Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Thursday, June 01, 2006

Pyramid Scheme Again...

Thanks to Ben at the Housing Bubble Blog for this bit on the OFHEO report.

OFHEO site's (PDF file)

“An important factor that has affected the HPI in some recent quarters is the influence of refinancings on the overall index. Valuations derived from refinance appraisals are constructed under different circumstances than those surrounding purchase prices; appraisers operate under specific types of pressures and may employ different ‘comparable’ properties in estimating value than were (implicitly) used in the formation of a purchase price.”

“Similarly, appraisals conducted for ‘rate-term’ refinances can in fact look different from appraisals for ‘cash-out’ refinances. In areas where the cash-out refinancing has grown the most, the divergence between the HPI appreciation rate and the purchase-only rate is the greatest.”

In conclusion, the empirical evidence suggests that the growing prevalence of cash-out refinances over the last year has had the effect of increasing measured appreciation rates for the HPI. Homes with cash-out refinances likely are disproportionately those that have experienced the most appreciation. Thus the HPI dataset, which includes appraisals used for cash-out refinances, may have relatively more rapidly appreciating houses than the purchase-only index.”

Even the OFHEO knows this market is a giant pyramid scheme. Home appreciations were not due to value increasing... it was due to DEBT increasing as home debtors used their houses like ATM machines and credit cards. The scheme allows them to spend their house and the next fool comes along and buys the debt. Those people are called the greater fools... or bag holders. Apparently there was a pretty good supply of them too. How loud do you think these guys will scream when the fecal matter hits the fan?


At 6/01/2006 05:10:00 PM , Anonymous tom stone said...

"tom,DON'T EVER TALK TO ME ABOUT REAL ESTATE AGAIN"....just last week.i hope i'm not yelling "DON'T JUMP" at him next year.we'll see.

At 6/01/2006 08:43:00 PM , Blogger moonvalley said...

Oh god! we have friends like that too. I still haven't found out whether or not our ex-neighbor "got" that house he was being roped into.

At 6/02/2006 02:04:00 PM , Blogger hemorrhoidforhousing said...

Things are getting ugly over at bubble meter blog. There is an anonymous poster attacking everyone with cheap shots and insults. Kind of fun to watch the bulls fear being turned into steers....

At 6/02/2006 02:06:00 PM , Blogger Athena said...

catfight? really? ok... well let's go see then! ;-)

At 6/02/2006 02:33:00 PM , Blogger Marinite said...

That bryce fellow sounds a lot like our ethno Marin snobs.

At 6/02/2006 02:45:00 PM , Blogger Athena said...

check the previous thread on the the OFHEO data... ;-)

At 6/02/2006 02:54:00 PM , Blogger Marinite said...

I did. OMG. I had to plead with David to turn off anonymous posting.

At 6/02/2006 06:26:00 PM , Anonymous tom stone said...

marinite,i took a look,and i can understand why you took off the anonymous posting...the low quality of the abuse in these personal attacks is saddening.have a lovely weekend all.

At 6/04/2006 12:03:00 PM , Blogger moonvalley said...

Athena, I got my usual RealtyTrac notice this morning in my e-mail box, so I deceided just for the hell of it to go check out what these foreclosure bait sh**boxes actually are worth.
18155 Barret avenue. In preforclosure, owing upwards of 15k indefault on the mortgage.
The house sold in Sept. 2001 for 269k
Again in March 2005 for 326k
Finallly our suckers bought it in Sept. 2005 for 495k.
Less than a year and theyre already in trouble.
13 Melinda Lane in Petaluma...
Sold in 1991 for in preforeclosure..for default for 8k and change...must have been a HELOC going on there as there are no other sales on record.
7620 Sonoma Highway...worth default for the heck did that happen??
309 E street:
Bought in 2000 for in default for 7k
still the same owners..wonder what sort of loan it would be.
Of course there are many factors that can contribute to this situation, illness, death, divorce, job loss incalculable things that might occur. However, when one sees such large numbers of preforeclosure properties, the main thing that comes to mind is the heady mix of bubbles and toxic loans.

At 6/04/2006 12:28:00 PM , Anonymous tom stone said...

mv,that 240k was likely a balloon payment,divorce,illness or job loss could all explain an inability to refi.only an inability to face reality explains why they didn't get out...sure a potful of preforeclosures and tax liens in affluent areas isn't there? effuent areas?

At 6/04/2006 12:34:00 PM , Blogger Athena said...

wow! This is a story of its own!

Tonight I will see what is up on the foreclosure list.. also have to run the next price reduced report.


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