January 25, 2007

California: Home of interest-only loans, the most overvalued real estate in America, and now... exploding foreclosures


Hat-tip to the always excellent TheMessThatGreenspanMade for drawing attention to the DataQuick report.

California is the perfect recipe for housing crash destruction. Home prices totally detached from incomes or rental yields, and homes bought with no money down and interest only payments (70% of San Fran area buyers used interest only last year, 61% in San Jose, 78% in Vallejo!)

So what happens when values start to move south and REIC jobs disappear? It's pretty obvious - a sea of foreclosures. You ain't seen nothin' yet. Millions will now lose their homes. But don't worry, those realtors and mortgage brokers got paid!

18 comments:

Anonymous said...

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Shhhh.......... This news wasn't supposed to get out!

Anonymous said...

Don't worry the REIC will spin this as a postive also.

Anonymous said...

Auctions on courthouse steps will be the ultimate market. Look for a sale near you.

veritas_faust said...

Do you have these articles cataloged? One is from '04 the other from '05.

But it shows...they were warned!

ocrenter said...

from DataQuick:

"Indicators of market distress are still at a moderate level. Financing with adjustable-rate mortgages is flat. Foreclosure activity is rising but is still in the normal range."

...don't worry...
...be happy...

...don't worry...
...be happy...

Anonymous said...

Vallejo is the freaking armpit of the BA. So is west oakland, so is hayward or whatever is along 880. San Jose has some good parts and some bad. I can totally see why someone will want to buy in Vallejo just to flip or count of appreciation so they can take the $$$ and run. Cos you cannot live in vallejo.
Of course if vallejo goes up you can bet every other place has shot up so that whole equity harvest and move up thing is flawed.
Anyway, the high paying jobs went to India and china and Kansas and other small town in the mid west. Watch this place drop to well below the 90's levels.
Cool.
Cow_tipping.

devestment said...

Last weekend I went house shopping in a rural area of California. The prices aren’t too bad, but services are nonexistent and I could hear war drums and deliverance in the background. I spoke with a real-t-whore and she spilled the beans. It seems she owns half the property in the little po-dunk town herself. I asked for specific properties, and she kept sending me to places she owned. She said she may sell a few because she’s a bit overextended. She said she owns several lots in a new development and may need money to build. I have emailed this real-t-whore twice now with no reply. When I call she sings like a canary. I am sure her area will take a 4o % haircut as soon as the big city money stops flowing to the outskirts. It cost me $80.00 in gas to drive there; imagine that $160.00 a month in gas to visit my lean-to shanty twice or $320.00 for four times a month. This is definitely an owner will carry community. My money is going back into my wallet!

Anonymous said...

Saturday I went to an open house for new development (9 houses) three blocks from where I rent in LA county. The houses were tiny. The kitchen and bedrooms were smaller than the ones in my old apartment. The monthly payments would be about $3700 a month including $625 for taxes and $105 HOA if you had a 30 year fixed. Now I don't feel so bad paying $950 rent.

Anonymous said...

You mean the "bubble-proof" Bay Area is experiecing a rapid rise in foreclosures?? Say it ain't so!

Huh. Guess the declining population, stagnant wager and continued outsourcing just might be causing a problem.

But it will be our little secret. ;-)

hemorrhoidforhousing said...

But....but...everybody wants to live here because it's sooooooooo beautiful and progressive(liberal)!

Just as I have bought and driven repossessed cars I plan on taking advantage of a fool and their poor decision next fall.

Anonymous said...

Now I am seeing panic!!!

Anonymous said...

Woooooohoooooo! PANIC IN THE STREETS!

Shakster said...

Kern,and Lake counties are having their tax assessors auction starting Feb 31st.Enjoy-
www.bid4assets.com

dave_leroy said...

They're not making anymore land

Lost Cause said...

It is going to get pretty ugly. (did I say pretty ugly?)

Anonymous said...

Anonymous said...
Vallejo is the freaking armpit of the BA. So is west oakland, so is hayward or whatever is along 880. San Jose has some good parts and some bad. I can totally see why someone will want to buy in Vallejo just to flip or count of appreciation so they can take the $$$ and run. Cos you cannot live in vallejo.
Of course if vallejo goes up you can bet every other place has shot up so that whole equity harvest and move up thing is flawed.
Anyway, the high paying jobs went to India and china and Kansas and other small town in the mid west. Watch this place drop to well below the 90's levels.
Cool.
Cow_tipping.

Thursday, January 25, 2007 3:28:44 PM

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When is the next round of riots scheduled? 1992 was "fun."

Anonymous said...

Anonymous said...
You mean the "bubble-proof" Bay Area is experiecing a rapid rise in foreclosures?? Say it ain't so!

Huh. Guess the declining population, stagnant wager and continued outsourcing just might be causing a problem.

But it will be our little secret. ;-)

Thursday, January 25, 2007 4:57:02 PM

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Huh what? I thought "everyone wants to live here (Craplifornia)." At least that's what Suzanne told me...

Kerry Dale Hancock Jr said...

ARE 50% OF THE CALIFORNIA HOME LOANS GOING INTO FORECLOSURE?
By: Kerry Dale Hancock Jr
Many real estate experts and California lawmakers are aware of the fact that about sixty percent of sub-prime loans in California which are home loans that are given to the borrowers with the most risk allowed borrowers to only pay the interest or had an options on an adjustable rate.
The major problem with this is most of these people were given a Sub Prime home loan when in all actuality they could not afford it. How is this possible? Very easily; these borrowers were giving incentives such as no money down, low introductory payments or interest only payments and sometimes less than that.
Regulators are saying that most of these loans were taken out in 2004-2005 and they will see the higher rates this year. As this happens we are expected to see an enormous amount of foreclosures in California. This will be tragedy for some and opportunity for others.
It is a fact that some times borrowers were not required to show proof of income, assets or proof of a current job. Many of these Sub Prime home loans have terms for more than 40 years compared to a traditional 15 - 30 year fixed mortgage. Smells like possible disaster for so many new home owners in California.
These are perfect reasons you should shop around for your home loans and if you are in California make sure that you get a local real estate professional so that you don't find your life upside down a few years later.