patrick.net

Just talked to an acquaintance in the mortgage industry.

Jumbo loan remains in the semi-shut-down stage, because no investors will buy them. People without a good credit and a solid family income (read: $200K or above) can hardly borrow anything beyond $417K. Those who pass the threshold can only borrow up to 3x gross household income. Secondary loan+ primary loan combination to come up with enough dp is on life support.

So, the higher-income worker bees with a long enough earning history in the valley now can only borrow up to $750K (assuming $250K income). That will put a cap on middle upper class housing price at $937K.

People without a good credit and a solid family income (read: $200K or above) can hardly borrow anything beyond $417K. Those who pass the threshold can only borrow up to 3x gross household income.

Wow. If this is representative of the general mortgage market, this will *destroy* prices in CA. I doubt there's a broom closet to be had in Pasadena for less than $417k.

I heard similar things from a MB friend. Looks like 10% DP is the absolute minimum now. And even that is difficult to pull.

Wow. If this is representative of the general mortgage market, this will *destroy* prices in CA. I doubt there’s a broom closet to be had in Pasadena for less than $417k.

Yep. The prices we see now are simply lagging the financial reality of the market.

NOT INVESTMENT ADVICE

Peter P,

I agree. They're totally unreal. We really can't say where prices are right now and probably won't until after the dust settles.

DinOR :

That’s why this is so pathetic. 6 mos. ago it was “buy now or be priced out forever” and now it’s “Why a bailout makes sense!”

First they were trying to convince us that housing prices will keep going up forever. Now they are trying to argue that the prices will not fall due to bailout etc.

The only problem is they are a bit too late in their arguments. Prices have already started coming down. I have noticed a sea of change in the attitude of Bay Aryans - including dual income immigrant techies. Some people even realize that median going up is a deceptive indicator ! Who knew !

Given the way the money faucet works, I think the current "fair" market price for SFHs in good neighborhoods should be around $800K-950K, which means lots of these 1.xM homes will need to come down 25-30% to meet the "new market".

Since we know that the market always overreacts, so it is possible that you may pick up a deal, say $650K in San Marino or something.

10% dp will not work for something without a 750+ credit score.

Now in order to borrow more than $417K, you need aboslutely the combination of the following 3:
1) 10% dp as the absolute minimum
2) more than 3 years of documented earning history that supports your borrowed amount (3x)
3) credit score of 750+

Even so, you are looking at a rate of 7+%. People who cannot jump through such hoops may still get money if they are lucky, at about 12% rate.

The SF Bay Area Craigslist ReduceOMeter has been shutdown, because, quite frankly, it just wasn't that much fun any more. As a replacement, may I introduce the ShortSaleOMeter. There were 89 "short sale" listings for the two day period of Aug. 31-Sept. 1. Even a couple of condos in *gasp* Marin. Don't worry FBers, your crys for help are not going unheard...

StuckinBA,

Exactly. I just can't understand why any REIC member would find this something to boast about?

"Go ahead, take the plunge (even if prices are in a free fall and your source of funding is in doubt!) How much lower could prices go down with a bailout at the ready?"

Great sales pitch! How's that working out for you? :( Pathetic.

For that matter, why is it that corporations get a total free pass while individuals get the new “means test”? Ford, Chrysler, GM, AA, United, Continental, etc. all get to file BK as often as they like, while we put individuals through the wringer.

To be fair, AA has never file for bankruptcy.

"may I introduce the ShortSaleOMeter"

You certainly may! Sounds like the only sensible alternative. Like I say, with as many specuflippers (TM) going the "no guts, no glory" route when insisting on their 'wishing price' this may be a more accurate indicator anyway. I mean, the guy is 5 months behind on his specu-payments and he can only rent for 1/2 to 2/3rds. of his monthly nut so WTF!

"Either I'll get lucky and sell it for what I owe, or it'll go back to the bank, right?"

A single foreclosure is a tragedy. A million foreclosures is a statistic.

From sushi to Stalin in one single thread. :)

We need some sort of commitment for those seeking BK that they won't do it again. Plus we need to prevent such people from procreating. A quid pro quo of sterilization in exchange for BK protection may be an appropriate remedy.

A similar solution to illegal immigration would replace the current "catch and release" program with "catch, geld, and release". This would have a strong deterrent value as most illegals have bought off on the whole machismo lifestyle.

Build camps on the border and send the illegals found breaking any laws there. This would make them uncomfortable while they wait a court date.

Actually, isn't true that aliens who entered without formalities are not protected by the Constitution?

Regarding problems in Jumbo mortgage.

I have been hearing similar stuff but not in so clear terms. I have been arguing for a longest time that in spite of the strong job market the market in BA cannot sustain the madness in the face of rates near or over 8. Even at 7 the market started stalling and falling, but with 8% even the Fortress can stall.

Whatever the bailout is, it will have zero impact on BA. It's one thing to take a political posture of bailing out a poor FB who was tricked into a subprime mortgage. It's completely another to bail out a Software Engineer who earns over 120K and bought a 1M+ home. Not going to happen.

The real question is what will happen to jumbo mortgage market ? How long the crunch will remain ? Will it keep getting tighter and/or have higher interest rates ? What will be the effect of rate cut(s) by FED ?

A $1.1 million home for $650,000? Get real. The Great Hosuing Crash of 2008 has officially been cancelled.

This has happened in places where governments are even more eager to intervene.

The real question is what will happen to jumbo mortgage market ? How long the crunch will remain ? Will it keep getting tighter and/or have higher interest rates ? What will be the effect of rate cut(s) by FED ?

FHA limits will probably be raised, whether we like it or not.

We may end up with a combination of high inflation, weak dollar, lackluster economy, and high mortgage rate (higher risk premium).

My original post is not bailout and punishes FBs and Credibtors alike. What else do you want?

About class warfare. The rich has won over and over and over again. That is why there is a 3rd world and the reason the rich and their sympathizers don't want to talk about it.

We all knew people who didn't listen to us non-professionals and now are in trouble. But those who know better from Greenspan to Leahr told EVERYONE there was no problem. And now their buddies are the ones you want to bailout. Huh? Did the investors really think there was no risk?

I knew there was a problem and I also know this is not just a housing bubble problem. But a problem of our whole way of life.

This whole thing is about marketing and the false prosperity we all are induced in, in our society. It is also part of the American system, not just the myth of Free Enterprise.

Class Warfare is an essential part of human societies.

Watch out for Generation Warfare. This one is something new.

We've been waging generational warfare for quite some time now. Social Security and Deficit spending.

We’ve been waging generational warfare for quite some time now. Social Security and Deficit spending.

The only way we can "win" the generational warfare is to side with the seniors.

Or arrange a powergrid shutdown and concurrent heatwave.

skibum :

The even funnier thing about TOS’ “bottom line” is that by strict definition, a recession is technically defined as at least TWO quarters of negative GDP growth.

Good catch !

What our Lady Aristotle is saying is "TWO quarters of -ve GDP growth will last about ONE quarter". It makes perfect sense.

I found this link over on the HBB : http://tinyurl.com/yr7w92

Check it out and snicker for a good long time. A 20 year old who puts the 'broke' in mortgage broker.

Hey Donald you nimrod,

I've got news for you - the "bailout" you keep touting and hoping for ain't gonna help much. It's just political window dressing. Do you really think those in government really want to help out your average FB? This is just a great political opportunity for the Democrats to seize on an issue and claim they are trying to help the "working class."

You are just too dumb and/or naive to realize this, it seems.

Again, my condolences for overpaying for your home in New Jersey's "Gold Coast."

“The history of all hitherto existing society is the history of class struggles.”

— The Communist Manifesto, Chapter 1

DS, that is very true, isn't it?

Donald Says:
Sorry, I should have written “The NAR and NAHB funded Democrats want to help out the homeowners.”

Sorry, you should have realized "The NAR and NAHB funded Democrats want to help out the NAR and NAHB."

Any scraps thrown at FB's will be only to the extent that their interests coincide with those of NAR and NAHB. In a tight credit environment, underwater FB's will find that the NAR is no longer 'their best friend', and that the NAHB is actually in _competition_ with them.

SP

Serious suggestions:

Fed rate cut by 75 basis points.
Extend 600k conforming loan limit to entire country.
Heavily regulate mortgage industry to eliminate bad actors.
Government agencies get lenders and owners to renegotiate toxic and underwater loans where possible.
Increase arcahic $3k/year capital loss limit to $100k or more.

And on the lighter side:

House Katrina refugees in empty $1million McMansions to save on trailers.
Convert abandoned condo complexes into housing projects.
Depreciate dollar by 2x through inflation until everyone has positive equity.
Elect Hugo Chavez president and then cancel all debts retroactively.

marx is by far the most important economist in history.

To be fair, TCM has a rather accurate prognosis of capitalism. However, its prescriptions are worse than the disease.

Nevertheless, we do not really need economists. All we need is more hedge funds to arb the market.

I would say George Soros is the most outstanding econo-philosopher in the 20th Century.