Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Wednesday, August 30, 2006

Open Mouthed @ Open House- Update

Why does the word Fraud come to mind?

A reader last summer sent in some details about an open house he visited in Sonoma 660 East MacArthur

The house at that time was priced at $1,395,000 and apparently it is a 1950 cottage turn cliche. He said it was remodeled with all the cliches we have come to expect. The granite countertops, the pottery barn colors and yadda yadda yadda... but there certainly were no solid gold toilets or bathtubs and he said what he found most interesting is what Zillow had to say about it.

Zillow Sez:
660 E Macarthur St, Sonoma, CA 95476
Zillow Estimate:

660 East MacArthur's Market Value Change for 1 yr.

Sales History:
12/24/06: $1,200,000
07/12/2006: $1,258,000

hmmm... but in October 2005 this house was sold for $712k

Then sold in two months later for $600k. $112,500k LESS just two months later... WTF?

Then a mere 6 months later it was up for sale again, and with an asking price of $1,395,000 and it sold for $1,258,000...

... and then just 1 month after the $1,258,000 sale it was put up for sale again with the same realty company, (Morgan Lane) and wonder of all wonders only the listing agents and the price changed. This listing price was $1,284,500

Then reported by SFGATE in their December 24th Homes sold report 660 Macarthur again changed hands... going down $84,500

Homes sold week of: Sunday, December 24, 2006
660 East MacArthur Street$1,200,000,

Look at the zillow valuations...
January 2002 Value: $221k
January 2003 Value: $280k
January 2004 Value: $300k
January 2005 Value: $400k
August 2006 Value: $669,320

You have GOT to be kidding!!!

Tax Assessment History: 2004
Property tax: $2,218
Assessed value bldgs: $105,939
Assessed value land: + $44,606

Total assessed value: = $150,545

Something is not passing the smell test...

Sonoma House

HUA Award...

...and boy do we ever have a winner today.

From the Washington Post: “Lorenzo Wooten Jr. said that even in his Prince George’s County neighborhood, he has noticed more houses on the market and longer sales times. Wooten and his wife, Courtney, signed a contract last month to buy a $1.2 million house in Woodmore North.

‘I feel pretty comfortable where the Washington, D.C., market is,’ said Wooten, 33, a regional manager for Fannie Mae. ‘I really don’t think that they would have offered this price guarantee if the prices weren’t fairly priced currently.’

Genius works for Fannie Mae, and is purchasing a 1.2 million dollar house in an obviously declining market.

How did he miss this?

Get out before U.S. housing caves

"What will it take to shake investors’ confidence? Not high fuel prices, not Israel’s invasion of Lebanon or the alleged plot to torch a dozen airliners over the Atlantic. Not Iran’s uranium-enrichment program and the threat of another Middle East war. Investors trundle along. It’s hard to tell whether the global risk-a-thon is priced into the market, misunderstood or simply ignored. It’s still summer — grab a beer, worry later."

"Even more astounding is that investors seem oblivious to a genuine homegrown threat in the form of the waning, perhaps collapsing, U.S. housing market. David Rosenberg, Merrill Lynch’s North American economist, has fretted about a housing bubble for at least two years."

"Now he looks more right than wrong and he’s steadfast in his convictions.
Mr. Rosenberg points out that there have been 10 U.S. housing downturns in the past 50 years and seven of them triggered a “full-blown recession within 24 months.” Typically, Canada does not avoid U.S. slowdowns."

"You’d have to be living on Pluto, or in Ottawa, to miss signs that the housing market is cruising into an economic cul-de-sac….."

By the way... Merrill Lynch had this to say today...

“Merrill Lynch issued a bearish note on the homebuilding sector, predicting a slowdown already under way will get worse before it gets better. ‘We are neutral on the homebuilders because fundamentals are still too strong to call a bottom,’ Merrill analysts wrote. ‘In short, housing starts remain too high, margins are declining and rate cuts will provide little benefit from here.’”

From Bloomberg.
"Christian Holland, who helps manage about $1 billion in London said, ‘Unless you’ve been on Mars, everyone’s aware that the housing market is rolling over, and that does have obvious implications on the consumer’s ability to prop up spending,’ Holland said.”

Tuesday, August 29, 2006

Flip Flopping in Sonoma County

PD says Flippers are Flopping in Sonoma County.

"Investors who once hoped to make a quick buck on rising home prices are now pulling back from Sonoma County's housing market, according to a study issued Tuesday."

"Buying and selling homes within such a short period is known as "flipping." Investors seek quick profits particularly when sales are strong and home values are rising."

"Almost half of the Sonoma County sellers who flipped their homes in the second quarter lost money, according to the study.Statewide, 2.4 percent of homes sold during the second quarter had been owned less than six months, compared with 3.8 percent in the first quarter of 2005, the study found. It was the lowest level of flipping activity since the first quarter of 2003."

Monday, August 28, 2006

Downturn Hit Harder & Faster...

"Lockboxes hang from front door handles. Some houses are obviously empty, though lawns and shrubs remain well groomed. Others are immaculately staged with plush furniture, lavish drapes and homey touches."

'"Price reduced" and "price reduction" are common inducements on the signs in front."

"It is a scene repeated across Sonoma County, from neighborhood to neighborhood, cul-de-sac to cul-de-sac. Behind those for sale signs are sellers who have put their lives on hold as a market that stayed red hot for so long has turned cold."

"And for every owner, the cooling trend could influence a lifestyle built on the financial bedrock of their home. As homes rocketed in value, the new riches changed spending habits."

"Once viewed simply as shelter and a piggy bank for a modest retirement, the home became the path to a financial windfall. As interest rates fell and home sales rose, values went up and deals abounded to draw money out of homes like an ATM for cars, remodeling projects and other consumer spending."

"Some forgot that home prices could go down, as they did in Sonoma County in 1993 and 1994, when prices dropped a total of 4.2 percent over those two years. That downturn lasted four years."

"Now the market has reached a kind of psychological standoff, withsellers reluctant to accept the reality of falling prices and buyers holding onto the expectation of even deeper cuts. Now, homeowners face an uncertain future."

"Selling a home in Sonoma County is more challenging than at any time in the past decade. Sales dropped to an 11-year low and homes on the market climbed to a 10-year high in the latest Press Democrat monthly sales report."

"The housing downturn has hit harder and taken hold faster than expected, catching many homeowners off guard and forcing price cuts as they wait months for homes to sell."

"Gone are the days of selling a home in a week or two in Sonoma County."

"And no more are the days of pricing a home a percent or two above what the neighbor's house sold for a month earlier."

"Homeowners are hanging onto what one broker describes as mental equity - the price a house might have sold for several months or even a year ago. "A year ago, you got away with murder. You sold a house no matter the condition," said Sandy Geary, broker and owner of Remax North Bay Realty in Rohnert Park."

'"Buyers have almost too much choice. I have buyers who come back and every week something is cheaper," Geary said.Price cutting is accelerating. About 50 sellers on average each day reduce prices on listings in Sonoma County."

"A better strategy is to set the initial price under comparable homes in the same neighborhood. Even then, prepare to wait two to four months for an offer that still could be for less money."

"A year ago, buyers were jumping into homes. Very low interest rates and an array of adjustable and interest-only loans often allowed first-time and move-up buyers alike to buy more expensive homes once out of reach."

"Buyers aren't finding the financing deals available a year ago and more buyers no longer can afford to purchase a home because monthly mortgage payments are more expensive."

"There also are fears the house they buy today might go down in value just months later.So there has been a sort of stalemate between buyers and sellers."

"It is a change reflected not only on the North Coast, but across California and the nation. Sales are in steep decline and supplies of unsold homes are mounting, particularly on the coasts where housing inflation has been most dramatic."

'"Today's market is slowing as sellers maintain often unrealistic pricing expectations and buyers have more properties to choose from," said Vince Malta, president of the California Association of Realtors."

Thursday, August 24, 2006

A Little Scary?

"The housing market is deteriorating by the month."

In the latest and strongest indication that the home buying and selling frenzy is over, the National Association of Realtors reported yesterday that sales of previously owned homes fell to the lowest level in July in more than two years, prices flattened and sellers waited longer and longer to find buyers for their homes. The supply of unsold houses on the market hit a record high.

"July’s data showed that prices fell in most areas of the country. Only in the South are prices still rising: the median home there sold for 3.2 percent more last month than a year earlier. If prices there had not been so strong, the national median home price in July would have declined on a year-over-year basis. That has not happened since April 1995."

'“It does feel a little scary right now,” said Celia Chen, director of housing economics at Moody’s “I think these markets will correct. The price gains that they have seen have exceeded what can be supported by the economic and demographic fundamentals.’’'

'“Certainly, the housing market is undergoing a measurable adjustment,” Lawrence Yun, senior economist with the Realtor association, said. “It’s a continuing cooling trend.”'

"The bloated inventory levels, Mr. Yun said, indicate “a very sudden change which I have never seen before.”'

'“That’s a good indication of an unexpected decline in demand,” said Michael Carney, a professor of finance and real estate at California State Polytechnic University, Pomona."

"The sales and price declines were most pronounced on the East and West Coasts, where the housing market had overheated the most."

"The slowdown means that housing, the sector of the economy that has helped carry the country through a period of rapid expansion, now could act as a drag on growth."

"Sales of new homes dropped in July by the largest amount since February while the inventory of unsold homes climbed to a record high. Piling on more proof that the housing boom is over, the Commerce Department reported Thursday that new home sales fell by 4.3 percent last month."

"The July level of 1.072 million units sold was down 21.6 percent from a year earlier and below the 1.100 million that had been expected by analysts."

"The data follow another report Wednesday that also provided evidence of how much the once-sizzling housing market has cooled. Sales of previously owned homes dropped 4.1 percent in July from June to a 2 1/2-year low, while the inventory of unsold homes climbed to a record high, the National Association of Realtors reported."

C.A.R. reports sales decrease 29.9 percent in July

"Closed escrow sales of existing, single-family detached homes in California totaled 453,980 in July at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 29.9 percent from the 647,910 sales pace recorded in July 2005."

'“Today’s market is slowing as sellers maintain often unrealistic pricing expectations and buyers have more properties to choose from,” said C.A.R. President Vince Malta. “In addition, unlike the slowdown we experienced in the 1990s, homeowners today are not under duress to sell due to job losses. The urgency that characterized the market for the last few years is now gone for all but well-priced properties.”'

"C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in July 2006 was 7.5 months, compared with 2.9 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate."

Real Estate: About to Get Worse

by Steve Sjuggerud, PhD

'It’s looking like 1990 all over again… "

"1990 was the last time homes were unaffordable. The confidence of homebuilders was at a record low (and about to go lower). And the U.S. economy was starting to cool…"

"Home prices fell hard. Nationwide, new home prices fell from around $200,000 in 1990 to around $175,000 by 1992 (in inflation-adjusted terms)."

"By 1993, home prices were affordable once again. Home buyers slowly crept back into the market. Prices crept higher, and they didn’t surpass the 1990 highs for over a decade (in inflation-adjusted terms)."

"Over a dozen years have passed since new home prices bottomed back then… enough time for people to forget real estate is not always a sure thing. Just ask the Japanese how bad it can get… they just lived through 16 straight years of falling home prices."

"Also, homebuilder confidence has been falling for seven straight months, just like we saw in 1990. Homebuilder confidence is now down to its lowest level since February 1991, according to the National Association of Home Builders (NAHB)"

"The homebuilders have been particularly accurate in gauging the market in the past…
Builders were particularly optimistic in 1999, and home prices rose in the following years. Builders maintained their enthusiasm, and prices continued to rise through 2005."

"Now the homebuilders are hanging their heads. It signals trouble."

"We’re setting up for a repeat of 1990. Back then, new home prices nationwide fell by double-digits, percentage-wise, over two or three years. Speculators got crushed."

"Again, the last time around, prices peaked around 1990. It took a decade for new home prices to get back to 1990 levels (in inflation-adjusted terms)."

"We could see the same today… a fall in prices for a couple years… and then a slow rise again, as people who got burned are slower to touch the fire."

"So if you’re looking to buy real estate, but don’t have the money now… there’s no hurry. If we see a repeat of 1990, you may be able to buy cheaper two years from now."

"And if you’re overextended in real estate, but you’re holding out for your price, you’re doing the wrong thing. Get out now. The cost of carrying that real estate will eat you alive."

Wednesday, August 23, 2006

Oops, It Happened Again...

(Reuters) - "The pace of existing home sales in the United States fell a sharper-than-expected 4.1 percent in July to their lowest level since January 2004 as the downturn in the U.S. housing sector accelerated, the National Association of Realtors said on Wednesday."

"The supply of homes for sale at the end of July jumped sharply by 3.2 percent to 3.86 million units. This represented a 7.3 months' supply, the highest since April 1993."

"Economists were caught off guard by the severity of the drop and said the slowdown in sales activity and the associated wealth effect on consumers could drag down the overall economy."

"Sales of existing U.S. homes fell for a fourth consecutive month to a seasonally adjusted annual rate of 6.33 million units in July from a downwardly revised 6.60 million unit pace in June. The July pace was 11.2 percent below the July 2005 pace of 7.13 million."

"Analysts had expected home resales to slow to a 6.55 million unit pace from June's originally reported rate of 6.62 million units."
"NAR Chief Economist David Lereah said the increase in the supply of available homes so far this year was the sharpest on record."

'"What we are experiencing right now is an inventory and price adjustment," Lereah said. The housing market is in transition, he said, "and there is pain in that transition."'

"Lereah said the slowdown represented both cooling of overheated high-priced markets and sales declines in some markets that were struggling with a slowing economy, such as Midwest manufacturing cities."

"The housing sector is fragile," said David Lereah, the association's chief economist.

"For five years running, home sales had hit record highs as low mortgage rates lured buyers. But the housing sector has lost steam this year as mortgage rates have gone up and would-be buyers have grown cautious amid high energy prices and a slowing economy."

"Consumers who watched their homes rise rapidly in value over the last several years felt wealthy and more inclined to spend. They also borrowed against their homes — treating them like ATMs — to support their spending ways."

"Wednesday's report shows that the bloom is off the rose."

Wall Street Journal
“For years, real-estate brokers and home builders promised that the soaring property market eventually would glide to a soft landing. It isn’t working out that way. The rapid deterioration of the market over the past 12 months has caught many homeowners and builders off guard. Some are being forced to cut prices far below what their homes could have fetched a year ago.”

“‘It would be difficult to characterize the position of home builders as other than in a hard landing,’ says Robert Toll, Toll Brothers CEO.”

Tuesday, August 22, 2006

Just For Fun...

Seeing how readers find the site is always interesting, and a great view into what's going on out there...

These are some of the actual search terms used by readers who found SHB this week.

1. "straw buyers definition mortgage fraud 2006"

2. "construction jobs trends sonoma county"

3. "california brokers say they are beginning to see a return of 'short sales'

4. "debtors anonymous meetings sonoma county"

5. "apartments converted to condos, rohnert park" (searched for by a large financial services company)

6. "false paystubs"

7. "latest housing bust news in sonoma county"

8. "incompetent real estate agent"

9. "complaints against coldwell banker for dual agency"

10. "fannie mae appraisal complaint"

11. "complaints standard pacific homes"

12. "care one credit counseling"

13. "sonoma county housing price drop"

14. "any address on encinas way in boyes hot springs california" (what were they looking for? foreclosures? because so many addresses have been on the foreclosure list on encinas its hard to believe the whole street isn't bankowned by now.)

15. "firemark lending felon"

16. "heard it on the grapevine"

17. "vintage greens residential homes at low prices california windsor"

18. "san bruno, condos, bubble" (searched by countrywide home loans)

19. "mcmansion electric"

20. "world option arm"

Crisis of Confidence....

(Bloomberg) -- "Toll Brothers Inc., the largest U.S. luxury homebuilder, said fiscal third-quarter profit fell 19 percent, the first decline in four years as higher mortgage rates ended the housing boom."

"Toll Brothers cut its forecast for fourth-quarter profit as rising rates reduced demand for its houses, which sell for as much as $1.5 million. The market for expensive homes was the first to slow as wealthy buyers deferred purchases. After 17 rate increases by the Federal Reserve in the last two years, the number of new unsold single-family homes are at an all-time high."

'``Homebuyers are having a crisis of confidence,'' said Sam Lieber, chief executive of Alpine Management and Research in Purchase, New York, which has $3.7 billion under management including 800,000 shares of Toll. ``Even if they want to buy a new house, they're worried they can't sell the house they're in.'''

"Orders for houses, a gauge of future revenue, fell 48 percent to 1,400 from 2,705 in the quarter, excluding unconsolidated partnerships, Toll said in an Aug. 9 preliminary report on the quarter's earnings. It was the third consecutive year-over-year decline following 10 quarter of gains."

'``No one wants to be the guy who bought at the peak,'' Barron said. ``There's a lot of fear in the market right now, and that's translating into an oversupply of homes.'''

Market's `Malaise'
`'`The continuing malaise in the housing market, we believe, is the result of an oversupply of inventory,'' Chief Executive Officer Robert Toll said in the statement."

"A record 566,000 new houses were for sale in the U.S. at the end of June, the Commerce Department said in a July 27 statement. It reports July's inventory and sales Aug. 24 at 10 a.m. New York time."

"Toll Brothers cut its land holdings by 2.2 percent in the third quarter from the previous three months, to 82,800 lots. The company wrote off $21.1 million in so-called ``options,'' or contracts to buy land at pre-set prices, according to the report. The write-offs were primarily in Florida and California."

Monday, August 21, 2006

This is Just the Beginning....

'"Over 8,500 properties in Florida went into foreclosure in the month of June alone," said president Alexis McGee. She added that the problem was being exacerbated by the widespread use of so-called "creative mortgage products" that people used to buy homes they really couldn't afford as prices skyrocketed in overheated coastal markets."

'"Now, price appreciation has gone flat and even reversed slightly and this trend is colliding with rising interest rates. People who bought at or near the market peak are being squeezed out of their homes and speculators find themselves trapped by rising costs and negative cash flows," said Ms. McGee. She pointed out that in Georgia almost 8,900 properties had already been lost in foreclosure."

"McGee said foreclosure acitivity had increased more than 67 percent year over year at the end of the second quarter in California."

", a northern California based real estate investment advisory firm and publisher of foreclosure property information, reported today that the rising tide of foreclosure activity in southeastern housing markets was an indication that property flippers who bought at the peak of the price appreciation curve were simply walking away from houses they were unable to sell at a profit."

'"We think this is only the beginning of a major shakeout. There are about $400 billion of these exotic loans out there across the country that will reset to market rates this year and cause severe payment shock to homeowners," she added."

Sunday, August 20, 2006

C.A.R. President Predicts RE Agent Shakeout

"The economy's growth has never before been so driven by real estate. Now that engine is sputtering."

"Until recently, the housing industry was the biggest engine of job growth in the country, accounting for more than a third of all new jobs added to the economy since the boom began earlier in the decade."

"Housing-related employment now accounts for about 1 in every 10 jobs, a record, according to Moody's "We're more dependent on housing than at any time in the last 30 years," says chief economist Mark Zandi, "which could be a problem if the downturn becomes more pronounced."'

"Housing economists say the depth of the real-estate slump in markets around the country will depend, in part, on the local employment picture."

'"If job growth remains strong, that means people are going to keep moving in and buying houses," says housing analyst John Tuccillo."

"Trouble is, many areas that have enjoyed the biggest run-ups in real-estate values have also seen corresponding increases in housing-related jobs, leaving them especially vulnerable."

"In Florida, where in some coastal areas housing now accounts for as many as 1 in 5 jobs, the number of real-estate agents alone has increased by more than 40 percent since 2001, to 305,000."

"Jiany Massad isn't quite ready to throw in the towel on his fledgling career as a Miami real-estate tycoon. But if the local housing market continues to head south, the 30-year-old real-estate broker is already making alternate plans. "I might restart my old business," he says of a home decorating company that specialized in high-end window treatments. "At least it's real-estate-related."'

"With home sales down by nearly a third in Florida last quarter, thousands of those who hoped to cash in on the real-estate gold rush are now facing the cold reality of working in one of the country's most cyclical businesses."

"Everyone's getting out," Massad says of colleagues who have already traded in their real-estate licenses for jobs in the jewelry trade and Internet sales.

"Brokers' ranks have also surged in California, to more than half a million-about one for every
home the California Association of Realtors expects to be sold this year."

'"The numbers just don't add up," says Vince Malta, CAR's president, who predicts a coming shakeout as less experienced agents find they can't earn enough to stay in the business."

Price slide...

"The latest housing industry numbers suggest that's exactly what's happening. Both existing-home sales and housing starts slowed sharply last month, especially in formerly hot areas like Florida and California."

"Meanwhile, more than two dozen metro areas reported outright price declines. In Boston, nearly half of all homes on the market had been reduced in price at least once, and more than a third have been marked down in San Diego and Phoenix, according to figures from"

"That could create a vicious cycle as job losses in the housing sector begin to undermine the overall economy, leading to an even deeper downturn in housing. "There's somewhat of a time lag here, but everyone's eventually going to feel it," says Jay Butler, director of the Arizona Real Estate Center near Phoenix, where housing-related commerce accounts for about a third of the local economy."


"That process is already underway in other housing-related jobs, such as mortgage lending, title services, and appraisals. With the refinancing boom played out and mortgage applications near a four-year low, lenders like Washington Mutual have recently laid off thousands of workers, while some smaller operations have shut down completely."

'"It was quick, easy money, but then rates go up and it's over," says mortgage trainer Christopher Cruise, who recently visited one mortgage lending operation in Rockville, Md., that let all 71 of its loan officers go."

'"At the peak, all you needed was a voice and a telephone, and you were pretty much guaranteed six figures. But now you've got to suck it up, and some folks would rather just go lay on the beach and wait around for the next refi boom."'

"For his part, Massad is trying to adjust his clientele, too. The founder of had specialized in helping investors buy preconstruction condos. But with investors all but vanished from the Miami condo market, he has recently taken to walking his neighborhood to drum up residential sales."

Party At Marinite's...

Please see Marinite's post for a terrific "How To" article on how to play to win at the overpriced housing game, and topple the pyramid scheme it has become.

Here's a hint:

1. Look up the price 5 years ago
2. Add 25%
3. Adjust for inlfation

That's your offer.

If it was worth $300,000 five years ago
It is worth approximately $364,000 today.

Don't be the greatest fool and pay for another fool's idiotic lifestyle choices.

Friday, August 18, 2006

Affordability Index.... Still Laughing....

I was going to post the latest CAR Affordability index and some thoughts on their "new formula" but has done a better job of it.

Lies, Damned Lies, and the C.A.R.

"August 17th: CAR (California Association of Realt-whores) announces it’s “new-and-improved” Housing Affordability Index (which they had ceased reporting in December, 2005 after it hit an historic low of 14% statewide)."

"Tragically, even after torturing the numbers thusly, CAR was only able to produce an affordability figure of 23%. This is just NOT acceptable! Clearly, they ought to keep on torturing those numbers until they confess 100%!"

Read the rest and discuss....

Are You Really Surprised?

"Sonoma County home prices fell in July for the first time in more than four years, the latest sign that the once-booming housing market continues to slow."

"July's median resale price was $595,000, down 3.3 percent from the same month a year ago, when the median stood at $615,000. It was the first year-over-year decline since February 2002."

'"It will be a little bumpy," said Karl Bundesen, owner of Century 21 Bundesen realty in Petaluma. Home sales have come down sharply across California and the nation."

"In Sonoma County, home sales hit an 11-year low for the month of July and have dropped for 10 consecutive months in year-over-year comparisons."

"While the slowdown was anticipated since the market peaked a year ago, longtime brokers were surprised by the price drop."

What? Real Estate doesn't always go up? How could a Realtor be wrong? This is a new paradigm. We are at a permanently high plateau. This is the new Sausalito. Everyone wants to live here. It's different here. It's different this time. You can't lose. You will be priced out. They aren't making any more land. The realtors said this all was true. How could prices drop?

'"It was much softer quicker than any of us expected," said Tom Lawrence, broker-manager for Frank Howard Allen Realtors' office in Windsor."

It was "much softer quicker" than any of them expected?

Sales have been dropping for 10 months.

In the last three years the number of creative loans to purchase over-priced houses has increased drastically. That was not because housing was getting more affordable, it was because they were less affordable. Who can't add up that equation and see the bottom falling out of a phony market built on the a foundation of lies, deceptions and magical thinking?

"There are so many listings on the market that are taking so much longer to sell. Price reductions have set in."With the average home taking more than two months to sell, the supply of homes on the market has swollen to its highest level in a decade.

Actually according to the average time to sell is well above 90 days for most cities in the county.

"Buyers are out there cherry-picking," said Rick Laws, Coldwell Banker manager for Santa Rosa, which prepares the monthly Press Democrat home sales report. "There are homes that have been on the market since spring that are not selling. That means they are not priced right for what they are."

That is correct. They have been priced based on make believe appreciation fueled by speculation and hype. None of that appreciation is real, and more buyers should keep that in mind.

'"I didn't think it would go down as quickly this soon. I don't think it's hit bottom," said Beth Robertson, a broker for Century 21 Classic Properties in Rohnert Park."

By golly, I think she is right.

Quote from a previous article:

"experts have a warning for today's home shoppers: It often takes a year or two for prices to adjust downward in a slowdown.

"In Petaluma, for example, one seller cut the price twice in two months, lowering the listing more than 4 percent to $545,000 to get the home sold. And even then, the buyer waited 12 days before making an offer and still negotiated credits for repairs, said Luis Nanez, the buyer's agent."That's basically what's going on in this market," said Nanez, a Century 21 Bundesen agent."

'"That's the reason people do open houses and nobody shows up, because they're way overpriced," he said."

I repeat... "...experts have a warning for today's home shoppers: It often takes a year or two for prices to adjust downward in a slowdown."

"Buyers haven't faced such an advantageous market in a decade. Sellers still are adjusting after enjoying a run of strong sales and often soaring prices."It's really back to a normal market. It's a correction that was needed," Bundesen said.

No...this is not a normal market. It will be a normal market when once again fundamentals are present. Fundamentals such as: price to own vs. price to rent are more in balance. While owning is still 2-3 times more expensive than renting a comparable property it is still a fool's market, and there will be fools buying all the way to the bottom. They will be the ones screwing the comps up for the rest of the bagholders trying to unload the debtbox they thought was a sure thing.

"I think it's taking some sellers a little longer to get with the program and realize the market has changed. There's still sellers coming on the market unrealistically."

"Housing began to turn downward last summer. The combination of rising rates and high prices made more buyers cautious about paying too much, while others could no longer afford to buy homes."

Buyers should still be cautious about paying too much. Prices are still extremely overpriced. 20% increases for 5 years is too much. There was no value increase, there was no economy to support such a rise in price. These prices were inflated due to the pyramid scheme of fools and greater fools selling houses back and forth to one another.

"A sense of urgency drove people into the market. Now what we have is the opposite of that," Laws said.

Right. Now the bagholders are running for the exits, and hoping there are still greatest fools out there willing to buy their maxed out debtbox.

"And now the herding instinct is to wait and see if prices soften further."

Again... "experts have a warning for today's home shoppers: It often takes a year or two for prices to adjust downward in a slowdown."

"Slowing sales have dramatically driven up the supply of homes for sale. The 2,571 homes for sale in the county at the end of July represented a seven-month supply based on the current sales pace, the highest inventory since June 1996."

2,571 = Lie

seven-month supply = Lie

Sonoma County MLS: 4318
(Bareis MLS)

At the current rate of sales this translates into a 12.77 month supply of homes for sale. This number only represents existing homes on the market, and does not include newly built homes.

# on Price Reduced List: 1519

Sonoma County listings progression
3/20/06 = 1742
3/26/06 = 1766
4/03/06 = 1888
4/19/06 = 2828
4/25/06 = 2868
4/30/06 = 2898
8/10/06 = 4072
8/16/06 = 4298
8/18/06 = 4318

'"We're getting right to a point where a lot of people would say we're moving into a buyer's market," Laws said."

As long as houses are still over-priced and the cost of ownership is double and triple the cost of renting, it is a fool's market not a buyer's market.

"Sellers with homes still on the market this fall could decide to make them rentals if they don't have to sell."

Good luck with that.

Thursday, August 17, 2006

It's Going to Bite People in the Butt...

"Homes sales in the Bay Area fell to their lowest level in a decade last month, while home values increased at their slowest pace in three years, a real estate tracking firm reported Wednesday."

"Bay Area home sales fell more than 30 percent compared to a year ago, and the median price was up only 3.5 percent from a year ago and were down from a record in June, DataQuick Information Systems reported."

"That could spell trouble for borrowers with creative mortgages who rely on rising appreciation to work most effectively. Sellers also may have to accept smaller appreciation gains and be willing to negotiate more with buyers."

'"The housing market has become the victim of its own success," said Kei Matsuda, senior economist at San Francisco-based Union Bank of California. "In the last couple years you have had phenomenally high transactions" along with appreciation."

Not so any more.

"Increased inventory and climbing interest rates are factors behind the housing slowdown, which began in spring 2005 with decreasing year-to-year sales."

'"How much of today's demand has already been met? If the market is indeed going through a lull, expect low sales and flat prices through fall and on into next year," DataQuick President Marshall Prentice said."

'"There is a lot more inventory and more for people to choose from, and housing is staying on the market a lot longer," said David Kerr, a senior sales association at Emeryville-based online real estate firm ZipRealty."
"Appreciation slowed to single digits in March after two years of double-digit gains."

"The slowing appreciation could be bad news for people with creative financing who are counting on home prices to climb at a good clip. Among many options, these mortgages include no-money down 100 percent financing."

"Another type is the negative-amortization loan, which lets borrowers hold back on payments in exchange for having a growing loan balance."

"In cases where the borrower has skipped or deferred loan payments, creative loans can result in a borrower ending up with a larger loan balance than equity held in the home when housing prices flatten or drop."

'"It's going to bite (those) people in the butt," said Sue Rainwater, a loan officer with CMG Mortgage in San Ramon and past-president of the East Bay chapter of the California Association of Mortgage Brokers."

'"And we are going to see more foreclosures and short sales, and we are going to see more people who are unable to refinance because they are going to end up owing more than the home is valued."'

From MarketWatch

"The pace of activity in building new homes fell in July to the lowest level in nearly two years, adding another piece of evidence indicating a slowing U.S. economy."

"Housing starts, tracking the nation's rate of construction on new homes, fell 2.5% last month to 1.8 million on a seasonally adjusted annual basis, the Commerce Department said Wednesday.
This marked the fifth decline in housing starts in the last six months. It's the lowest level since November 2004. Read full government report."

"Meanwhile, building permits -- an indicator that foreshadows future construction activity -- plunged 6.5% to 1.75 million annual units for July. This was the sixth straight monthly decline and the largest drop seen since September 1999."

"Permits are at their lowest level since August 2002."

"Economists generally agree that the housing market's rolling over. There remains a debate about the magnitude of the decline and its impact of the overall economy."

"Joel Naroff, president of Naroff Economic Advisors, said it is no longer correct to describe the weakening housing sector as a slowdown. "Rout" is now the proper word, he said."

Housing’s crumbling foundation
The latest statistics are numbing:

"Mortgage application volume was down nearly 30% year-over-year in the week ending July 28; in June, housing starts were down 11% from a year ago, while existing home sales and new home sales were down 9% and 11%, respectively; the inventory of unsold homes was up nearly 40%; and most alarming, the decline in the growth of median existing home prices was the most precipitous since 1981."

"With mortgage equity withdrawal having essentially replaced wage gains as the primary source of income gains over the last several years, consumers’ tapping of their home equity has allowed them to withstand the burgeoning cost of the aforementioned “essentials.”'

"Although household net worth remains at record levels, 37% of it is now accounted for by real estate, up from 24% in 2000."

"The severe weakness in housing unequivocally reduces aggregate demand, has strong direct (home equity drawdowns) and indirect (net worth) effects on consumption, and reduces employment."

(30% of the growth in payrolls in the last several years was directly or indirectly related to housing).

"Consumers account for about two-thirds of GDP, and they’re under increasing pressure."

Still Living High on the Hog...

"Many U.S. homeowners continue to take cash out of their homes even as mortgage rates climb and home sales slip, helping to brace the economy, economists said."

'"I would have thought the home equity extractions would have been much weaker now," said Frank Nothaft, chief economist for the mortgage finance giant."

"This year, Americans who refinance their mortgages are expected to draw $257 billion of wealth out of their homes, according to mortgage finance giant Freddie Mac."

"That's $13 billion more than the refinancing cash-out seen in 2005 - the hottest year of the recent housing boom."

"Doug Duncan, chief economist of the Mortgage Bankers Association, credits the mortgage industry for making refinancing easier and cheaper in recent years."

"Give homeowners with untapped reserves of wealth a simple process to refinance and they will naturally be tempted to cash-out, he said."

'"One of the big changes is that people look at their home as a financial asset," he said. "In another generation, the notion was 'Burn the mortgage.' That phrase is not in fashion anymore."'

"It is hard to tell exactly where refinancing cash is going, said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies, and so gauging the impact of refinance spending "is pretty murky."'

"Still, he said, "all economist would agree that refinancing home equity loans has boosted spending."'

Stubborn Standoff

"Real-estate reports all point to a slowdown after a long boom, but don't assume that it's suddenly a buyers market out there."

"In most metro areas, the current cool-off doesn't mean a surplus of bargain deals. Mortgage rates are up, so the cost of owning a home is actually higher for many people than it was a year ago. And median prices are still rising, not falling."

"Among the nation's 151 metro areas, 26 saw the median price fall."

"It's true that sellers no longer can expect multiple offers on the first day they list their home. For shoppers, it's a strange and wonderful feeling to have some leverage."

"But experts have a warning for today's home shoppers: It often takes a year or two for prices to adjust downward in a slowdown. So far, many areas appear to be in a "topping out" phase more than a "bottoming out."'

"Separate reports confirmed that home builders face a harsher climate of cyclical downturn. New housing starts dropped more than expected in July, and have fallen 13.3 percent in the past year, according to data released Wednesday."

"And an index of builder confidence fell this week to a 15-year low - suggesting more retrenchment to come."

'"In the past, buyers were taking properties just as they were ... because they were afraid of prices going up," says Linda Behnke, assistant manager at a RE/MAX office near San Diego. "They were just happy to just get the house."'

"Realtors are observing a standoff, with home sellers reluctant to cut prices, while buyers try to win concessions. The result is a rising inventory of unsold homes."

"So far, the market shift is visible more in the behavior of buyers and sellers than in the prices."

Wednesday, August 16, 2006

Negative Appreciation for Sonoma County


"Home sales fell sharply nationwide during the second quarter of the year, and California showed the third biggest drop of any state, a Realtors group reported Tuesday. "

"The Realtors group found that volume slowed the most in precisely those states where sales had been hottest. Only Arizona and Florida posted a greater decline than California."

"Realtors association spokesman Walter Molony said the second quarter's results amounted to the slowest pace of quarterly sales in California since the first three months of 1996."

"The pattern of slowing home sales and flattening prices is typical when booms in the housing market end. The nation in general and California in particular are coming out of one of the strongest housing surges in recent history, owing to mortgage rates that dropped to near-record-low levels."

"Economists said it's natural, with rates rising, for sales to slow down."

"Vince Malta, president of the California Association of Realtors, said the sales slowdown, combined with the low, single-digit price increases, suggest that the state's real estate market is in a period of adjustment. The duration and result of that shift can only be guessed, he said."

"David Berson, chief economist for mortgage giant Fannie Mae, said he sees worrisome trends that suggest continued downward pressure on sales and prices from coast to coast."

"For one thing, the inventory of unsold homes on a nationwide level has risen. Berson said that, at the current pace of sales, it would take seven months to sell off all the single-family homes now on the market. From 1999 through 2005, this same indicator averaged 4.5 months."

"Berson said that in many locales, existing sellers also will have to compete with a large number of unsold new homes, roughly 570,000 nationwide as of June."

"We've never had more (new) homes for sale," he said.

"Perhaps the biggest unknown is what happens to the large numbers of so-called nontraditional mortgages -- often favored by new buyers in high-priced places such as the Bay Area -- as interest rates rise, Berson said. Such loans often have features that cause big increases in monthly mortgage payments."

"There could be some sort of payment shock when these things adjust upward," he said.


"The median price for single-family homes in Sonoma County fell 3.6% in July from the month before to $592,500. This is 2.9% lower than last July, and the first time since we've been keeping records, January 1999, annual appreciation has been negative."

Sales plummeted in July, down 21.4% from June, and down 40% from last July.

Sonoma County Home Sales:

July 2006: 338
June 2006: 430

July 2005: 563

Condo sales also fell sharply, down 27.8% compared to June, down 52.1% year-over-year. says this is not a trend.

Sonoma Valley July Sales Statistics:

Homes Sold: 25
Down YOY -34.2%

Condos Sold: 4
Down YOY -60.0%

Sonoma Valley June Sales Statistics

Homes Sold: 36
Down YOY -35.7%

Condos Sold: 3
Down YOY -57.1

Sonoma County MLS: 4298
(Bareis MLS)

At the current rate of sales this translates into a 12.71 month supply of homes for sale. This number only represents existing homes on the market, and does not include newly built homes.

# on Price Reduced List: 1502

Sonoma County listings progression
3/20/06 = 1742
3/26/06 = 1766
4/03/06 = 1888
4/19/06 = 2828
4/25/06 = 2868
4/30/06 = 2898
8/10/06 = 4072
8/16/06 = 4298

Sonoma Valley MLS: 487

At the current rate of sales, this translates into a 13.91 month supply of homes for sale. This number only reflects existing homes on the market, and does not factor in newly built homes.

# on Price Reduced List: 173

Sonoma Valley listing progression
2/14/06 = 172
2/14/06 = 183
2/24/06 = 193
2/25/06 = 200
2/27/06 = 214
3/01/06 = 219
3/04/06 = 220
3/12/06 = 230
3/20/06 = 236
3/26/06 = 238
4/03/06 = 268
4/19/06 = 291
4/25/06 = 305
4/30/06 = 315
8/10/06 = 471
8/16/06 = 487

Associated Press. “The slowdown in the once-sizzling housing market is spreading, with 29 states reporting spring sales declines, led by big drops in former boom areas of Arizona, Florida and California."

“The five biggest declines this spring compared to the April-June period of 2005 were Arizona, down 26.9 percent; Florida, down 26.7 percent; California, down 25.3 percent; Virginia, down 23.9 percent, and Nevada, down 23.5 percent.”

“‘We are not near the bottom,’ said economist Christopher Thornberg, a senior economist at UCLA. ‘Anybody who bought a home in the last year and was hoping for appreciation to bail them out is in for a rude awakening,’ he said.”

From the LA Times.

“As the housing sector cools from its torrid pace, the Fed found that about 60% of respondents saw weaker demand for mortgages, which was ‘a significantly larger net fraction than in the April survey,’ the report said.”

“Nearly 30 percent of banks, on net, indicated that they expect the quality of the nontraditional residential mortgage products currently on their books will deteriorate somewhat over the next 12 months,’ the Fed survey said.”

Monday, August 14, 2006

Overstating of Appraisals is Widespread

"As the housing market cools — for the first time in years, — folks are confronting a problem that was easily ignored during the real estate boom."

"The problem is inflated home appraisals."

"Real estate appraisals that come in over the “true” property value threaten home owners and home builders alike."

"Critics inside and outside the appraisal business have long warned that many appraisals are too high because generous appraisals help mortgage loan officers and brokers, who often select the property appraiser, complete more deals."

"Inflated appraisals were a non-issue when home prices were rising faster, since market values quickly could catch up. Now, some homeowners are finding that the market value is below what past appraisals led them to believe."

"Those with flawed credit are particularly vulnerable, says Iowa Assistant Attorney General Patrick Madigan, who coordinates with law enforcement officials from other states on a variety of mortgage-related issues."

"Madigan believes that the deliberate overstating of appraisals is “widespread” among loans to subprime borrowers. Jacquie Doty of Freddie Mac, a big buyer of home mortgages on the national scene, predicts that inflated appraisals will lead to higher default rates in the coming years."

"For sure, the inflated appraisal concern in the Quad-Cities likely is lower than in places like Florida or California, where consumers had little choice but to play along with silly appraisals if they hoped to buy a home. "

Sunday, August 13, 2006

Housing Market Kaput?

"Steeply deteriorating." "Hard landing." "Kaput." These are some of the terms used by analysts to describe the slowing of the U.S. housing market. And with the glory days of home-price appreciation now over, some homeowners are declaring, "Downsize Me!"

Americans are carrying a lot of excess weight and desperately want to slim down. No, not their waistlines -- in the size of their homes.

A huge gap between the supply of homes for sale and demand for housing means prices are leveling off -- and could tumble. David Horwitz and his wife, Diane, are the type of homeowners looking to streamline their expenses and unload their roomy homes for more humbler abodes.

The Horwitzes, both semi-retired, just moved into a 1,200 square-foot apartment on the Upper East Side of Manhattan after living in a 2,200 square-foot home in Scarsdale, New York.

"Our property taxes went down by 1,000 percent, the ConEd (bill) was cut by two-thirds and the cost of home maintenance was reduced by at least 50 percent," said David Horwitz. "No gardener, no roofer cleaning gutters, no tree spraying, no snow removal, no exterior painting every six or seven years."

Diane Ramirez, president of Halstead Property, has seen downsizing pick up steam in recent months, especially among suburbanites in New York, New Jersey and Connecticut.

"Homeowners are probably sensing now may be the right time to get the best price before the market cools further," Ramirez said. "Some of these homebuyers are empty-nesters now finding their homes are larger than what they need and more than they can handle."
The Horwitzes, who have no mortgage, plan to reside in the apartment for a while, so even if prices fall it is of little significance to them.

Friday, August 11, 2006

Step 5. Admit to the Gods, Yourself, and Your Attorney....

...The Exact Nature Of Your Financial Folly, and Fraud.

"Mortgage fraud became so rampant in Atlanta that the police department opened a Mortgage Fraud Unit. The unit is working on 49 open cases and recently closed one involving both a mother and son. "If you're involved in mortgage fraud, thinking about getting involved in mortgage fraud and it's here in the city of Atlanta, we're gonna come after you. We're gonna put you in jail. We don't care who you are. We don't care if you're working it with your momma. Like Mr. Hardy here, we'll put you and your momma in jail," said Sgt. Terry Joyner of the Atlanta Police Department."

"A federal prison guard and a state parole officer are among five people arrested as part of an elaborate mortgage fraud scheme in Atlanta, officials announced on Friday. Investigators said the five suspects devised a scheme to buy a house, use fraudulent means to inflate the value of the house, and then borrow money based on the inflated value."

According to police, the scheme involved the following suspects:

The buyer: 27-year-old Quentin Chandler, a recent parolee from the state corrections system.

The realtor: 25-year-old Takeisha Randolph, Chandler's girlfriend.

The sellers: 44-year-old Michael Turner, Chandler's parole officer, and 45-year-old Duane Timmons, a federal prison guard.

The loan officer: 42-year-old Royce Odor.

"All five suspects were arrested and charged under the state Mortgage Fraud statute. Their cases will be prosecuted by the Fulton County District Attorney Office."

Did you know?

"Despite being in the U.S. illegally, undocumented immigrants can legally buy a house.
Certain lenders don't ask for immigration papers. And buyers using a special tax ID often don't need a lengthy credit history."

"That has allowed many undocumented workers to realize the American Dream, experts said, while contributing to an upturn in the real estate market."

'"The real estate companies are focusing on the nontraditional buyers. Things are slowing down, and the focus has shifted to the Hispanic home buyer because of their numbers," Houston real estate consultant Oscar Gonzalez said."

"According to the U.S. Census Bureau, 48 percent of the more than 40 million Hispanics in this country were homeowners in 2002, the last year for which such figures are available."

"Although some anti-immigration groups claim that those in the country illegally pose an economic burden, a study by the National Association of Hispanic Real Estate Professionals said that home purchases by undocumented workers could result in $60 billion in mortgages over the next few years."

"The total value of mortgages granted for home purchases in 2005 was $1.5 trillion, according to the Mortgage Bankers Association in Washington, D.C."

"Estimates on the number of illegal immigrants in the U.S. vary. The U.S. Census Bureau puts the figure at 11 million."

"For Jorge and Maribel, a couple from Mexico who have lived illegally in Houston since 1996, an Individual Tax Identification Number, known as an ITIN, and a Texas driver's license were enough to secure their mortgage, allowing them to purchase a home in 2002."

'"I was really surprised when I found out that it could be done," said Jorge, who bought his home through Gloria Castrejon's realty firm, La Palma."

"Like Maribel, Jorge asked to be identified by only his first name."

"The fact is, it can be easier for many undocumented immigrants to buy houses than to get jobs.
To complete the purchase, they don't need a Social Security number."

"An ITIN, their last two yearly tax returns, an official ID such as a consular registration card and a few credit references, such as electricity and telephone bills, are enough to apply for a mortgage and buy a home, according to experts."

'"Residency has never been a condition to purchase a home," said Frances Martinez Myers, president of the National Association of Hispanic Real Estate Professionals, which is based in Washington, D.C."

"Being in the country legally or not is not an issue when you are buying a house."

"If a buyer does provide a Social Security number, real estate agencies and lenders may request proof of legal status, according to Myers. But that is usually not the case with an ITIN."

'"It is not illegal for an undocumented immigrant to buy a house. What is illegal is to do so using a false Social Security number," Houston immigration lawyer Jose Vega warned."

"Although real estate deals involving non-U.S. residents have been going on for a while, Myers said that banks have only recently begun processing mortgages with ITIN numbers."

"Real risks For illegal immigrants, however, buying a home can carry risks."

"The biggest, said Houston real estate consultant oscar Gonzalez, of Gonzalez Group, is deportation. If homeowners are forced to leave the country, they might be unable to afford payments and, therefore, could lose their home, Myers said."

"Fraud is another risk. Paco Felici, spokesman for the Texas Attorney General's Office, said a Dallas operation that was selling homes to Hispanics without giving them property titles was busted in June. "

Put Down the Loan Application and Step Away From the Hole!

"Luisa Cordova-Holmes was looking to lower her monthly payments when she refinanced her $312,000 mortgage in 2004. Instead, she wound up digging herself into a ditch."

"For their new loan, Ms. Cordova-Holmes and her husband chose a so-called option adjustable-rate mortgage, which carried an introductory rate of 2.35% and gave her multiple payment choices each month. "I had a lot of financial obligations," says Ms. Cordova-Holmes, an accountant who lives near Detroit."

"Two years later, however, the interest rate on her loan has jumped to 8.75%, her loan balance has climbed to $324,000 and her minimum monthly payment has risen to $2,257. She says the terms of the loan weren't clearly spelled out."

"Ms. Cordova-Holmes says she would like to refinance, but can't -- in part because her loan carries a prepayment penalty that would force her to shell out thousands of dollars if she did. Instead, she's trying to sell her home. But with Detroit's economy slumping, she hasn't been able to find a buyer. When she and her husband first put the house on the market last summer, they were asking nearly $400,000. Now they're willing to accept as little as $270,000."

"We're in a very bad situation," she says. "The payments are just killing us."

"In recent years, homeowners like Ms. Cordova-Holmes have embraced adjustable-rate mortgages -- and such variations as option ARMs, interest-only mortgages and "piggyback" loans, which, respectively, allow borrowers to make a minimum monthly payment, pay interest and no principal in the loan's early years, or finance 100% of the purchase price. The growing popularity of these products has helped fuel consumer spending, as well as double-digit home-price gains and rising homeownership rates."

"Rising mortgage rates are causing problems for first-time home buyers such as Edward Snyder, a product manager who bought his house in St. Paul, Minn., two and a half years ago. Mr. Snyder financed the $210,000 purchase with a $168,000 interest-only ARM that carried a fixed-rate of 6.15% for the first two years and a $42,000 second mortgage with a 9.4% rate that is fixed for the first three years."

"Mr. Snyder says he was stretched even before a rate adjustment on his ARM boosted his monthly payments by $200 in May. Since then, he has fallen behind on his water bills, car payments and student loan. "Now, it's a choice of what gets paid late," Mr. Snyder explains. Last month, he received a letter from his lender with the words "rate increase" on the envelope. Mr. Snyder says he hasn't opened it "because it gets too discouraging." This week, he's meeting with a mortgage broker to discuss his options."

"If I had been aware both loans were interest-only, I would have probably turned the loan down," says Mr. Snyder, who says that the terms of the mortgage were never properly explained to him.

"I believe this loan is built for failure. There's no means to build up equity."

"Roughly $137.5 billion in residential mortgages will face payment resets this year, with an additional $524 billion resetting over the next four years, according to a recent analysis by UBS AG that looked at loans sold to investors who buy mortgage-backed securities."

"Rising interest rates aren't a problem for most of these borrowers because they can refinance or have the cash to meet higher mortgage payments. Borrowers with troubled credit records may be able to refinance into a mortgage with a lower rate if they've been paying their bills on time."

"But other borrowers are running into trouble, in some cases because they didn't understand the risks of their mortgage or wound up at the closing table with a loan that wasn't what they expected."

"More than 30% of mortgage brokers believe their clients don't understand the mortgage product they selected, according to a recent survey by Macquarie Mortgages USA, a unit of the Macquarie Group. Other borrowers didn't leave a cash cushion to cover higher mortgage payments at a time when gasoline costs and minimum credit-card payments are also rising."

'"Often the reason somebody is put into an ARM or an interest-only because that's the only way the broker or loan officer could get them qualified," says Jordan Ash, director of the Acorn Financial Justice Center, an advocacy group that focuses on predatory lending issues. Acorn is currently negotiating with two large subprime lenders -- who deal with borrowers with blemished credit records -- about changes in underwriting standards and how to deal with borrowers whose interest rates are resetting."

"Many borrowers who run into trouble have relatively low incomes or scuffed credit records. But housing counselors say they are also hearing from a growing number of middle- and upper-middle-income borrowers who borrowed heavily to finance spending or buy a house they could barely afford. NeighborWorks Homeownership Center in Sacramento, Calif., says that 38% of the borrowers it's seen this year have "moderate or above-moderate" incomes, up from 24% last year."

"Mortgage delinquency rates hit 2.32% in the second quarter after bottoming out at 2.06% in the fourth quarter of 2005, according to an analysis by Equifax/Moody's The portion of adjustable-rate mortgages that were at least 90 days past due has climbed 141% in the past year, according to a recent study by Credit Suisse that looked at loans made to borrowers with good credit. That compares to a 27% rise in such delinquencies for fixed-rate mortgages."

"In Illinois, the new crop of borrowers includes people with bills for private schools, fancy cars and child care and monthly incomes of $3,500 to $10,000, says Michael van Zalingen, director of homeownership services at Neighborhood Housing Services of Chicago. Many of these borrowers took out loans that didn't require them to document their income and overstated their earnings, he adds."

"Steven Schwaber, a bankruptcy attorney in the Pasadena, Calif., area, says he's getting more calls from small-business owners who had refinanced into ARMs, tapping their equity in an effort to keep their businesses afloat. "All of the sudden their budgets are out of whack because their house payment went up by 25% or 30%," he says, at the same time fuel prices are rising. Some would have wound up filing for bankruptcy anyway, he adds, but rising interest rates have pushed others over the edge."

"Credit-counseling agencies say that in the past few months they've seen a growing number of homeowners pinched by rising mortgage payments. Neighborhood Housing Services of New York City says it has been "flooded" with calls from borrowers who took out ARMs two years ago and whose rates are now resetting for the first time. And Consumer Credit Counseling Services of Atlanta, which works with borrowers nationwide, says it has tripled its housing counseling staff in the past six months to keep up with increased demand."

"Until recently, most mortgage-payment problems were an unfortunate byproduct of major life changes, such as job loss, medical problems, divorce or a death in the family. But for the new wave of troubled borrowers, the problems stem largely, or in part, from the structure of their mortgage, housing counselors say."

"Some California brokers say they are beginning to see a return of "short sales" -- transactions in which the sales price isn't large enough to cover outstanding loans. Patti Vaughan, an agent with Assist 2 Sell in Temecula, Calif., says in recent months she has begun to get calls from borrowers looking to unload houses they can no longer afford. "They've upgraded their houses, put in a pool and bought themselves Hummers and BMWs," she says. "Now they can't get it refinanced and they can't sell."'

Quotable Quotes
(from around the blogsphere)

Comment by nnvmtgbrkr (at
"Don’t be lazy with probably the biggest investment of your life. Never, and let me reiterate never, immediately go with the broker your realtor recommends. These relationships serve each other, not you the consumer."

"If your realtor aggressively pushes a certain broker on you, then something is probably wrong. Never let a sales person at a big development tell you that they have a “preferred lender” that you must use. It stomps all over RESPA and is against the law. If they tell you that certain upgrades will be charged to you if you don’t use their lender, then threaten to turn them in."

North County Times.
“One of my pet peeves against groups who benefit from today’s obscene levels of housing prices is that they assume that everybody’s family should buy (invest in) real estate now. Who do you think is behind all this? I am blaming the following entities: city building departments, state politicians, banks, mortgage lenders and, lastly, your friendly neighborhood real estate companies.”

Palm Beach Post. “Mortgage broker David P. writes that, ‘The real issue is that there has been such an influx of new agents and new mortgage brokers with no financial sense..Foreclosures are inevitable in a climate of greediness that we’ve seen with overpriced listings.’”

George Hale of Bend-based WoodHill Homes, said the inventory buildup is causing him to trim his production plans this year, but he’s still bullish on the long haul. WoodHill sold about 25 percent of its homes to investors in 2005, Hale said, but those buyers ‘are pretty much gone.’”

“It’s hard to tell how sellers will react to the upwelling of inventory, Foster noted. Some are selling because they have to sell. Others are just testing the waters at intentionally high prices, trying to see whether a buyer ‘with a bucket of money and a box of stupid’ will show up to pay too much.”

Comment by ChillintheOC

"Act 2, Stage 1 - Enter “The Lawyer”….who will quickly determine that the broker made a hefty fee(s) from the transaction….the appraiser rigged the value of the home….the RE agent was in cohoots with both….."

Comment by Anonymous:

" time you will learn that when the UPS driver hands you their real estate agent card, and gives you investment advice... nod, smile, turn around slowly, and run ... and sell."

Thursday, August 10, 2006

Stats 8-10-06

Sometimes it is nice to pause for effect when looking at data progression.

Behold, the inventory stats....

Sonoma County MLS: 4072
(Bareis MLS)

# on Price Reduced List: 1476

Sonoma County listings progression
3/20/06 = 1742
3/26/06 = 1766
4/03/06 = 1888
4/19/06 = 2828
4/25/06 = 2868
4/30/06 = 2898
8/10/06 = 4072

Sonoma Valley MLS: 471

# on Price Reduced List: 167

Sonoma Valley listing progression
2/14/06 = 172
2/14/06 = 183
2/24/06 = 193
2/25/06 = 200
2/27/06 = 214
3/01/06 = 219
3/04/06 = 220
3/12/06 = 230
3/20/06 = 236
3/26/06 = 238
4/03/06 = 268
4/19/06 = 291
4/25/06 = 305
4/30/06 = 315
8/10/06 = 471

SHB Fun Facts

It is always fun to see who finds Sonoma's Housing Bubble interesting enough to read about, it is even more interesting to see how people have found the site.

The Sitemeter tracks basic traffic information such as Internet Service Provider and Domain Names, but it also shows the search terms used if a reader entered the site from the major search services such as Yahoo, Goog etc...

These are 15 of the most eye catching, actual search strings used that brought readers here this week:

1. I gave an employee a fraudulent check stub

2. renters rights during tax lien sale

3. housing market may land harder than predicted (This was a Mortgage Company!!!)

4. vintage greens housing windsor

5. income percentages sonoma county greater than $100k

6. mortgage lender jobs in sonoma county (This was a Sonoma County Government office)

7. sonoma county housing appreciation (This was a Mortgage Company)

8. housing going down

9. housing slump

10. northern california housing bubble

11. real estate fraud laws

12. option arm scams

13. dr horton summer lane prices drop

14. if you still don't believe there's a massive housing bubble that is beginning to deflate, look no further than toll brothers. (This was a BIG mortgage company)

15. below market rates in sonoma

Wednesday, August 09, 2006

Ben, Baby Take a Bow!

Let's All Give A Nod of Respect for Ben Jones, Father of the best Bubble Blog on the Blogosphere: The Housing Bubble Blog

Newsweek's Kathy Jones, sat down for a little Q&A with Ben....

"The fall of 2004 was no time for real-estate pessimists. In red-hot markets like California, prices in some communities spiked 50 percent higher than the previous year; multiple-bid offers were common on homes and cries of "they're not making any more land," fueled a property-buying frenzy."

"But something about the mania just didn't sit right with Ben Jones. The Texas native learned a hard lesson in the 1980s, when the savings and loan scandal hit and real estate slumped just as he was preparing for a career in the property market. "I jumped in at the worst possible time," the 42-year-old recalled from his home in Sedona, Arizona."

"That experience, coupled with a background in corporate accounting, made him wary of highflying markets, so when he saw housing appreciations rocket up and mortgage-lending restrictions sink low, Jones decided that this was a housing bubble, and he was going to warn his friends. ..."

Read the Rest....

Flipper in the House!

Remember this Guy from our POS Alert back in April?

337 ARROYO RD, Sonoma, CA 95476
On Market: 1 day
Price Reduced: 04/20/06 -- $455,000 to $449,900
Old Description
An unbelievable opportunity...Two houses for less than the price of one. Motivated seller has made these two charming cottages on one oak studded lot better than ever. Both cottages have been extensively remodeled. Private yards and a really cute setting. Ideal for an investor, owner/occupant, or extended families. Private laundry for each home. A great value for all. Separate gas and electric meters.

Well... He's still here!!!

Days on Market: 112

Price Reduced: 04/20/06 -- $455,000 to $449,900
Price Reduced: 05/05/06 -- $449,900 to $439,900
Price Reduced: 05/11/06 -- $439,900 to $420,900
Price Reduced: 05/23/06 -- $420,900 to $410,000
Price Reduced: 05/26/06 -- $410,000 to $399,999

His new description....

Is this cheap or what??? An unbelievable opportunity...Two houses for less than the price of one. Motivated seller has made these two charming cottages on one oak studded lot better than ever. Both cottages have been extensively remodeled. Private yards and a really cute setting. Ideal for an investor, owner/occupant, or extended families. Private laundry for each home. A great value for all. Separate gas and electric meters.

4/20/06 Zillow said: $462,081
Value Range: $402,010 - $508,289

Today: 8/09/06 Zillow Sez: $436,662
Value Range: $397,362- $497,795

1 yr ago value: $367,00

Sale History
01/07/2005: $350,000
10/02/1997: $28,500

Walks like a duck, quacks like a duck... Must be a flipper.

A flipper trying to make superficial price drops before he has to fully bend over and drop his pants.

Did y'all catch that 1997 sale price... $28,500?

This property is located in the *desirable* los banos area of Sonoma in Boyes Hot Springs.

Tax Assessment History 2004
Property tax: $2,598
Assessed value bldgs: $71,021
Assessed value land: + $68,730
Total assessed value: = $139,751

My Zimbio
Top Stories Bloggapedia - Find It!

Estate Real, House New

Housing Crisis

Free Site Submit by