Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Thursday, May 11, 2006

Going From Zero to Negative Equity in Oh My Gawd!

See the guys at Bubble Track for more about the home debtors with zero to negative equity and a whole lotta debt.

Also a blurb about it can be found here in the Golden West/Wachovia Story.

"A full 29 percent of people who took out mortgages or refinanced in 2005 have no equity or negative equity in their homes, according to Christopher Cagan of First American Real Estate Solutions, a data provider."

"That's a shocking figure, compared with 10.6 percent of people who took out mortgages in 2004. "I would not want to be one of those people," says Mr. Cagan."

"Many investors and economists are deeply concerned, of course, about excessive home-price appreciation in California and slackening lending standards. The option ARM could be making things worse."


At 5/12/2006 09:25:00 AM , Anonymous tom stone said...

can they do a 1031 exchange into lotto tickets?

At 5/12/2006 12:13:00 PM , Blogger Rob Dawg said...

[good one tom]

The big problem isn't the 1 in 8 that are already upside down, it's the additional 2 in 8 that will be exposed to the downdraft. That is today's word, downdraft. The highest priced comparable homes are also the most liable to tumble badly. All houses subsequently get repriced at the margins. Imagine having 70% LTV onlt to discover that after costs you are losing money on any sale. That's what I mean, nothing about your 30% equity changed, you are stable, you were conservative, youjust got caught in te downdraft.

At 5/12/2006 01:46:00 PM , Anonymous tom stone said...

this already has happened to some people in the sac valley who put 20% down and bought last year or the year before,a fixed loan is no protection against price drops.prices in sonoma county are now at or a little below last year at this time...and the squeeze has just begun.when we start out with 29% of homebuyers having no equity i suspect it will be a lot more than 2 in 8 underwater...hard money is reacting to the run up in gold and the increased risk quickly,rates are noticeably higher than 1 week ago...and going up.i would not be surprised at a 40% price correction over the next 2 years,and more in some classes of property and in marginal areas like merced or parts of the east bay.

At 5/13/2006 10:42:00 AM , Blogger moonvalley said...

Talking about Drowing in Debt
Just saw this article online.
here's a link to the Federal Reserve Flow of Funds chart.

At 5/13/2006 12:57:00 PM , Blogger Athena said...

Thanks MV. I posted it.

At 5/13/2006 03:36:00 PM , Anonymous tom stone said...

there are two infinities,the universe,and human stupidity.A.Einstein

At 5/13/2006 11:15:00 PM , Blogger Athena said...

my cousin and I were talking today... he owns a local construction company and he says that people just have NO clue that the market is tanking. He has done no blog research... read nothing on the topic. Is unaware of the actual statistics in the valley (other than what I have shared with him) and even HE knows it is going to be bloody. Though he is excited about us waiting until everyone HATES their asset and us going about picking them up dirt cheap and fixing them up.
;-) We talked about one of the open houses we looked at last week and discussed all the fun stuff we could do with it... but not until it is half priced!


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