patrick.net

The people that are still holding out probably aren't much at liberty of taking the loss. That is to say, if you are living month to month and just scraping by to pay your monthly nut, thinking that peak prices are coming back (or needing a return much closer to peak levels to be solvent) you're not going to wake up tommorrow and say fuck it, just short sale the thing and be done with it. Just think of all that leverage that built up to get to the peak, do you really think we've worked thru that thus far? The boomers are oftened referred to as the "bulge in the python". The first boomers have barely begun to hit retirement age, this will be a tough pill to swallow for many. What has changed? We've used five more years worth of petroleum, piled on a ton more debt, and been lucky to have just semi-stabalized and slugged along. Now, you might anecdotally look at your own personal situation, or some of those in your sphere, and say things aren't that bad, we're doing good for ourselves. As a whole, the 315 million are still tapped, over worked, under paid, buried in debt and of negative net worth. You'd have to be insane to think that house price go up from here. Smells like a big fat trap to me.

Sorry for the tangent. I just don't believe there is this large swath of mortgage debtors watching for seasonal price spikes to escape. Then they'd be in the same shit situation and out on the street. Those people will squat it out as long as possible, return to lender, and the banks will lean on the tax payer to slowly bleed out the inventory. If they had to mark to market and realize these losses, how many are still solvent?

dunross,

The Fortress is "different". However, for the Rest of Us who are not in The Fortress, I think that the most likely outcome is not 'another down leg' but instead a very slow downward grind, year after year, etc., so slow and gradual that many will not recognize it for what is.

The next catalyst:

Well, I am working on one right now. I put a bird feeder into my apartment's back yard. The goal is to get TONS of birds to feed there. I will then work caffeine and laxatives into the feed so that they fly all over Mountain View, shitting on everything. Surely that will cause house prices to crater as all the people with expensive leased cars flee in terror from the white rain that could break the terms of their lease!

Alternatively, I could probably just gorge myself on super burritos for a week straight, overload the sewage system and drive everyone out once they cease to have functional septic infrastructure. It'll be a little messy, but worth picking up a 4/3 on a quarter acre in Mountain View for $100.

bmwman91 says

Well, I am working on one right now. I put a bird feeder into my apartment's back yard. The goal is to get TONS of birds to feed there. I will then work caffeine and laxatives into the feed so that they fly all over Mountain View, shitting on everything. Surely that will cause house prices to crater as all the people with expensive leased cars flee in terror from the white rain that could break the terms of their lease!

Alternatively, I could probably just gorge myself on super burritos for a week straight, overload the sewage system and drive everyone out once they cease to have functional septic functions. It'll be a little messy, but worth picking up a 4/3 on a quarter acre in Mountain View for $100.

MOST DESERVING UPVOTE, EVER! Five Thumbs Up!!

B.A.C.A.H. says

The Fortress is "different".

That can't be the case, that every other area, except the fortress goes back to fundamentals. If that was true, then, with each boom-bust cycle, the fortress would become more and more overpriced, relative to the other areas. History has shown, that this never happens. Quite, the contrary, with each boom-bust cycle, areas which were considered as a fortress before, evolve to become just ordinary neighborhoods, and areas which were ordinary become the fortress. Take Detroit, Cleveland, Houston and South Florida and others. All those areas were considered fortresses, in the past, and look at what happened to them, today. This is because, the govt can't inflate new bubbles in the industries which have already deflated. New industrial centers will rise out of the ashes of the bust, and they will not be the same as yesterday's fortresses.

Catalyst incubator;

http://sfbay.craigslist.org/sby/reo/3070271322.html

Banks, NAR, Government, and investors are in control of it, or so it seems to me sometimes. Time to clear inventory/carnage, as painlessly as possible for them of course. Home prices are moderating in the spring as they usually do, will we have another leg down, or are prices just north because of that. Looks like we might have to wait and see.

Rates are at record lows again, good time to try and pump the market up.

Point is they won't put inventory on the market for this reason. They want prices high. They are the ones that got them their in the first place. You owe you go: to work. The more you owe the longer you stay at work. Its not what they earn. That they have plenty of. Its your productivity + amount owed + time owed (measure of time owed = time at labor). That figures into most everything. Hey the more you get the bigger the asset you will spring for the nicer the asset they have. It sits there they either get a lot of labor to pay it off or a really nice asset to use again. See they utilize assets also in relation to labor.

If they didn't set the prices on houses realtors etc. How could they fix the time you will be at labor given the level of very measurable income as it relates to job description? So what this all adds up to is they aren't giving you any free time for yourself mush.

The bottom, bottom line you don't buy and sell uhuh your a fixed price retail kind of people that stays put and loses their houses instead. Thats the way it is. They want retail back but on their terms. Why give you an equity line? Simple. The bank has to pay the fed back thats one. Its interest multiplication going back in the other direction without offense of course. Within the qualifications that maxes you out and leaves you going through the revolving doors for a long time pumping out labor to get even. You can't leave you owe. Meanwhile you don't know what to do. So you give up your labor (which they can use you for anything they want including menial tasks) to be in debt for what they do know how to do. The difference bettween forced labor and debt not much they can make you work at anything they want in the way they want. In any way they decide. Object no one can do anything for you or about it the same thing really.

HRHMedia says

realtors should be paid $500 transactions fees on home sales upto $1500
no more

I only pay my tax accountant $200 to do my taxes, and he has a CPA. Why do realtors deserve more than that? My accountant actually works pretty hard for his money.

HRHMedia says

Valuations/Assessment & Inspections of homes should be done by the state and tied to the note!!!!!!!!!!!!!!!

I can't believe it! And, you don't see any moral hazard in that?

You guys just aren't listening. My army of caffeinated defecatory bomber birds will smash housing prices in a volley of white terror. Only those that smear the blood of a realtor above their front door shall be spared.

The complete collapse and utter repudiation of socialism.

HRHMedia says

realtors should be paid $500 transactions fees on home sales upto $1500
no more

Valuations/Assessment & Inspections of homes should be done by the state and tied to the note!!!!!!!!!!!!!!!

The state should hold the info and charges for a look by prospective buyers.!
(It should be the basis of the owners property tax valuation)!

The state should take some responsibility for the condition of the property it collects taxes on!

As is the case with realtors, THE STATE isnt independent of the transaction. The state would favor higher inflated values to gather higher property tax, finance their social agenda, and keep their elected position, keep high level of govt jobs.

You need someone completely independent who wouldnt benefit either way.

In California, that catalyst is Governer Jerry Brown.

In November we will have an election ito expand sales and income tax. The clueless voters will probably give him waht he wants.

My guess is that a win in November will embolden his next attack on Proposition 13 to expand property taxes.

Zlxr says

I'm concerned that we will get a new kind of money called IOU's which are really hard on the bookkeeping and bank balances. And I'm kind of wondering how a bank that isn't really solvent is going to honor IOU's.

That actually did happen back in 2009 as i recall. and yes some banks did honor the IOUs.

http://www.reuters.com/article/2009/06/25/us-california-debt-idUSTRE55O07Q20090625

California set to issue IOUs as fiscal crisis weighs

I think it will be caused by an increase in the interest rates. Then watch out!

HRH, I totally agree with your fee structure for realtors...they make way too much money. Why not start up a real estate company and establish a commission plan like that for the people who work there. Then when it becomes wildly successful you can franchise the operation and make millions.
Problem solved - no more greedy overpaid realtors !!

APOCALYPSEFUCK is Shostakovich says

They don't. The Realtor® should get $6 an hour, $6.50 an hour if they blow you, wash and wax the car and run to get you cigarettes.

Yes, and I know plenty of them who, I bet, would love to take you up on your offer. They haven't sold a single house in the last 2 years, but they will all tell you that sales are at multi-year high with multiple offers in the double digits.

What about HELOC-bombs? Along with the housing market boom, the HELOC boom began in the early 2000's. Most of these HELOCs were interest-only loans for the first 10 years, which then become 15-year fully amortizing loans.

However, most of these folks probably refinanced their houses in the mid-2000's. With houses appreciating six-figures a year, who wouldn't? Realistically, some of these HELOC bombs may start going off next year, but they won't peak until around 2016-2018.

I guess my only question is, how many houses are still sitting on a HELOC bomb, and how many have already defused their bombs?

Call it Crazy says

It's funny you bring that up... I believe there is a HUGE HELCO bomb just sitting, waiting to blow..... I read a story that Wells Fargo, who holds a crap load of HELOC's, is going out to current customers who are current on their payments to try and settle the HELOC's by offering a payout of .25 cents on the dollar.

It seems that W.F. would settle for 1/4 of what's owed and get some cash back versus get "stiffed" when the home owner defaults, and they get nothing....

Got a source for that? It seems VERY surprising that WF would do that.

CA is out of money, I think that will have a significant impact.

The bubble was fueled, at least partly, by giving anyone with a pulse a loan. Who will replace these buyers at such a large number? New Household formation? Wouldn't most new households be poorer, due to the recession, but in general they are anyway, since they tend to be young and burdened with student loan debt, weddings and such.

Seems like the catalyst will be when the banks give up the ghost!

CL says

Seems like the catalyst will be when the banks give up the ghost!

Which, so long as the US government exists and is functional (I use that word loosely), they always will. The only way we will see a total and complete housing implosion all across the board will be if the entire nation's economy implodes. It is all rigged to extract every last cent out of us working class folks, and history has shown that the extractors do not stop until the entire system comes crashing down on itself. This isn't some prophecy of doom and gloom. It is just repetition of history.

I think that a more likely scenario that will help things correct in the SFBA will be the reduction or elimination of FHA loans of up to $726k. Even that isn't terribly likely, but it is a hell of a lot more likely than having the banking system go down without the rest of the nation going with it. Honestly, there really is a lot of money in the SFBA. Couples pulling $200k+ are in the 75th percentile. So, feeling like you can't afford shit on a very nice salary isn't all that surprising. 1 in 4 couples make more than $200k annually, and I wouldn't be surprised if there are not enough houses for 1 in 4 couples. Add to that the fact that a lot more than 1 in 4 couples are willing to borrow themselves into oblivion to get a house here (and most importantly, there are still ways to do that), and there's no light at the end of the tunnel.

I think that the SFBA RE "correction" is basically over. As many have noted on here, the only way that SFBA house prices will crater is if the entire regional economy totally implodes, in which case there will be a lot less reason to want to be here. This is NOT a good excuse to join the others and borrow yourself into oblivion too since, if you aren't comfortable with it now, you still won't be even knowing that it's a hopeless rat race around here. Your options are to rent close to work/around schools, have a long commute or move away entirely. Sorry, but there's no "buy a cheap house in the area you totally want, close to work with awesome schools." It's best to accept it and stop hoping for something that will never happen.

Yes, there are all sorts of good logical reasons for things to be different. Much of the frustration comes from having a system that is VERY openly rigged against "responsible middle class" people that is making it difficult to accomplish something that we are all told to do from birth in this country. Well, it's entirely our choice whether or not we are miserable about it. I used to do it to myself, but life's a lot better now that I see it for what it is and don't give a fuck. It's wrong on many levels, and it's a reality that self-inflicted misery will not change. Wait and save up more money, learn to enjoy renting or move away. I doubt that prices will have any meaningful gains in the next 5 years since even a system this badly rigged will have a hell of a time dealing with the endemic structural rot within it. Yeah, we'll see seasonal oddities like this year, but prices will probably be flat for all intents and purposes. So, wait & save is the strategy to employ if you want a house here. It is what I am doing, while also working the logistics on a move to Seattle.

Oh, and increasing interest rates might help. This isn't so much because it hampers borrowing power, but because it may start to attract investors to other money making venues. Right now, RE is all the only "safe looking" cash flow investment with decent return on it with the world economy and markets looking to be on the brink of disaster.

CL says

Seems like the catalyst will be when the banks give up the ghost!

I still haven't seen any reasonable explanation for why banks would continue keeping their properties from the MLS at this point when inventory is crazy low. If this was some sort of plan by all the banks, wouldn't they be feeding properties out to the MLS so that there was a good balance? Say 4-5 months inventory at any time?

The theory that banks are purposely holding properties back just doesn't pass the smell test.

Do we really need to discuss just one? Here are the potential downsides to housing as the market sits now:

- Shadow inventory
- Economic growth stifled
- Unemployment
- Decrease in small business formation
- Stagnant incomes
- Decrease in new housing starts
- Decrease in overall household formation
- ZIRP strategy, and when it will end (because it has to)

and MOST of all

- Housing is still too expensive in nice areas of non-flyover states when compared to incomes!

All of the above show me that housing still has many legs left to go down.

Goran_K says

- Housing is still too expensive in nice areas of non-flyover states when compared to incomes!

It sure feels that way to us, since we are unwilling to utilize the almost criminal financing methods that are still available (FHA 3.5% loans). Irvine is a nice area, and I bet that a $200k household income puts you somewhere in the 70-80th percentile there. Are there actually enough nice houses, conveniently located and in "good" school districts to accommodate even 1 in 5 people? You are competing with even more than that since damn near anyone can come up with 3.5% down, and investors are making up about 1 in 4 purchases to boot.

I don't disagree that there are TONS of logical reasons for prices to come down in nice areas. I just disagree that they will since the whole system is anything but logical, and very deliberately so. I would LOVE for prices around where I am to tank, but I am not "waiting for it" at this point. Doing so did nothing more than make me frustrated. So, I count all of the many blessings in my life and rent. Some people call it "settling" and they are absolutely right. I am settling for a set of annoyances that outweigh all the things that would REALLY bug me if I financed my way into an expensive house around here.

Renting isn't settling, especially if you're renting for a lot less than what you could "finance" for given equivalent properties. That's called being smart.

But for the most part, people are over leveraging, FHA needs a bailout, and human beings prove again that they have short memories.

Goran_K says

Renting isn't settling, especially if you're renting for a lot less than what you could "finance" for given equivalent properties. That's called being smart.

But for the most part, people are over leveraging, FHA needs a bailout, and human beings prove again that they have short memories.

I try to be honest, and in some ways I feel like I am settling. That's life though...trying to get everything you want usually just leads to misery. "Pick your battles" as they say. I want a garage (with a house attached to keep the Mrs. happy) for woodworking and car projects. Non-shared walls are also a plus for me since I am into building speakers. However, it is worth far MORE to me to rent, have a 5 minute bike commute and money for most of what I want (other than a house) than it is to have the commute that comes with a house that hits rental parity. A house is a WANT, not a NEED. No matter how big one makes the WANT, it still isn't a NEED except perhaps to our emotions. We all know how smart it is to let THOSE make the financial decisions lol.

tatupu70 says

The theory that banks are purposely holding properties back just doesn't pass the smell test.

Wouldn't locking the previous buyers into their loans be an incentive? The ones that are on the fence need a reason to stay put, rather than default and drag the market down lower.

Temporarily, you can make the loan holders feel like they waited it out and prices are coming back. Return the 1099 tax penalty, and you've hooked their payments in.

When Ritholtz defines "shadow inventory" he includes millions of people who are within a certain percentage of their breaking point, doesn't he? So, any dip adds those to the real inventory and then the cycle would feed on itself.

bmwman91 says

I think that a more likely scenario that will help things correct in the SFBA will be the reduction or elimination of FHA loans of up to $726k.

What if that happens, and Governments decide to balance their budgets by adding parcel taxes, or Brown has enough desperation to rejigger prop13?

And wouldn't migration out of the state create less demand?

Heloc bombs, tidal waves of shadow inventory, collapsing economies around the world… YAWN. Listen negative nancys these are reasons why YOU SHOULD BUY A HOUSE. A happy place you can paint any color you like and have super bowl parties, instead of paying attention to reality!!! Listen to BMWMAN, obviously doing well he has a bmw, step right up ladies CHACHING!

CL says

Wouldn't locking the previous buyers into their loans be an incentive?

Maybe--I'm not saying it's impossible--but it still seems kind of far fetched to me.

Who's to say that the 1099 penalty won't be revoked again if foreclosures spike. I certainly wouldn't bet against it.

I just don't think: 1. banks cooperate with each other, and 2. are smart enough to pull this off.

tatupu70 says

Who's to say that the 1099 penalty won't be revoked again if foreclosures spike. I certainly wouldn't bet against it.

I can picture a Kabuki theater situation where the Dems blame the GOP for obsessing about deficits and the GOP blames the Dems for spending like drunken sailors. The casualty would be the fence-sitter, but the benefit would be to the banks.

They just want to push the emotional drive to stay put, already likely since the affected owners have been in a zombie-like state for years, but now they will just be stoically resolute. "Ahhh, fuck it. I like the house, the pool and the addition I built".

tatupu70 says

I just don't think: 1. banks cooperate with each other, and 2. are smart enough to pull this off.

They certainly have the incentive this time. Trillions of dollars and economic collapse could create enough collusion and coordination to do it!

Why do you think they are sitting on them? Or do you think they aren't?

“Or is he finally retired on a tropical island with his cash-flow positive Concord properties providing lots of drinks, and island virgins?” Ahh you bitter renters don’t know how close to the truth you are, we duckheads, ARE ROLLING IN IT. Just the other day we swapped Real Estate Tycooning tips over drinks and steaks at SF Penthouse Club! Too expensive for you negative nancys but let me tell you CHACHING BABOOMBOOM.

duckhead says

Heloc bombs, tidal waves of shadow inventory, collapsing economies around the world… YAWN. Listen negative nancys these are reasons why YOU SHOULD BUY A HOUSE. A happy place you can paint any color you like and have super bowl parties, instead of paying attention to reality!!! Listen to BMWMAN, obviously doing well he has a bmw, step right up ladies CHACHING!

That's right, come git it ladies. You know you want to ride in my 21 year old car that I paid $2k for...the sucker can hold ~0.85 G's on the skidpad and rev to 8000 RPM all day long! Sorry honey, you can't turn the AC on. I never put it back after tearing the motor down 5 years ago. Yeah...'tis a real pussy magnet!

CL says

Why do you think they are sitting on them? Or do you think they aren't?

This is (obviously) just my opinion, but I don't think there is any concerted effort to hold back inventory to raise prices.

I think it's possible that banks are foreclosing at some steady rate to manage the effect on their financial statements. And it's also possible that the whole robosigning debacle slowed the process.

But I can't see how banks would orchestrate this to stabilize prices then let inventory get this low without taking advantage of the situation to unload a bunch of their REOs.

Aye Carumba no ac! Bmwman is not doing as well as I thought. :( Okay bro here is what you need to do: buy as many houses as you can ( pay the Realtors â„¢ full commission cause they got your back) then rent them out YOU WILL BECOME RICH. Ignore the doomers here, and dream your way to reality!!!

tatupu70 says

But I can't see how banks would orchestrate this to stabilize prices then let inventory get this low without taking advantage of the situation to unload a bunch of their REOs.

So, if it's not concerted, then you'd think that a large amount of inventory will be coming online soon, bringing down prices?

CL says

tatupu70 says

But I can't see how banks would orchestrate this to stabilize prices then let inventory get this low without taking advantage of the situation to unload a bunch of their REOs.

So, if it's not concerted, then you'd think that a large amount of inventory will be coming online soon, bringing down prices?

No--why would a large amount of inventory come now? Maybe a little more because of the robosigning settlement...

So you think inventory is genuinely low? It seems as though the robosigning issues held up the processing, but now that they have their guidelines they will be able and have been foreclosing on more houses.

What happened to all the houses that became REO? What about the ones that are being processed now that the logjam has been cleared?

They gotsta go somewhere.

CL says

What happened to all the houses that became REO?

That's a good question. What is the actual number of REOs? How many/what percentage are on the MLS? That would be interesting data to have.

CL says

What about the ones that are being processed now that the logjam has been cleared?

There was an increase in foreclosures last month. Maybe it's the beginning of a sustained rise. We'll see.

CL says

They gotsta go somewhere.

That is a fact.