patrick.net

Like I said Robert, foreclosures starts are down in Arizona, but I don't believe that tells the whole story. Arizona is #2 in the nation for percentage of homeowners with negative equity (only behind Nevada):
http://bottomline.nbcnews.com/_news/2012/03/14/10626408-5-states-drowning-in-underwater-mortgages?lite

Here are some other facts about the Arizona market:
- Percent homes underwater: 48.3 percent
- Total property value: $243.02 billion
- Mortgage debt outstanding: $226.22 billion
- Median home value drop from peak: 47.9 percent (second-biggest decline)
- Homes in foreclosure or 90-plus days delinquent: 7.1 percent (11th-largest percentage)

Being #2 in negative equity, and #11 in the 90+ day deliquency department show me that Arizona might be enjoying a short term upward bounce (after 4 years of price drops from peak), but there is still a significant downside to Arizona's market.

Well, I think it's one of those things that will take a while to see how it pans out. It's very difficult to explain market volatility, and short term events, even the best get it wrong time after time. What we do know is the reduction in inventory is a recent national occurrence, not only in Arizona, and it happened very quickly (within 5-6 months).

The causes are debatable, but the effect isn't. I personally believe banks are causing the shortage through market manipulation, and with the tacit agreement of the federal government because taxpayers cannot afford another financial bailout for those institutions if they had to realize their losses on paper (though that is only a personal theory, and of course impossible to prove).

One thing I know for sure is that all the delinquent mortgages didn't suddenly cure, nor did all those empty homes suddenly get bought up.

Call it Crazy says

Many "shadow" house don't show up on ANY data point.... you can "look" for data all you want on Freddie and Fannie records but they aren't going to tell you NOTHING if the bank hasn't moved to foreclose.

They'll be on the delinquency reports, won't they? 30 day/60 day/90 day/pre-foreclosure lists...

Should be, but not always the case.

Our neighbors (60+ years old) stopped making payments sines last summer, no records on their property anywhere. They purchased it in 2007, now 5 years later deeply underwater.

After trying to negotiate with BOA for many months, they have been offered a loan modification: 50 years fixed with 3.25% interest, no principle reduction/forgiveness, plus all interest for the last year will be added to the principle.

Their current mortgage 5.25% variable for 30 years with 10 years fixed interest only.

By accepting this offer they will save about $1,000 per month, but they will be renting their property from BOA for the rest of their life.

Aha! So thats why real estate prices have been kept artificially high in the bay area! I knew that boatloads of corrupt filthy rich Chinese were not the reason.

zhanka says

Should be, but not always the case.

Our neighbors (60+ years old) stopped making payments sines last summer, no records on their property anywhere. They purchased it in 2007, now 5 years later deeply underwater.

After trying to negotiate with BOA for many months, they have been offered a loan modification: 50 years fixed with 3.25% interest, no principle reduction/forgiveness, plus all interest for the last year will be added to the principle.

Their current mortgage 5.25% variable for 30 years with 10 years fixed interest only.

By accepting this offer they will save about $1,000 per month, but they will be renting their property from BOA for the rest of their life.

30yr mort in '07 in their 60's,,,,,they were already signed up to rent from boa for the rest of their lives

Fuck the data

The psychology matters as much if not more then anything. People still view the whole ponzi scheme the same way they did five years ago. If you give them enough rope (credit), they will club and claw over one another to hang themselves with it. Overbidding now into supply constrained markets, and jacked up rents ought be plenty proof.

Its like buying season tickets for the Steelers. There's only so many available, but everyone wants them. If they auctioned them to the highest bidders, we'd have a website with 1000's complaining about how they can't buy a Steelers ticket for the same price a detroit lions ticket. Well no shit, sherlock, look at how many people are fighting it out for the fixed supply of land in SFBA , I bet if you asked um all, they're going to tell ya, california is so eff'ing cool. Which is the same reason the same people look down their noses at pheonix/arizona, because who on earth would want to buy more house for 80% less, I mean, it's pheonix. Real estate is local, and location location location really does matter. All realtwhore trichanry aside, all that matters is the desirablity of the location.

The most mind boggling, is that most people just want to use a piece of RE as a consumption item. It provides them NO RETURN, on the contrary, it requires a lifetime of maintenance and upkeep. They pay for their vanity. At least some people still understand that land/RE does provide a return, TO SOMEONE. Its just usually, someone else. The landlord, the bank, the local government.

there's two sides to every trade

All the foreclosed homes were sent to Kolob by Joseph Smith. Not until Romney comes to power will they be sent back. Until then, prices are going higher, much higher. If you don't believe me, just check out the Book of Mormon. Jeesh!

Detail of Joseph Smith Hypocephalus. Reference numeral 1 represents Kolob according to Joseph Smith, Jr., who was not a trained Egyptologist. Critics interpret this as an altered figure of a creator god.

dunnross says

t doesn't take a Berkeley professor with a Math degree to realize that the banks are withholding inventory.

Yes, they are doing this for aone simply reason and that is because of second liens or HELOCS which they will not dishcarge. this is yesterdays news

Robber Baron Elite Scum says

I am warning that you are making a very risky & bad bet based upon misguided optimism not facts & figures which clearly demonstrate the RE market to crash further. I never name called you nor did I ever personally attack you.

no way. we all like Roberto. He is a veyr warm man. Yes He is also a troubled soul but he offers his honest input on here and that is invaluable to me. :(

"You have never posted a single fact that shows anything to back up your belief. Thanks for the warning, but I invest on data."

I'm not here to teach. Just because I don't post my facts... Just my predictions, doesn't mean that proves they are not based on facts. Nice try though.

"You have posted many times that "housing will collapse 95%. I am buying a home in two weeks for $60,000 that has a tenant in it paying $850 a month. 3/2/2 garage on a golf course... So, this home will be $3000 soon? fascinating!"

No. I said 90-95% off 2005 prices. Not today's prices. Stop taking things out of context & putting them into your own context.

"Which facts have I deleted?"

Shadow inventory.

"Where are these shadow homes?"

Where are the stolen goods from a burglary or robbery?

"All that is going to cause my to lose money on real estate? what about global warming, and colony collapse syndrome that is hurting the bee population?"

Your sarcasm is actually a psychological mechanism of denial if you believe none of the below can affect real estate...

"It IS based upon 3 years of research of historical RE data, demographics, trends, fractional reserve banking, mortgage industry, income correlation, divorce rates, marriage rates, birth rates, interest rates, lending practices, foreclosures, deflation, inflation, monetary policy, international trends, economic conditions..."

You have a vested interest... Period.

Robber Baron Elite Scum says

ou have a vested interest... Period.

I do to bud , but I know reality from a wish and the shadow inventory you all are talking about is a fact. I know because I deal in foreclosures. Banks that have properties with 2nd mortgages on them are unable to do much with them. they can't sell them to Fannie and Freddie and they will not right down the second mortgage so they stay on the books. this is really real Robber. I have treid to buy such properites by getting in tough directly with the banks and.. guess what .big fat nothing. it is more EQUITABLE for them to keep them on they books than to sell to me for speculation which is just BS. I want more rentals!!!!!! A mans gotta eat and I eat damn well!

robertoaribas says

Guess what? in AZ, they just get wiped out in the foreclosure, so they can negotiate for a token payment in short sale, or they can get nadda.

Sorry Rob. As anyone with eyes in they head can see, you are a good-hearted man, and also a friend-to-animals. But that what you said here is simply untrue my friend ..least from what I seen. Banks jus can't be that different in AZ than what they are in the two states I own houses in. I am telling you, these banks do not so casually wipe out seconds because among other things, the seconds are actually reported as performing. I don't blame them, frankly.

http://www.americanbanker.com/specialreports/176_5/second-lien-loans-remain-worry-1036731-1.html

robertoaribas says

AND have paid me rental income in excess of 10% of the purchase price..

This will be 35% in another five years. You will be too busy counting you $$$ to come on Patrick and wrastle with the out crowd!

Robber Baron Elite Scum says

That college curriculum is for the most part very insufficient & useless in the real world.

Pretty much, yes. Unless you go into sick-care.

Robber Baron Elite Scum says

Good luck happily buying anything after another crash... Because banks all over will have a solvency problem.

Small banks might have a solvency problem. The big ones will have an endless stream of newly-printed cash from Uncle Ben.

We are moving forward on a condo short sale here in Oregon that also has a 2nd mortgage. Took a little more time clearing the title, and I am not privy to what lender is getting what out of the deal, but guessing the 2nd mortgage holder is getting close to diddly.

LOL! This site is just too awesome sometimes.

freak80 says

Robber Baron Elite Scum says

Good luck happily buying anything after another crash... Because banks all over will have a solvency problem.

Small banks might have a solvency problem. The big ones will have an endless stream of newly-printed cash from Uncle Ben.

I believe all banks will have a solvency problem. I do not think their will be bail outs this time.

I think their will be a currency devaluation first & then the FDIC will give depositors cheap money.

FDIC is by the way a private corporation severely lacking in funds to cover major bank failures & solvency issues.

"If you even have one brain cell, you will sell. You are getting greedy. Cash out, now. Once you win, don't become intoxicated & try to win more."

The problem is he has 2 cells left in his brain. That's why he hasn't sold yet. Why sell at $120k today when you can sell it for $240k or more in ten years. In the meantime, the property mints money for you. :)

Robber Baron Elite Scum says

I believe all banks will have a solvency problem.

Your believe is not the reality. Here is the reality. Wells Fargo & JP Morgan Chase are making record profits despite the fact that JPM recently loss $4.4B in derivative trades.

Hello? Anyone home?

E-man says

"If you even have one brain cell, you will sell. You are getting greedy. Cash out, now. Once you win, don't become intoxicated & try to win more."

The problem is he has 2 cells left in his brain. That's why he hasn't sold yet. Why sell at $120k today when you can sell it for $240k or more in ten years. In the meantime, the property mints money for you. :)

Learn from your victory. Prosper from your failure.

You will think that you are making gains but when you adjust inflation you are actually not & in fact losing.

Rents will fail as well. They are just temporary sources of income.

E-man says

Robber Baron Elite Scum says

I believe all banks will have a solvency problem.

Your believe is not the reality. Here is the reality. Wells Fargo & JP Morgan Chase are making record profits despite the fact that JPM recently loss $4.4B in derivative trades.

Hello? Anyone home?

Learn from your victory. Prosper from your failure.

What these banks practice is crony capitalism. Where the debt is PUBLICALLY shared, yet their profits are PRIVATELY shared.

You are very short-sighted with how these banks are making their money.

J.P Morgan will have a solvency problem but will not go out of business, since they essentially have shares in the Federal Reserve & FDIC.

If not solvency, they will shut down all banks no matter how big or small... Devalue the currency & the reopen all banks to pay out depositors.

Small banks will likely however be bought out along with buying out whole entire corporations for pennies on the dollars. They did this during the great depression & they will do it again.

Ignorance gives you often a opposite appearance of reality.

They did this during the great depression and they will do it again!

In 1929, you had a incomplete crash. Then denial. Then false hope and then a complete crash in 1933.

In 2008, you had a incomplete crash. Then denial. Now false hope and miss guided optimists like Roberto. And the complete crash is coming in end of 2012.

1929-1933

2008-2012

All 4 years apart. History repeats itself. You will also likely have a major war.

Many people during 1929 through 1933 in the media were optimists & even common people like Roberto were becoming optimists. The the crash of 1933 came & they lost everything. Many of these same people paraded themselves as being experts & extremely credible due to "education". You have the same problem with so called "credible experts" today.

Great depression ended around December, 1941. The coming great depression will end around December, 2020.

8 years apart from shit hit the fan until you begin to have some level of prosperity & decent living standards for the majority of people.

Now is not the time to make money. That should have been done during the 90's & early to mid 2000's.

Now is the time to keep what you have & prepare for collapse so it doesn't affect you. Then, once the collapse comes... Then you become greedy & buy as much as you can for pennies on the dollars.

Passing on your pennies on the dollar deals to future generations 80 years later... Making them very wealthy as long they weren't fuck ups.

Just like the Rockefeller's, Rothschild's, Carnegie's, Dupont's, Vanderbilt's & Morgan's along with the rest of the secret aristocracy.

^

Useless babble up ahead.

This crash is far worse than the Great Depression when you consider the ratio of privately held debt, to income.

robertoaribas says

and the middle class may be destroyed for our generation.

Is the middle class not already at that point? Seems like it from most indicators (income growth, job growth, privately held debt per capita, etc).

"Fair enough, you've given a basis for your beliefs, and I respect that."

I will also give points for at least owning some physical land & real estate. And not keeping all your wealth in fiat currency.

At least it is something physically valuable unlike paper. I also believe that the coming crash will be worse for those with no assets of real estate... Just fiat currency kept in banks.

But also believe again that buying real estate now is a mistake.

Silver is the best investment right now. Protects you from fiat currency crisis & another RE crash.

gbenson says

Took a little more time clearing the title, and I am not privy to what lender is getting what out of the deal, but guessing the 2nd mortgage holder is getting close to diddly.

Jest be sure you don't have problem with the deed later down th e line. i have some hassle right now with that very sort of deal on one of my properties.

Robber Baron Elite Scum says

I also believe that the coming crash will be worse for those with no assets of real estate... Just fiat currency kept in banks.

Disagree. The dollar is king and will be. Listen to Jody.

JodyChunder says

Robber Baron Elite Scum says

I also believe that the coming crash will be worse for those with no assets of real estate... Just fiat currency kept in banks.

Disagree. The dollar is king and will be. Listen to Jody.

Deflation will be short-term. I do believe it will be king since all other fiats will collapse and the world will run to the dollar.

It is the world's reserve currency that will rise due to other currencies collapsing... Until the dollar then collapses.

Also while probably everyone agrees on the need to drastically reduce the military budget by ending useless wars, thinking that the continued spending spree by Dems will save the middle class is stupid - cuts are needed and yes, there will be stagnation, maybe even depression for a while, but in the end prosperity will set in faster as the bad debt is gradually cleared and deflation is correcting the prices. If you spend and inflate the rich will have it easy as they have most of their fortunes in assets that will inflate with them while the middle class is mainly depending on day job salaries as their main source of income, and we all know that those already haven't been able to follow the recent inflation. A loose spending policy under the false premise to help the middle class will make things far worse than spending cuts where prices will deflate back to fair value - money always finds a way to trickle up but it never comes back.

mell says

but in the end prosperity will set in faster as the bad debt is gradually cleared and deflation

No sir. This will not save the middle class. besides what we are in is a depression like new-normal. That's all.

I'll also admit that I somewhat respect Roberto for not falling for 2005-2007 prices.

Cashing out and selling then.

I also believe that even if the crash which I expect really happens... Then Roberto will better off than 99% of people since he at least sold during the peak and then bought as cheap as he could in today's prices with profits he made during the peak.

But I still strongly disagree with his investments and am bearish vs him being bullish... Albeit respectfully.

Robber Baron Elite Scum says

I'll also admit that I somewhat respect Roberto for not falling for 2005-2007 prices.

Roberto is mathematician so he calculates risk in a way that is very hi tek and not emotional

zhanka says

And few years from now some will say the bottom was 20___

We purchased our property in June 2009 thinking it was the bottom.

At that time it was apprised at $430,000

Tried to refinance two times in 2010 and 2011. In Nov. 2010 it was apprised at $395,00, and in Sep. 2011 at $354,000.

Z, you jumped in a little too early with the condo market. SFH homes bottomed out first in 2009. In early 2010, I talked to a veteran investor, and he advised me not to touch condos and townhomes until Feb 2011. This guy bought 50 SFHs for himself in the Silicon Valley in 2009.

We bought 2 condos and 2 townhomes between October 2011 and May 2011 this year. Got one more condo in pending status. Hope to get it wrapped up in the next couple of months. The complex has appreciated tremendously. Fingers crossed.

Robber Baron Elite Scum says

You are very short-sighted

Wow. How did you know? That's correct. I wear glasses. :0)

If TPTB navigate thru the headwinds "we" are facing here over the next few years, and people still have faith in the currency, it will be nothing short of a miracle imo.

When interest rates bottom out (stop going lower to accommodate flatlined prices ) that will be our 'take the training wheels off' the damn thing moment. The way I see it, they won't even have to start going up like many have claimed they eventually have to do, they'll just have to stop going lower, and then all bets are off. By the election, you'll have to figure every house debtor that will have made their final refinance by then, so there won't be much of a re-fi market moving forward. Then the fun starts

E-man says

zhanka says

And few years from now some will say the bottom was 20___

We purchased our property in June 2009 thinking it was the bottom.

At that time it was apprised at $430,000

Tried to refinance two times in 2010 and 2011. In Nov. 2010 it was apprised at $395,00, and in Sep. 2011 at $354,000.

Z, you jumped in a little too early with the condo market. SFH homes bottomed out first in 2009. In early 2010, I talked to a veteran investor, and he advised me not to touch condos and townhomes until Feb 2011. This guy bought 50 SFHs for himself in the Silicon Valley in 2009.

We bought 2 condos and 2 townhomes between October 2011 and May 2011 this year. Got one more condo in pending status. Hope to get it wrapped up in the next couple of months. The complex has appreciated tremendously. Fingers crossed.

Yes, I believe we did jump too soon, but on the other hand with 3.5% down, and almost 15,000 back at closing from a seller, we though it was a good deal because of Cupertino school district. So our plans were to sell it in 3 years or rent it out before buying a house. But it is hard to refinance it now (I don't see comparable sales that would support high price tag), and it will be even harder after we buy a house considering a fact it would be a rental property.

I spoke to a few different brockers at different times, almost all of them say not to put cash down to get it refinanced, kinda not worth it, and even some of them advised to buy a house and then dump this one.

My husband and I still believe it is better to hold on it since it almost cost us nothing and the rent ($2,800 if believe to patrick calculator) would cover mortgage, interest and HOA, and maybe someday taxes, so rent would pay it off someday and we will have additional income when we retire and pass it to our kids...

Anyway, I'm like many patrick readers believe we didn't rich the bottom yet, but it is a good time to refinance if you can. I hold my husband to not buy a house at least before election...

Z,

If your loan is FHA, you might qualify for streamline refinance. Underwater or not doesn't matter. Talk to a mortgage broker that understand HARP 2.0.

Good luck.