Foreclosures up 100% YOY (real estate market, refinance, bad credit)

[IcantSELLmyHouse]

This was from another forum. I think this why the house prices will fall 50% more, look at the figures how many can afford a house with these incomes. Now they actualy check to see if you have the income. Yep 50% more to go.

According to the US Dept of Commerce, Bureau of Economic Analysis

Released April 26, 2007

Average Annual Salary
06085 Santa Clara $71,774
06075 San Francisco 66,398
06081 San Mateo 65,525
06001 Alameda 52,783
06041 Marin 51,595
06013 Contra Costa 51,416
06059 Orange 46,872
06037 Los Angeles 46,228
06067 Sacramento 44,603
06111 Ventura 44,557
06073 San Diego 43,419
06055 Napa 40,102
06061 Placer 39,956
06097 Sonoma 39,870
06113 Yolo 39,725
06083 Santa Barbara 39,061
06095 Solano 38,849
06087 Santa Cruz 37,983
06053 Monterey 37,246
06115 Yuba 37,130
06071 San Bernardino 35,918
06077 San Joaquin 35,458
06017 El Dorado 35,225
06029 Kern 35,154
06069 San Benito 34,793
06065 Riverside 34,697
06099 Stanislaus 34,560
06051 Mono 34,288
06079 San Luis Obispo 33,660
06057 Nevada 33,542
06035 Lassen 33,470
06031 Kings 33,214
06019 Fresno 32,822
06005 Amador 32,801
06089 Shasta 32,189
06063 Plumas 32,131
06109 Tuolumne 31,902
06047 Merced 30,787
06101 Sutter 30,688
06025 Imperial 30,599
06039 Madera 30,168
06103 Tehama 30,069
06007 Butte 29,989
06011 Colusa 29,642
06033 Lake 29,633
06027 Inyo 29,623
06023 Humboldt 29,562
06015 Del Norte 29,402
06107 Tulare 29,101
06045 Mendocino 28,993
06009 Calaveras 28,929
06091 Sierra 28,847
06021 Glenn 28,784
06043 Mariposa 28,242
06093 Siskiyou 27,772
06105 Trinity 27,599
06049 Modoc 26,726
06003 Alpine 26,392

[Axiom]

I'd love to see a reasonable explanation too.

I know when we asked some CA real estate and finance folks how people were able to buy with the crazy high housing prices, we got responses along the lines of:

you have to throw some of the conventional rules out the window in CA
our market is ideal for ARM's because property values are constantly increasing
you have to get creative with financing, just like everyone else does

(some may not be exact quotes - but they're all very close)


I guess I can understand how Joe homeowner could have gotten caught up in the hype... doesn't excuse the lack of foresight, but I can see it.

you've got to get in now or you'll be priced out forever, so; sign on the dotted line and get that ARM, then watch your equity climb as prices continue to soar, then just re-fi, you'll be fine

But both Joe homeowner, and especially the real estate/financing experts, had to realize the unprecedented price appreciation couldn't continue forever, right?
Or maybe not... I still see plenty of posts here from folks who are adamant that their location is immune to any down-turn in price.
So maybe everyone was counting on continued record price increases to keep people afloat?

[tigerclaws]

Originally Posted by Charles

Taking losses isn't normally a good business strategy.

I realize it isn't about protecting joe homeowner. But isn't it hurting the mortgage companies too? Doesn't selling these mortgages that are resulting in mass foreclosures hurting the bottom line? Not sure how the graphic below will live but Countrywide was in the mid 40s a year ago, now it is about one third of that. Did selling those ARMs affect CFC's stock price? Where those good business decisions?

Adding to what you said, it is really difficult to find people who make the right decisions in this day and age. The Tim Duncan's are really hard to find (Tim Duncan incidentally rejected the max offer that the Spurs gave him - 51million and he suggested that he will take a lower pay 40million so that the team could find better players). CEO's are a selfish bunch, they worry about the stock price while they are in office. The real results of bad decisions come a few years after the CEO has long departed.

[Charles]

Originally Posted by Axiom

I'd love to see a reasonable explanation too.

I know when we asked some CA real estate and finance folks how people were able to buy with the crazy high housing prices, we got responses along the lines of:

you have to throw some of the conventional rules out the window in CA
our market is ideal for ARM's because property values are constantly increasing
you have to get creative with financing, just like everyone else does

(some may not be exact quotes - but they're all very close)


I guess I can understand how Joe homeowner could have gotten caught up in the hype... doesn't excuse the lack of foresight, but I can see it.

you've got to get in now or you'll be priced out forever, so; sign on the dotted line and get that ARM, then watch your equity climb as prices continue to soar, then just re-fi, you'll be fine

But both Joe homeowner, and especially the real estate/financing experts, had to realize the unprecedented price appreciation couldn't continue forever, right?
Or maybe not... I still see plenty of posts here from folks who are adamant that their location is immune to any down-turn in price.
So maybe everyone was counting on continued record price increases to keep people afloat?

Before this takes a stray tangent, I'd like to reiterate my question of how the mortgage companies with their infinite wisdom could let this happen. They had the experts, they knew the risks.

I don't think my question has been answered.

[IcantSELLmyHouse]

The answer is GREED!!!!

[EscapeCalifornia]

Originally Posted by IcantSELLmyHouse

The answer is GREED!!!!

Pretty much. Everyone wants as much money NOW as possible and worry about the future later. Its like buying into a big Ponzi scheme, knowing it'll end some day, but hoping to make a fortune and cash out before it all collapses.

The problem with predicting how much more things will appreciate is that house values and incomes parted ways a long time ago. How do you predict the end of the runup when there's no relationship to reality? I'm sure lots of experts said things were overvalued at 1/2 of today's prices. Maybe they were right, maybe there were wrong, but anyone who bought at those "overvalued" prices and sold last year did pretty well.

[sheri257]

Originally Posted by Axiom

But both Joe homeowner, and especially the real estate/financing experts, had to realize the unprecedented price appreciation couldn't continue forever, right?

Or maybe not...

Well ... we were some of the few who didn't listen to all of the BS when we bought our house four years ago. We moved out to the desert so we could buy our house for $150K. We went fixed, even though everybody wanted us to get an ARM and, also buy a lot more house than we could afford.

The reason we didn't go for it was because we'd already been through the crash of '92 and didn't want to get into a negative equity situation when the market crashed. I definitely saw this coming .... not because I'm that smart but because I'd been through it before.

So I guess people have to learn these things the hard way like we did. On the other hand, friends of mine who did suffer through the crash of '92 made the same mistakes again this time buying at the peak of the market so ... go figure.

I guess people got caught up in the frenzy of it all ... the herd mentality and all of that.

[sheri257]

Originally Posted by EscapeCalifornia

How do you predict the end of the runup when there's no relationship to reality?

I think this played into people's fantasies of living way beyond their means. I would love to live in a fancy house but, I wasn't going to fool myself into thinking that I could actually afford it.

Our goal was the have a mortgage payment that was manageable so if one of us lost our job ... it wouldn't be a disaster because we could still make the payment on one income if necessary.

But we don't really care that much about keeping up with the Jones ... so to speak. We care more about financial security and not having to sweat the monthly payment.

But I have friends who have to have that fancy house, whether they can afford it or not. And, of course, now they're really struggling to pay the bills.

[UB50]

I'm sure housing prices are going to fall another 50% too. They are just too far out of line with wages.

I believe ARMs have been around for a long time but they used to only be offered to a specific part of the population. They still had to put 20% down, but they had adjustable payments. This was a great benefit to anyone who worked in the movie business because actors, writers, and sound editors don't get steady paychecks. They might do two movies this year but nothing the next -- so being able to pay varying amounts was a good deal.

The problem is, most people don't have jobs like that. They work for regular W-2 wages and their incomes don't vary a lot from year to year.

Once they let everyone have a "no money down adjustable ARM" that was the start of housing insanity.

[sheri257]

Originally Posted by Charles

Before this takes a stray tangent, I'd like to reiterate my question of how the mortgage companies with their infinite wisdom could let this happen. They had the experts, they knew the risks.

I don't think my question has been answered.

The same question applies to the internet bust. Why did people invest billions in companies with no revenue? It didn't make any sense and was phenomenally stupid but they still did it.

To me it all comes down to human nature and the herd mentality. Once a market gets hyped up with smoke and mirrors .... common sense doesn't apply.