patrick.net

Duke Says:

> 1. Some areas have been hit so hard so fast they are largely
> done in price correction. Barring a full blown Depression,
> I don’t think you will get homes of this quality any cheaper.
> As Baps points out, Los Banos is not without its problems.
> But I think labor and material would push $143,000.

The cost has nothing to do with the price of a home (take a look at the bad parts of Cleveland, OH or Flint, MI where hundreds of homes are listed for sale at under $30K).
What will bottom out home prices is when an investor can buy the home and make money renting the homes. I just bought a vacant home in Sacramento for $190K directly from the bank (that took it back from an “investor” who paid $435K in 2006).

Paying $190K for a home that rents for $1,500 a month is usually not a good investment, but the place is next to a 42 unit apartment I own and I didn’t want the vacant home to turn in to a crack house. It cost me $10K to get it ready to rent with ~$5K for all new Cascade vinyl windows and ~$5K for carpet, tile and paint.

Lost Cause:

So-Called "fortresses" are "special" places that are theoretically immune from substantial, if any, real estate losses. Such places are usually upscale, land-locked (built-out) communites with excellent schools which are located with easy commutes to one or more city centers. These are locales where demand for housing is theoretically endless regardless as to what happens to the economy. These are places where everyone wants to live. Hence the name "fortress". Much of the Peninsula, SF, Marin and few pockets of the East Bay are, what I think, people refer here to as the Bay Area's "fortress". Manhattan would definitely be described as one as well...

Anyone paying attention to the details of the Housing Bailout Bill? I have seen no mention on this site yet about what the elimination of the Down Payment Assistance programs is going to do to the housing market.

http://blogs.wsj.com/developments/2008/07/24/the-end-of-down-payment-charities/

Seems the only housing market segment that is actually selling right now in many areas is the sub-$250K's. I would bet that a large portion of these buyers have little or no down payment, and are relying on the DPA's to get the FHA minimum of 3%, because no way they can get conventional minimum of 5%.

The end of the DPA programs is going to put even more downward pressure on house prices and sales.

The Bailout bill will change nothing for the average homebuyer, and further empower and protect the ultimate beneficiaries of government welfare - Fannie and Freddie and their overpaid, under performing appointees.

(did you notice the bill authorizes the creation of yet another oversight agency for Freddie and Fannie? Dems and Repubs both are still lining up at the boomer free-money trough)

We still got a long way to go before bottom, folks!

when you are doing blow off a Thai hooker’s ass in your 34th floor condo south of market do you really care if san fucking hosebag is in the toilet? Here is some fucking news folks, san hosebag, milshitass and crapatino have always been in the toilet.

fUcK the bay area. really. come on now folks is working 80hrs a week at intel really worth the 2hr commute?

Wait a minute, what if google offered free curried fried rice in the cafeteria? Now there's a winning combo.

Hey fuckers, how's your equity?

MCM Says:

> Anyone paying attention to the details of the Housing
> Bailout Bill? I have seen no mention on this site yet
> about what the elimination of the Down Payment
> Assistance programs is going to do to the housing market.

This is going to bum out a lot of “developers” who have been buying land in crappy areas of the central valley and building condos for under $100K each then setting up a fake “charity” to “give” dumb people (mostly recent immigrants who don’t speak much English) a 3% down payment then they sell the condo for a $100K profit knowing that once the IO period ends the poor dumb people will have no chance of making the payments and it will go back to the bank…

>> when you are doing blow off a Thai hooker’s ass in your 34th floor condo south of market do you really care if san fucking hosebag is in the toilet?

Ahhhh ... beauty and what a language! Please sprinkle this dry blog with your gracious presence more often Sufer-X.

If housing is such an "investment", then it is past time for it to pay capital gains just like any other investment. I would like to see renewed calls to drop the capital gains exemption for residential real estate, as well as the MID. Let it be sold just like any other investment, or strike all investment-related language from the industry.

Then Los Banos experiences will give rise to "past performance is no guarantee of future results" clauses...even in Los Banos itself.

"past performance is no guarantee of future results"

It was incubator housing. :)

Boy, the equity give in the housing bill by those who take advantage of it is no small number. This thing does have some teeth in it for the users. It may help weed out some of the speculators.

Now there is a new scam "covered bonds" after failure of securitization market.

US presses plan with banks to offer new mortgage bonds

WASHINGTON (AFP) — The Treasury and four large US banks endorsed plans Monday for "covered bonds," flexible mortgage-backed securities to help pump additional liquidity into the strained housing market.

The announcement by the banks along with US Treasury Secretary Henry Paulson, comes amid a frozen market for most mortgage-backed securities and troubles for the main sources of housing market liquidity, funding firms Fannie Mae and Freddie Mac.

Paulson said covered bonds, used extensively in Europe, represent "a promising financing vehicle" and can be used without special legislation. The Treasury published a "best practices" guide" for the securities.

Analysts say covered bonds are similar to traditional mortgage-backed securities in that they are backed by a pool of assets, usually mortgages.

But unlike most used in the US market today, covered bonds allow the issuer to remove bad loans from the pool to maintain its quality and also alter the terms of the mortgages if needed.

This feature "gets around a current problem with mortgage-backed securities over who has the right to alter the terms of the underlying mortgages should the borrower get in trouble," said Robert Eisenbeis, an economist at Cumberland Advisors.

Bank of America, Citigroup, JPMorgan Chase and Wells Fargo announced their support for regulatory efforts taken to promote the development of a US covered bond market.

"We believe a robust US covered-bond market would provide an additional stable and cost effective funding source for banks to originate and hold mortgages on their balance sheet," the banks said in a statement.

"We look forward to being leading issuers as the US covered-bond market develops, with programs consistent with the (regulatory) and Treasury statements."

Paulson said covered bonds represent a market of three trillion dollars worldwide and "have the potential to increase mortgage financing, improve underwriting standard and strengthen US financial institutions by providing a new funding source that will diversify their overall portfolio."

Fortress? Do people really have memories this short? Do you remember, before the dot.com bubble, that "California Real Estate" was shorthand for a disastrous plummeting values that were impossible to get rid of? It was sort of like a STD before antibiotics. Manhattan? New York was the crime infested capital of a declining decadent empire.

Bap33 Says:
> I’m keeping my GM V8 monster.

One good side-effect of gas prices is that new V8 monsters can be had for a song. As a corollary, fuel-efficient used cars are going for a premium.

I just sold my tired old Toyota truck for $2k more than I paid for it four years ago, and bought a brand-spanking-new fullsize Chevy for over $8k off list. $8k will buy a lot of gas.

Lost Cause:

The "fortress" is simply a theory that was coined by someone on this board some time ago. I don't necessarily agree with it either, but what I wrote above is what I understand to be the meaning behind it. Basically, any upscale neighborhood/city within or near a major urban center that is theoretically immune from declining values because of the wealth of the residents and the desirability of the location.

the new phase of big government
Do you really think the Obama will continue the policies of the last eight years? Gore, under Clinton, was the one who really downsized the government.

I can see why the banks are all in trouble, bankster. You don't seem to know anything.

Fortress:

The first class cabins on the USS Titanic will not notice anything more than a little water damage.

Do you remember, before the dot.com bubble, that “California Real Estate” was shorthand for a disastrous plummeting values that were impossible to get rid of?
FWIW, unless you were paying attention in high school/college, anyone under 40 has little memory of this. For me, at my first job in SV, I do remember some water cooler talk by folks who bought at the 1989 peak and were "underwater" until the mid/late nineties resurgence. For some perspective, SF Bay Area C/S index started at 100 in Jan. 2000 was up 30% by the next year. This is the "reality" that many experienced (and drove Patrick into his rental!) The pain will be remembered by this generation and the cycle will repeat.
Visited a $599k open house this weekend. Of course, it was a 2/1 1,100sq.ft bungalow. But it had a garage and 6'ft. ceilings in the lower level (not part of the sq. footage). I actually got momentarily excited about this. That's what living too long in Fortress East Bay will do to you.

tannenbaum, I think you've got a good working definition for Fortress areas. Financing and REOs are what will move prices downward where new construction was not much of a factor.

>> you think Obama is going to downsize government?

I doubt it .....

If you hate mortgage banksters and Realtwhores for exploiting people's emotions for a home, read this article. It will make them look like petty thieves compared to our esteemed population of Washington DC.

The Fannie Mae Gang
http://online.wsj.com/public/article/SB121677050160675397.html

They are raping us and telling us that its for our own good.

You can bookmark this for some unforeseen future need to induce vomiting.

I have every reason to think that the financial mess that our country is in will be job one for Obama. If taxes have to go up, so be it.

I don't have any respect for someone who thinks that smearing someone with their own brush is contributing to healthy discourse. TOB sounds and acts like a hit and run thug, complete with threats.

There is just no talking sense to you TOB. This is an election, and people say things. What is so shocking? I could say that John McCain supports amnesty for illegal aliens and has a drug adict wife and childeren of other races. Does that make it true?

The federal budget and deficit have risen consistently in the Bush years, and it is certain that the day of reconing is approaching.

So why do you say that Obama is the next phase in big government? This makes no sense, since the current pumping does not seem sustainable.

This is the same Big Government lie that is repeated so often. Just a trired cliche and talking point, with no meaning behind it.

It looks like Surfer-X also now has a gig writing for the Guardian.

www.guardian.co.uk/media/2008/jul/23/mediamonkey

FWIW, there was also a bit a speculation in Los Banos real estate due to the specter of high speed rail. Currently, AB3034 has passed the Assembly and gone to Senate. A bill from Assemblywoman Cathleen Galgiani, D-Stockton, would begin to address some of the most pressing problems with the rail system. It would placate some environmental concerns by excluding the possibility of placing a rail stop in Los Banos (Merced County), with its protected grasslands. No train station, for you!

So what? McCain wasn't born in this country -- he was born in Panama, and probably does not even fit the minimum requirements spelled out in the constitution. Just for your information, if you look around, you may notice that there are many people who haven't grown up in this country either.

A politician who is a liar? Say it ain't so. Yes, Clinton was a great liar, but he at least inspired investment in the US due to good financial housekeeping.

Yes, I read it. I observe a year when the deficit was $17 billion.

$17 billion? When the headline today is $490 + 80 billion that they are not even counting? You are complaining.

[Insert repeated republican slogan and talking point here.] But you are "independent." Wink.

I have another interesting statistic about the Clinton years.

The Dow Jones Industrial Average went up by 8000 points under Clinton.

I have a prediction about the DOW. I will soon fall below the 10,587.59 on the day that Bush took office.

Tell me what terrible managers the democrats are again.

The abiding lesson here is what happens when you combine private profit with government power. You create political monsters that are protected both by journalists on the left and pseudo-capitalists on Wall Street, by liberal Democrats and country-club Republicans. Even now, after all of their dishonesty and failure, Fannie and Freddie could emerge from this taxpayer rescue more powerful than ever. Campaigning to spare taxpayers from that result would represent genuine "change," not that either presidential candidate seems interested.

I see. McCain's military skills got him captured and held prisoner for five years. I think that is just the kind of leadership that we need in wartime.

Obama learned the Koran? And ths is a disadvantage in the Global War on Terror because...?

I remember John & Robert Kennedy, which is why I can actually hope.

It seems that responsible sellers now have another thing to compete with thanks to this administration. Here is a link to the housing bailout plan. In it there is a $7,000 tax credit for buying a foreclosed home. Again I have to restate that this is a bank bailout, not a home debtor bailout. Someone selling a house competing with a comprable bank owned house now has to drop their price $7,000 below the bank's asking price.

http://thomas.loc.gov/cgi-bin/bdquery/z?d110:HR03221:@@@D&summ2=m&

Reading one of the news links today, I saw that the estimate now is 25 million homeowners are potentially upside down. Basically this means that suddenly the problem has just multiplied 10 fold because originally there were only 2 million homeowners at risk. I might add that pretty much all 2 million eventually did go into foreclosure.

Sorry, I look forward to peace and prosperity, respect by the world and financial discipline that involves more than making sure that wages decline. With all due respect, if you don't like it, tough shit.

Someone selling a house competing with a comprable bank owned house now has to drop their price $7,000 below the bank’s asking price.

At least there is the silver lining of a $7k downward pressure on houses, adding to the real affordability.

So, does that mean a first time buyer who is buying a forclosed house gets $14,000 in tax credit?

It's $7500.00 max and they have to pay it back to the tune of about $500.00 a year added to their income tax if I understand it right. It ain't no gift.

I see, more like an interest free loan.

Something like that, I tried to find the article that I read so I could link it, but it's long gone and I can't seem to find it. I'll keep looking.

For the 1st time buyer of a forclosed home, it seems:

$7,000 tax credit for the forclosed home part

Up to $7,500 15 year interest free loan (principle delivered as a tax credit) for the 1st time buyer part.

To actually use a tax credit of $14,500 would require a Federal Taxable Income of around $90k, assuming no MID or medical deductions.

I am interested in that credit. I see the dollar going to hell fast. If I can make use of the money now and pay it back with depreciated dollars, this could play to my advantage. I see America being looted all around me and feel now I may be stupid and regret it latter for not grabing what I could when I had the chance.

I have been saving money up for the last 4 years for a down payment and have enough now to get about a 150k home with 20% down. With the crap in this bill I could get 20% "down" on a 200k home.

This money was not easy to save. It is amazes me how people are so cavalier about money when they would have no hope of ever saving that much on their own. They have no problem barrowing and spending it however.

I live in Ohio and meet the above in Headset's post. I have to run the numbers on my discounted cash flow spreadsheet, but under the inflation rate of 10% a year (realistic amount), I could come out ahead.

Neutron,

That just might work. Neat idea. I like it. The one problem is the equity give - back. Any equity you earn, should you sell or re-fi, is split with Gummy Man.

100%, 0 to1 yr.
90%, 1 to 2 yr etc. until you get to 50% and it stays there.

To actually use a tax credit of $14,500 would require a Federal Taxable Income of around $90k

That's OK, President Obama will push up the poverty threshold to about that figure.