afford a south of the blvd home in Encino, their costs skyrocketed from $799,000 to $1,599,000 for an outdated 2,400sf Ranch style. I am beginning to see cracks in the armor now. Slowly, houses are coming into a range where I will be able to squeeze in to that upleg house where I can live for 40 years.

We'll see a bottoming out when we hit prices as they were in Q1 2004 or Q3 of 2003.

[Simplat]

Boy oh boy...

You folks act like it's some sort of travesty that a real estate agent is trying to get out of her house w/o losing money.

She made a bad deal, ok. Try to find a better one for yourselves.

Regards. Simy.

[Chris]

ACE -
Nice job explaining why this "real estate professional" is in so much trouble. There should have been laws preventing this type of lending. Oh, wait a minute......some states passed laws to prevent this and guess what the national bank lobby did? They got the anti predatory lending laws in Georgia, New York, New Jersey and New Mexico squashed. That was good thinking...see the story here
http://www.washingtonpost.com/wp-dyn/
content/article/2008/01/24/AR2008012402888.html

[PeteViles]

KCLA wrote, "Actually Peter V paraphrased the article incorrectly..."

dwr wrote, "The article clearly says her payment has "jumped $1200 to $5000", not jumped FROM $1200 to $5000."

ART wrote, "Correction: Her monthly mortgage payment increased by $1200; it did not increase from $1200."

Thanks, folks, good catch. My bad. I fixed the post. No excuse.

[Erc]

Never believe in property valuation by broker and agents, U will end bottoms up. Before any purchase, check current property value indication with at least 3 banks, not with mortgage brokers. Same time, do market research for at least 3 months noting low/lowest selling prices of properties in that area and location u wish to buy. Never buy when the market is up, never follow the crowd. Like equity market, property market goes thru cycle, pick up when nobody wants it at the lowest. Pickin up at 40% -50% off peak price would be fair value, wait for downturn as it comes once every 5-10year cycle.

[Joseph... the Real Estate Guy]

I agree with GDC!

This lady most likely knew what she was doing...she was betting on the market doubling in a couple of years...same way Lenders were thinking...Greedy!

If it wasn't for the "Negative-Arms", which apparently the smart Realtor Lady took, the market would have peaked in 2004, which would have made for a softer landing.

Lots of people got caught up in the "Get-Rich- Quick-Scheme"!

Coming soon:
www.asktherealestateguy.com
Maybe I should be asking for donations(Joke)

[tom]

The article clearly says her payment has "jumped $1200 to $5000", not jumped FROM $1200 to $5000. Nice reading comprehension.

Sorry dwr, but the article says "from". Since the average salary in this country is around $40,000 p/yr, $1200 p/mo is about the correct amount someone should pay for housing.

[El Guapo]

This is poetic. I've seen genuine amazement from brokers and realtors that this ponzi scheme is ending. So maybe they are more clueless than dishonest?
Anyway, my wife is on board now. I had to weather the "advice" from her friends. I was a heretic in 2005, but now we politely don't discuss real estate as I don't need to rub it in. And they are nervous. Of course now it's "our neighborhood won't be affected." I think that's the last rationalization these folks will have. When that goes, they are out of bullets. Oddly, her dad is hot for us to buy now and he's an otherwise smart guy! A realtor told him it was a good time to buy and he took it at face value! We'll weather that too - politely.

[Mark Too]

Realtor lady sounds like one of my neighbors. He bought a townhome in our small comples for $490k in Feb. of 2006. Since that time three other units have sold for:

$595k in May of 2006
$585k in Dec of 2006
$625k in May of 2007

He put his townhome on the market around May of 2007 and was asking $650k for his place. But why not, if the last one sold for $625 his had to be worth more and the market was still going like gangbusters - that was in the Seattle are - we're a bit behind the times here. Only problem was, May of 2007 is just when the market started to tank up here. He didn't recognise that though. Seattle was supposed to be different - we're special. His townhouse sat for several months and he lowered his asking price to $635k. Still no takers and the townhome was dropped to $610k a few months later. It's now on the market for $500k and is listed as a short sale. He also did a refi within four months of the original purchase. I don't know exactly how much he owes on the place but the bank is going to lose out on this one.

People are still in denial up here. Nothing is moving and inventory is building every month, and we are starting to head lower.

A little perspective on the $490k he paid - I bought mine in Feb. of 1997 for $165k.

[Uncle Billy]

There's still hope!

My daughter had a vocabulary excercise today:

Which of the following will increase a person's opportunities?

a) diligence b) bankruptcy c) education d) poverty

She chose "a" and "c" but NOT "b."

All is not lost!

[joe shmoe]

nothing like a good old petard hoisting!

and this one won't be the last we'll be reading about.

Joe

[amir]

"ha ha!"

Nelson Muntz (Simpson's bully character)

[Ann]

Realtor bought 2 1/2 years ago in Porter Ranch for $620,000, her monthly payment has jumped by $1,200 to $5,000, originally listed the home for $765,000, has dropped the price to $719,000.
-------------------------------------------

Now if the payment jumped up by $1200, she was paying around $3800. Assuming a 30 year amortization on an ARM, that would be around 6% interest with principal.

This sounds like a 2/28 subprime given the payment and the time of the reset.. The subprime ARMs carried around the same interest rate as a fixed rate prime.

Since the best she could hope for was to refinance into an amortizing fixed rate prime loan, it would have been around the same interest rate – and the payment would stay the same. She certainly wouldn’t have a LOWER payment – unless she came up with money for a down payment to reduce the mortgage. She certainly can’t have more than $5K –10K in equity after only 2 years – assuming that it was an amortizing loan.

Unless she was making close to $190,000 a year, she had no business buying this house. She could not afford it. It takes that kind of income to keep the mortgage, taxes and insurance around 30% of gross income – and that is the max that is affordable.

It is incomprehensible as to why people thought that if the value of the house went up, their loan payments would be less. If you borrow $500,000 and the house costs $501,000, you owe $500,000 plus interest. If the house then goes up in value to $750,000, you STILL owe $500,000 plus interest. The debt does not get less because the house is worth more.

Moving from a subprime ARM to a prime fixed rate loan would most likely not change the interest rates when comparing the teaser rate on the ARM and the rate of prime fixed. You don’t save any money – you just eliminate the risk of paying more interest.

Unless she HELOCED it to hell and gone, she needs to drop the price to what she paid. That is where the market is. It is NOT 2005 + 15.96% - and certainly not 23.38% which was her first list price! That would have been over 11% a year just for sitting there. Didn’t notice incomes going up 8+% a year and certainly not 11+% a year. The price is 2005 max – and falling quickly so she had better hurry. If it is HELOCED, time to start a short, short, short sale. Maybe file Chpt 13 to buy time to do the short sale but that is all it would do.

[Cal]

13,844 places sold in 2007.. 2,988 foreclosures. So for every 5 homes sold it was replaced by 1 home coming on the market as a REO. Which, while bad, isn't as bad as I think the picture really is, the foreclosure really were weight towards the end of the year. By this time next year I bet we see ~5k foreclosures and 11,500-12,000 sales. The market will be defined by the short sales and foreclosures.

[GDC]

Did anyone notice how much money she's made over the years? She says she typically sold 25-30 homes a year. Let's assume on the low side in the SFV that these homes were in the $500k range (lless than the median there). If we assume she made the standard 3% on the buyer or seller side of these transactions, that means she made a WHOPPING $375k - $450k PER YEAR! I personally know agents in the Westside area who made more than $1 million per year from 2001-2006 from buying/selling 2 homes per month. Of course, some of the homes they bought/sold were in the $1 million - $2 million range. It's ridiculous how much money realtors and mortgage lenders made the past few years. The ones that saved are still doing ok; the ones that spent are in real trouble.

[Karl]

Congress should bail these speculators out...yeah, thats the ticket.

[Sam]

Andy and Matress man,
Thanks for your notes, and thanks for taking my side.
You know women as well as I do, no matter what happens...they always find a way to make themselves sound right (no offense ladies...)...
Anytime I argue that...well honey, look at the market now....she turn to me and says that if we had only bought in 2002 when I told you, we would have sold by 2007 and doubled our money!

[ScarletSpider]

Construction cost new, determined from an unbiased, reputable, and time-tested data source, is the only way to ground value in reality. As long as we continue to fool ourselves that value is whatever someone is willing to pay, we will continue to be in situations like these. And the banks, realtors, government, and many financially challenged would-be homeowners will continue to do whatever they can to see that the good times roll on someone else's dime. Nuff said.

[jb]

One thing to note from reading comments over the least few months - the anger has frequently shifted from the FB's and the mortgage crap packagers to the real negligent crooks that really fueled the fire - the banks. I think this is 100% appropriate - these highly paid professional risk management specialists ignored what a bunch of untrained idiots [myself included] were screaming about!

These Banks should fail. They will be replaced by better institutions who will manage risk properly now an in the future.

[xtine]

Sam -

We DO always have a way to make ourselves sound right.
We learned that skill from our fathers, brothers and male friends.

[tarbubble]

oh yeah, it's we chicks who go crazy with the money. men never have any emotional issues with money - i don't know ANY men who have ruined their family's finances with stupid financial decisions like "professional gambling", repeatedly buying/leasing expensive cars, starting ill-conceived businesses, risky "high-yield" investing, or outright criminal enterprises.

oh wait, i DO know families that have been devastated by every single one of these scenarios. all initiated by the man. so take your veiled misogyny and shove it, please.

[tritesprite]

My horoscope on msn.com this morning:

If you own your own home, dear Virgo, you may learn today that its value has increased substantially. If you don't own a home but want to buy one, this is the time to start looking. Any investments made now, particularly in land, will probably be solid and apt to gain in value - though results might take some time to materialize. It's important that you consider all contingencies carefully before committing, however. This is not the time to act on impulse.

(still chuckling...)

[JohnnyB]

There’s also a reality out there that most people don’t fully grasp or want to talk about because it has to do with “race”. It’s certainly a multi-faceted subject with many view points and one that deserves more consideration. It’s impact is enormous and it effects all of us to some extent – both positively and negatively.

I can’t tell you how many houses I viewed in San Flipper Valley (when searching all over in 4Q’04) that were full of Mexicans renting out individual rooms. I’m talking beds and mats laid out in each room… even large walk-in closets. It was pretty surprising at first. I also met many fine Mexicans buying, fixing and flipping houses – nothing wrong with that.

But, there was a rapid influx of millions of Mexican immigrants in the last 10 years – and thousands swept through huge swaths of areas in the Valley (and other areas). The top mortgage holder sir names are now Latino (a very recent change) and Rodriguez and Hernandez have displaced the Smith’s and Jones’s. It’s just a fact.

Cheap Mexican labor drove the construction/building industry (hired by all the mega builders)… making new homes for existing home owners to upgrade into… and opening up the lower priced existing homes for the new population of immigrants. Hard working, family oriented folks seeking places to live all across the country.

In a relatively short time frame, there was an enormous pool of folks (without credit history, with non-verifiable or cash incomes, typically less educated, but with a well earned tradition of working hard for a living) eager to sign on to mortgages of all types and industry incentives quickly set-up to make it happen.

Any company or industry selling products does their own demographic analyses and seeks to maximize market share and profits. These immigrants were an enormous untapped market. The idea that our government - tied to the hip of the banking and land development industries - didn’t see it as such is just silly. That demographic coupled with Government, Fed, Bank policy and Wall Street’s quest for providing global investors with alternative, profitable products (especially after the dot com crash and 911) initiated and led the housing bubble.

With housing demand at much higher levels, prices began rising in short order. Questionable institutions supporting and exploiting the market and industry sprouted up all over the place. It then snowballed with everyone and his uncle getting on board the gravy train and seeking not only a home but an investment – and potentially big $$$$. The heard mentality sets in pretty quickly... as does greed. And, it gets emotional.

The banks new these immigrants and all subsequent sub/alt mortgage customers were riskier, so they devised “ingenious” ways of hiding, spreading and supposedly diluting and mitigating that risk – only to discover that their complex derivative math doesn’t actually make the monthly mortgage payment. It eventually comes down to the home’s “cost” and folks ability to pay for it – at some point in time.

So, when I now see… “Foreclosures up 435% in the Valley”… I can’t help but think back to my experiences in said Flipper Valley when I was seeking a home and coming up against this wave and frenzy of home buying… by that time with folks of all stripes and creeds, wide-eyed and crazed, outbidding each other for small, over-priced boxes, the same day they came onto the market.

And, I’m interested in the dynamics of how it all started… no offence intended on this post.

[armando]

1200.00 payment on a 600k+ loan, she was one of the DUMB ones that got into a pay option arm (adjustable rate mortgage) AND ONLY MADE THE MINIMUM PAYMENT as long as she was allowed to, who's fault is that, i have no sympathy for idiots like her.