Foreclosures up 90% over the year

<div class='quotetop'>QUOTE(MarkMN @ Jun 14 2007, 12:53 PM) [snapback]461661[/snapback]</div>

Sounds like you have a lot of hostility towards banks and Realtors. I guess in your opinion everyone in those two lines of work are "slick" and don't care about people as long as they can make a buck off of them.

The reality is that a lot of these people do NOT listen to advice from Realtors. I was against the 0% down, 100% lending from the beginning. I warned people not to do this, and gave them the facts - some people will NOT listen, regardless. Your grouping of everyone into nice little compartments is unwarranted. Not all Realtors are the slime you portray them to be, and not all these people are "victims" (except of their own illusions). Some of like tobe able to sleep at night, thank you very much.

 

<div class='quotetop'>QUOTE(burritos @ Jun 15 2007, 09:17 AM) [snapback]462361[/snapback]</div>

What. You going to tell me there is something inherently bad about real estate investments in Sacramento?

Yes, the house is in Sacramento.
It's a cute 1920's bungalow located in one of Sacramento's most desirable, established, well cared for neighborhoods.
It is a lovely two mile commute via tree lined residential streets to the downtown area. No freeway commute here.

It use to be the the worst house on the block. A nice three-color paint job did wonders for its curb appeal.
Now the larger neighboring houses are sucking its value higher.
This area has the highest price per square foot in the entire Sacramento area.
[real estate investment axiom: Buy the worst house in the best neighborhood!]

The installation of a skylight in the kitchen, opening up the wall between the kitchen and dining room, and adding insulation and central heat and air have increased its value even more.
But it is the low crime, large mature shade trees, and original charm of the house and neighborhood which will guarantee the value and make it no problem at all to rent or sell.

So what is wrong with Sacramento?
Is the state going to lay off tens of thousands of state workers? No.
It's not in a flood zone, but it is still insured for everything.
I even have earthquake insurance . . . even though there are no faults around here.

Let's see . . . what could go wrong with investing in Ventura County . . .

 

<div class='quotetop'>QUOTE(jhinton @ Jun 14 2007, 03:02 PM) [snapback]461779[/snapback]</div>

Bingo. And in doing so, pull all the equity out of their home that they've built up.

I had a client last year who "needed to sell" because they were in a flood zone and had had enough after the two major floods in the area in '05. I did a market analysis for them, told them a range in which their house would likely sell, and indicated where offers would initially come in at. They flat-out told me they needed "more" out of the house than what the market indicated. They had been in this house for at least 15 years, so they should have built up a LOT of equity. But, there was the new SUV, the vacations, the toys, etc (i.e., refinance and take some money for yourself to go play). They overpriced the house (even though I was able to get them down to within $40-50K of where I knew they would eventually sell) but still got two offers, EXACTLY where I said they would come in. Both offers disappeared (the buyers bought elsewhere locally for those same prices) based on their unwillingness to accept what was a reasonable offer, because it wouldn't cover their debt AND allow them to buy "up", because a lateral move (even just to get them out of the flood area) wasn't good enough. They just flooded again this spring. I have a hard time feeling bad for them due to their decisions.

 

<div class='quotetop'>QUOTE(burritos @ Jun 15 2007, 04:23 PM) [snapback]462583[/snapback]</div>

The bank account would obviously be more than the check alone. However, it's a lot less than the increase in value the house had (and when you consider the increase in value AND the check, even minusing for property tax, insurance, and income tax, I'm still WAY ahead).

 

Here's a viewpoint with some detail of where and why the numbers are what they are.

Is the Foreclosure Crisis Real?

Their Take:

Activity is on the rise nationwide, but only a handful of states are responsible and delinquency rates are down

... attributes most of the first-quarter increase in foreclosure starts to a boost in activity in California, Florida, Arizona, and Nevada. "Without these four states, foreclosure starts would have declined," Duncan predicts. In fact, 24 U.S. states saw a decline in foreclosure starts, while the rest of the states saw what the MBA describes as "negligible" increases.

For total foreclosure inventory for the quarter (1.28% of all loans) the blame fell on Ohio, Indiana, and Michigan. These three states account for just 8.7% of all mortgages in the county, according to the MBA, but they account for 19.9% of the total loans in foreclosure and 15% of all the foreclosures started in the first three months of 2007. Without these three states, Duncan predicts that the portion of loans in foreclosure in the U.S. would be 1.12%—below the 1.19% average of the last 10 years.

.... In the first quarter, foreclosure starts increased 19 basis points in Nevada, 13 basis points in Florida, 12 basis points in California, and 7 basis points in Arizona, according to the MBA. These areas have been heavily influenced by speculators who drove up home prices in the first part of the decade. Now that home prices have started to fall, the MBA says these investors are walking away from properties, especially as they face resets for the adjustable rate mortgages they took out for the homes.

Though high foreclosure rates are largely confined to the seven states highlighted in the MBA survey, foreclosure is still a very real and serious problem for the country, says Moody's Economy.com's Pat McPherron. "The idea that there's a hump and we've passed it, that everything's fine and it's just these states that are having trouble—I'm not ready to buy into that," he says, citing higher gas prices and rising interest rates.

McPherron suspects that the reason delinquencies fell in the first quarter may have to do with a change in the loans that MBA members serviced in that period. Eighty subprime lenders have gone out of business since late 2006, the MBA estimates, and others including Accredited Home Lenders (LEND) and Fremont General (FMT) have stopped making the risky loans.

But even with the first-quarter decrease in delinquencies, the MBA expects to see a "modest increase" in late payments over the next two quarters, with an increase in foreclosures on a lag. The association expects the housing market to recover in late 2007.

Indeed, the foreclosure situation could get much uglier in states like Nevada, Florida, California, Arizona, Ohio, Michigan, and Indiana. But the rest of the country might not notice.

 

<div class='quotetop'>QUOTE(burritos @ Jun 15 2007, 05:51 PM) [snapback]462726[/snapback]</div>

"Lyon said Davis and older neighborhoods like Land Park, Curtis Park and McKinley Park have seen prices rise up to 6.7 percent from this time last year.'
"I'm putting location, location, location back in my vocabulary," he said. "Go where you don't have to drive far to work."

Couldn't have said it better myself.
Oh wait, I did.
The house is in the "East Sacramento" neighborhood . . . of which McKinley Park is just a yuppified name for part of the neighborhood.

The more any city grows and the freeways become more impacted, the desirable neighborhoods close to the downtown area will increase more in value than the outlying commuting areas.

<div class='quotetop'>QUOTE(burritos @ Jun 15 2007, 05:51 PM) [snapback]462726[/snapback]</div>

ACTUALLY . . . . there is more.
I also installed all new electrical and plumbing.
I did all the work myself . . . except $500 to a friend to do the physical install of the CH&A unit on the roof, and $300 for a carpenter to do some framing for the CH&A unit, skylight, and arch for opened wall.
The CH&A total was about $2,000
The skylight $200 (it solved major darkness ills)
Plumbing and electrical about $3,000
Paint about $800
Maintenance expenses over the years, probably $3000.

The first renter really wanted the place and didn't mind paying half price while work was ongoing for about four months. It has only been vacant a couple of months between tenant changeovers.
$30,000 is a very good guesstimate on my part.

 

<div class='quotetop'>QUOTE(Sufferin' Prius Envy @ Jun 16 2007, 02:03 AM) [snapback]462881[/snapback]</div>

How is that working for people that "invested" in Detroit in the 90's. You can't give away downtown real estate now. I know, you think that it can't happen in California because everything made in CA is "High Tech" and can't be outsourced. :lol:

 

<div class='quotetop'>QUOTE(jhinton @ Jun 16 2007, 08:59 AM) [snapback]462991[/snapback]</div>

It doesn't work for Detroit. Nor does it work for all growing cities.

Unfortunately, Detroit and Wayne County have had a declining population for many years.
With a decline in population comes a decline in demand and a decline in value.
http://en.wikipedia.org/wiki/Detroit,_Michigan
http://en.wikipedia.org/wiki/Wayne_County%2C_Michigan

On the other hand, what I wrote absolutely applies to Sacramento . . .
http://en.wikipedia.org/wiki/Sacramento
. . . or any other city with a growing population and a large traffic-jam-producing downtown job base.

The worse commute traffic gets, the higher a premium people will pay to live in the nicest neighborhoods closest to the downtown/job area . . . especially if they avoid freeway commutes altogether. That is one of the reasons it doesn't make sense for SteveO to sell his Bay Area rental house. People commute from hundreds of miles to work there. Demand is high, supply very low.

 

<div class='quotetop'>QUOTE(Sufferin' Prius Envy @ Jun 16 2007, 04:54 PM) [snapback]463125[/snapback]</div>

Damn right. I lived in the East Bay, worked in the South Bay; even though I didn't commute during rush hour, it was still an hour and a half commute going there (a half hour of which was the five miles going from my house to the onramp of the Bay Bridge). Which is why I moved out of the Bay Area.

 

<div class='quotetop'>QUOTE(burritos @ Jun 16 2007, 09:42 PM) [snapback]463315[/snapback]</div>

Take a house which has a positive cash flow and is on auto-pilot to pay itself off fully in about 15 years, take out a second loan, go negative cash flow, and purchase another negative cash flow property? Are you nuts!
Appreciation is nice, but I also appreciate not being saddled with high loan payments which take cash out of my pockets.
I like living for today too.

 

<div class='quotetop'>QUOTE(Sufferin' Prius Envy @ Jun 14 2007, 07:07 PM) [snapback]462045[/snapback]</div>

Many people automatically go the 1031 route, but you need to consider the current situation. With capital gains taxes at a low of 15%, it may be in your best interest to pay the tax now and then purchase another property. The democrats historically don't like low capital gains taxes and will probably raise it when they can. If it goes back to 35%, you could really get nailed in the future. But it really depends on your situation.

 

<div class='quotetop'>QUOTE(ZenCruiser @ Jun 15 2007, 05:26 PM) [snapback]462620[/snapback]</div>

Sorry to sound like I was generalizing, I wasn't clear enough for you. You probably shouldn't categorize me as a categorizer based on implied nuances that you chose to pick up from what I said. I was referring to more specific cases where localize real estate investment 'companies' have been set up, bought several properties a couple of years ago during the boom as investment properties, saw that housing was about to 'crash', then used their 'company' and thier real estate know-how to find people to buy the company's investment properties from them at an inflated, premium price. They were able to draw on the cheap loans from mortgage companies that were all too common, and the larger sociological ideals of homeownership and realestate investing (or is sociology outlawed in this country?), to coerce these people into buying homes with the full knowledge that they most likely couldn't afford them when their ARMs and other variable rate loans shot up. These were specific individuals outside of mainstream professional realtors who operated with the purpose of making a quick buck off of anyone they could coerce. Google "straw buyer" and you will become enlightened about how some people are slick enough to accomplish this.

I think there are problems with mainstream realtors and banking institutions as a whole, too, though in no way did I ever mean to generalize them as bad institutions full of slick people. I just have some reservations about some realtors I have met when I have looked at condos in my area which were aggressive and deceitful (yes, not all realtors are totally honest or friendly). I also have some issues with how many realtors, on the large scale, push urban sprawl further and further out (you can have four bedrooms and a half acre if you move out here, 20 miles from work, but you owe it to your kids to be raised in a 'safe' environment away from the city' - watch HGTV house hunters and you will find many, many, cases of realtors pushing people further from their target neighborhood or jobs despite what the buyers want in the beginning; and you will find a few great realors who actually listen to their clients too). There have also been a history of realtors stearing communities towards segregation (i.e., nice neighborhood to raise a family usually means 'white neighborhood'). And I have some issues with the banks that are too easy to give out subprime loans. Now, because this seems like generalization to a touchy person, I am going to have to state that I in no way want to imply that realtors and bankers are all like the above, but some people in these institutions do the above things. Realtors at the end of the day are dealors, and any profession where money is made on commissions, there is going to be a lot of members that will bring the integrity of the profession into question no matter how good and honest other members may be.

Otherwise, Realtors are usually a buyers and sellers best friend that can handle the complicated task of realestate transactions and help people find their home. Realtors have a fairly tough job who work a lot of thankless hours behind the scenes (I can relate to that as a scientific reseacher). I understand from my old high school buddy that there is a lot of work that goes into every house that realtors sell. I will probably find a realtor who I can trust when I buy a home. I think the profession is a worthy service that most people will need and almost everyone I have known to buy realestate are grateful for their realtor. As far as bankers, my wife works for USBank headquarters (6th largest bank based the US) here in Minneapolis in HR in recruiting. I am a big believer in banks and most bankers are looking out for their clients best interest. But I also know from my wife, of several personal bankers that have been fired for selling too many bad home loans or auto loans to people who shouldn't have been approved.

<div class='quotetop'>QUOTE(ZenCruiser @ Jun 15 2007, 05:40 PM) [snapback]462633[/snapback]</div>

This sounds like a good case for the show "Buy Me" on HGTV. Those homeowners in that show are usually asking for way too much, despite what their realtor tells them, and then blames their realtor for the house not selling and not themselves. I watch that show hoping the homeowners are slapped back to reality, but sometimes they wait long enough and actually sell for what they want. I think the recent real estate boom got too many people thinking that they 'deserve' an inflated price on their home.

:huh: I just realized that I watch too much of that channel I claim to hate so much!

 

<div class='quotetop'>QUOTE(burritos @ Jun 16 2007, 06:42 PM) [snapback]463315[/snapback]</div>

You can say that about any investment, even cash sitting in the bank. The market could also give him more.

He has a good investment and needs to prove it by buying additional property?

 

<div class='quotetop'>QUOTE(koa @ Jun 20 2007, 03:14 PM) [snapback]465386[/snapback]</div>

I think that it's a lot easier to live in a house, than in a lean-to constructed from stock certificates. Liquid assets are nice, but so are those with four walls and a roof.

I'm not an expert, but (as person who doesn't flip houses for a living) I'm of the opinion that real estate is a long-term investment which rewards patience. If you're patient, you'll probably do okay.

 

<div class='quotetop'>QUOTE(MarkMN @ Jun 20 2007, 03:39 PM) [snapback]465364[/snapback]</div>

And I'm sorry that I was a bit thin-skinned in my reply (I just re-read it) in a business where you need to be thick-skinned. You're right, there are enough out there with little ethics (and not in just the two professions mentioned) that give them all a black eye in the public's view.

Most of us do work on commission basis; this does lend itself to some doing unethical things to bring a transaction to close. It also serves, for the rest of us with ethics, to make us go that extra mile or provide additional services since referrals are paramount in this industry. Sometimes it's not how "big" the agent is, but if her/his former clients would use them again. That's the result I strive for; that's what lets me know I've done a good job.

 

<div class='quotetop'>QUOTE(burritos @ Jun 20 2007, 11:12 AM) [snapback]465337[/snapback]</div>

Like I said, " . . . in the nicest neighborhoods closest to the downtown/job area . . . especially if they avoid freeway commutes altogether."

None of those Sacramento zip codes meet that criteria. The two closest, still freeway commute (unless you want to hurt yourself on long surface street commutes ), are areas which also contain slum-ish or new construction areas, so even the cute, older, established neighborhood contingent of those zip codes are being affected by statistics . . . but they are holding their own price wise or still appreciating.

The areas in the Sacramento area which are hurting the most are those in the outlying areas and have had massive new home construction in the last several years.

One for instance, Elk Grove . . . I'd NEVER buy there!
At one point, in the last couple of years, it was THE fastest growing city in the US.
http://cbs13.com/topstories/local_story_171145615.html
ALL THREE ELK GROVE ZIP CODES MADE THE FORECLOSURE LIST.