patrick.net

http://www.contracostatimes.com/ci_9998529

Uh oh, trouble in the "Forteress" as well, not just Los Banos ;-)

Lung Cancer can be a big disaster for anyone. Now can anyone give me good numbers about probabilistic risk for the average Joe for radioactive noble gases vs the average car ride to work?

I think I would probably worry about falling down my steps on the way out of the door to work than the radiation exposure from the earth. If you worry about radiation, you should not have any contact with other people because they are irradiating you with their activated carbon.

OHH MY! Unless you eat mummies every meal, you are consuming radioactive carbon with every bite and making yourself a radioactive danger to yourself and others. You should stop eating Brazil nuts, bananas, and never fly on a passenger jet again if you ever have concerns about radiation from a counter top.

I'll bet the air in Los Banos is hazardous to your health.

One in four kids has an inhaler. What do you think? :)

Asante Real Estate Group works with many short sale clients, bank-owned homes and lenders. For example, Asante Real Estate Group has been trying to convince American Home Mortgage Servicing Corporation to accept fair market offers on two owner-occupied homes selling for $449,000 in San Jose, California and $3.9M in Los Gatos, California. American Home Mortgage Servicing Corporation has refused both of these bona-fide offers and these homes are now hurtling toward an unnecessary foreclosure.
Elected officials, like Senator Dianne Feinstein, claim that they want to help homeowners facing foreclosure. However, both of these homeowners went to Senator Feinstein's San Francisco office and requested her help only to be dismissed by her staff and referred to HUD counselors. Senator Feinstein's staff refused to help convince American Home Mortgage Servicing Corporation to reconsider the short sale offers for the above-described homes. In the end, these constituents were told to leave and they were physically shown the door by Senator Feinstein's security guard.
I am constantly dismayed that mortgage lenders, such as American Home Mortgage Servicing Corporation, consistently fail to work in good faith with distressed homeowners and fail to respond in a timely manner to time-sensitive offers. These lenders procrastinate and stonewall homeowners for months and end up forcing thousands of homes into foreclosure when those homes could have been saved through refinancing or short sales at fair market values.

Well, talk is cheap.

Carey Sutton, CEO
Asante Real Estate Group, Inc.
carey@asanterealestate.com

http://www.mercurynews.com/portlet/article/html/render_gallery.jsp?articleId=9836729&siteId=568&startImage=1

Booking mug for Gloria Madrigal Alvarez, former star agent for the defunct Century 21 Su Casa real estate brokerage who faces 11 felony counts inlcuding grand theft involving an alleged scheme to defraud lenders and clients. ( Special to the Mercury News )

F.D.I.C. Takes Over 2 Banks

The 28 branches of the banks, owned by First National Bank Holding Company, based in Scottsdale, Ariz., are scheduled to reopen on Monday as branches of Mutual of Omaha Bank, the Federal Deposit Insurance Corporation said.

The F.D.I.C. said all depositors, including those with funds in excess of F.D.I.C. insurance limits, would switch to Mutual of Omaha with “the full amount of their deposits.” As of June 30, the closed banks had total assets of $3.6 billion, down from $4.1 billion six months earlier.

Silicon Valley home prices slide to 2005 level
SALES ARE SLUGGISH, TOO, BUT AFFORDABILITY IS UP
By Sue McAllister
Mercury News

It's a real estate milepost that would have sounded unbelievable just a year ago: One-fifth of the houses for sale in Santa Clara County today are now priced at less than $450,000.

And the median price of houses that changed hands last month fell from $791,000 last year to $670,000. The last time that figure was so low was in March 2005.

Congratulations Efrain. Good thing you held out for a home your parents liked, at a price they can afford. Nice to see we could be of some help to someone.

If his parents are of retirement age it's probably not a bad deal. Commuting from Los Banos to the Bay Area would become increasingly difficult.

Nice story, Efrain. It must have been very difficult to convince your parents to wait it out. The fact that saving and prudence worked out in the end is a real sunshine story, no kidding.

We may see more stories like Efrain's. As prices fall, we will see more savers with the necessary cash buying houses when the houses are actually affordable. Let's hope that the prices continue to fall past the 2004 level in Efrain's example.

I think the take-aways are these:

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.

2. When you look at homes in the Fortress of ower structural quality that sell for $1m set against homes that sell for $150k, the trade to outlaying areas (and the possible/probable decision to use private schools) becomes attractive.

3. The price of gas, while high, is still absolutely NOTHING compared to th cost of housing. So, in my thesis, far from the exurbs dying from the expensive commute, they will attract people for their affordabiltiy.

4. Owning a home in an area that has already undergone price destruction reduces/removes the risks associated with having to move for job loss and or relocation.

5. Upcoming unfavorable business legislation aimed at balancing the CA budget will drive employers to seek moer affordable areas.

6. So, the price correction in the Fortress is coming. But do YOU want to live there? The risk reward ratio looks pretty bad.

PermaRenter,

I do not thing there are any good guys in your Asante Real Estate Group - American Home Mortgage Servicing Corporation - Senator Dianne Feinstein narrative.

Asante is upset over missed real estate commissions and wants a Senator to pressure the mortgage company for a sale.

American Home Mortgage may be holding out for the F&F bailout bill to rescue thier bad mortagages, using high "market value" appraisals to fudge the 85% rule.

Dianne Feinstein is not interested in saving "distressed" homeowners. The purpose of that F&F bailout was to perform alchemy for the lenders that turns the crap mortagage paper the lenders are holding into FHA backed gold.

"But I think labor and material would push $143,000."

Were labor and materials that much cheaper in 1999 than now? I presume the house cost less in 1999 than it did in 2004 (I can't tell from the chart).

If as you say, the cost of labor and materials will set the bottom, we can go back further than 2004 prices.

IIUC materials costs have been driven up lately due to China buying up the world's cement and, to a lesser extent, lumber products. If MBS problems slow down China's growth, maybe the cost of materials will go down too.

Labor may be a different thing. Much of the extra labor needed in the recent building boom was supplied by temporary (?) workers from Mexico. When the boom was over they just went home, mitigating potential unemployment among US building workers.

The manager of the Quality Tune Up in the San Antonio Shopping Center lives in Los Banos. Crazy commuter. I didn't see him last time I got an oil change. Maybe he gave up. Gas prices must be killing these long haulers.

Tannenbaum: San Jose is not the Fortress. As long as houses in Palo Alto continue to sell for over $1M more than my house, I'll keep watching the insanity.

Labor/building materials cost may not affect selling prices anyway. With enough houses for sale, a dearth of buyers may drive selling prices well below replacement cost.

Easy credit created the boom in the first place, and tight credit will undo it, possibly with an overcorrection. I do not think it will stop with 2004 levels, so hopefully we can party like it's 1999....

Gas prices must be killing these long haulers.

Actually they may survive if they ditch the SUV and get a Geo Metro or the like.

It's good to see prices come down - even in areas that have been holding out. Portland, OR is a great example. It was one of the few top performing markets on the Case Shiller Index for the longest time. Now prices are dropping and we're back to seeing some pretty good deals. If you're in the market for a home, take a look at http://www.agent503.com
It's a realtor's website with tons of stats. Also includes a desperate sellers database.

Actually history in other bubble-popping areas have always shown that peripheral places can always go lower, and the fortress, while they will follow suit, will always be the first to recover.

All the Los Banos equivalent in Tokyo are still selling at 10-15% of their peak price, nominally, after 18 years!! At the same time, the core fortress Tokyo have mainly recovered. On a smaller scale, Hong Kong is even more extreme. The Los Banos of Hong Kong are still selling at 1/4 to 1/3 of the 97 peak price, nominally, while the core Hong Kong fortress are already selling at 20-50% premium over the 97 peak. The Los Banos of Hong Kong became crime-infested areas attracting only the most financially disadvantaged families. It is a vicious circle that a place may never break. Honestly East Palo Alto has a much better chance of becoming a decent neighborhood because West Palo Alto spill-over will keep gentrifying the place, where are the spill-overs for Los Banos? None.

The reason is, Los Banos pretty soon will be full of foreclosures and hence become a magnet for financially disadvantaged place, which means higher crime rate and worse schools. Good private schools are not going to open branches at Los Banos given its demographic profile. So living there for retirement is fine, but anyone who still wants to see any return from their money on their home, avoid the Los Banos of the world at all cost.

This Los Banos house may already be selling at below cost of labor and materials.

It is not uncommon to see in a realty bubble correction that developers are selling their stock completely below cost just to recoup whatever they can. Look out for really shoddy jobs, recycled materials etc.

I won't be surprised to see that Los Banos house sell for half give it another 2-3 years. It is no different from some houses in Detroit selling for $5000. When you have no jobs, no geographical attraction, high driving cost, a house is completely a burden.

Is bubble the wrong word? Because when a bubble pops, there is nothing left of it.

My impression of bubbles is that they do pop, and that they more or less destroy whatever market there was before. Nothing orderly or neat about a bubble. What is all of this talk of fortresses?

Some Detroit houses actually have a NEGATIVE value. Not only can you have them for free, it's a lousy deal even then.

The problems are crime and taxes, in that order. Detroit is simply not safe for anyone of any race. If you've been there, you know.

The other big problem is that the city government is famously corrupt and the very high taxes go for no services at all, not even police protection.

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.