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.