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Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,957 posts, read 22,309,298 times
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Lots of grist for the statistical mill in the numbers. Heres a definition of Alt-A mortgages from Citytowninfo.com
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There are 13 million + homes in California, and I'm sure not all of them have mortgages, so we're looking maybe 10% of the mortgages out there. Not all sub and Alt-A mortgages are going to default either.
No doubt we haven't emerged on the other side of this mess, but to characterize the state as being toast is a bit overblown IMHO.
Last edited by Administrator; 11-08-2008 at 04:22 AM..
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Is it me or is this blog considerably slanted towards blaming it all on Wall Street's voracious appitite for high yielding investments?
It's the culture of greed, not any particular segment of the fininacing pipeline that created what now looks to be like the perfect storm.
It starts with people with no skin in the game, feeling entitled to their piece of the pie and somehow not a one of them seems to have understoof the concept of ARM reset, meeting
Lenders who built and relied on valuation models instead of the more costly appraisal and underwriting fundamentals, meeting
Wall Street, whose clients demand investments with high yields, meeting
Investors who ignored that higher yields means greater risks. The higher the yield, the more substantial the risk.
It's an election year and state attornies arel jumping on the bandwagon to go after Countrywide. It plays well to the people because people need someone to blame.
Totally agree with you DMenscha,
I wouldn't categorize it as totally toast either as even Alt-As aren't a huge percent of total loans and the delinquency and foreclosure rates on them are fairly low.
Selected information according to the Alt-A conditions in February2008 from the New York Fed using First American Data - link provided by Humanoid and cohdane in another post:
California Alt-A:
Loans per 1000: 47.8 or 4.78%
In Foreclosure per 1000: 2.1 or .21%
REOs per 1000: 1.1 or .11%
Share Current: 83.2%
Share 90 day Delinquent: 3.3%
Share Low FICO and High LTV: .1%
...and of course blogs that are called "bubbleinfo" are skewed to one side of the argument. If the bubble were to end and prices adjusted, then they'd have nothing to write about.
..and of course blogs that are called "bubbleinfo" are skewed to one side of the argument.
The blog is by a San Diego Realtor named Jim. He is in no sense biased...nor does he "skew" to one side of the argument. He benefits more if prices go up.. He is one of the few smart and honest Realtors out there.
Quote:
No doubt we haven't emerged on the other side of this mess, but to characterize the state as being toast is a bit overblown IMHO.
I don't think its overblown at all. There was a crazy asset bubble in this state (along with a few others) real estate is going to crash more than most people want to think. From Alt-A numbers I think two rather telling percentages are:
Low or No Doc 83.2%
Neg-Am 222,802 (31%)
The majority of people that went Low or No doc did so because they couldn't qualify otherwise. Doing a low or no doc loan only makes sense for a small percentage of buyers the fact that so many used this is extremely bad use. I ask again, why did they use this loan product? The number of Neg-Am is also very high and most of these are likely to default.
Anyhow, just as subprime has killed certain areas (inland empire, oceanside etc) these loans are going to kill the higher end markets as that is where they were typically used. They were also originated latter in the game so the majority of the foreclosure action hasn't started yet.
Given numbers like this it seems pretty hard not to conclude California real estate will not return to late (inflation adjusted) 90's pricing. That will be a major market crash with areas seeing a nominal decline of anywhere from 40~70%.
Lastly, mentioning that the default in these loans are a small part of total ownership ignores a rather important point - prices are set on the margin. If even a smallish percentage of the market goes into foreclosure that is enough to drive the entire market down as can be seen in areas like the inland empire or central California.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,957 posts, read 22,309,298 times
Reputation: 6471
My point, although it may have been fairly obscured is that while I agree with Humanoid that there are definitely some areas that are fubared, the whole state is not and shouldn't be classified as toast OTOH, there are sure a lot of places in CA today that are toast (quite literally)
You mention the "toast" and I am quite sure that the annual wildfires are well factored in the CA market, as are the mudslides. And the earthquakes. I don't see droves of people trucking themselves out of the state. That has to say something...
The blog is by a San Diego Realtor named Jim. He is in no sense biased...nor does he "skew" to one side of the argument. He benefits more if prices go up.. He is one of the few smart and honest Realtors out there.
I don't think its overblown at all. There was a crazy asset bubble in this state (along with a few others) real estate is going to crash more than most people want to think. From Alt-A numbers I think two rather telling percentages are:
Low or No Doc 83.2%
Neg-Am 222,802 (31%)
The majority of people that went Low or No doc did so because they couldn't qualify otherwise. Doing a low or no doc loan only makes sense for a small percentage of buyers the fact that so many used this is extremely bad use. I ask again, why did they use this loan product? The number of Neg-Am is also very high and most of these are likely to default.
Anyhow, just as subprime has killed certain areas (inland empire, oceanside etc) these loans are going to kill the higher end markets as that is where they were typically used. They were also originated latter in the game so the majority of the foreclosure action hasn't started yet.
Given numbers like this it seems pretty hard not to conclude California real estate will not return to late (inflation adjusted) 90's pricing. That will be a major market crash with areas seeing a nominal decline of anywhere from 40~70%.
Lastly, mentioning that the default in these loans are a small part of total ownership ignores a rather important point - prices are set on the margin. If even a smallish percentage of the market goes into foreclosure that is enough to drive the entire market down as can be seen in areas like the inland empire or central California.
Hi Humanoid,
From the RE report for June/July '08 from your guy, Jim Klinge:
"If you have been sitting on the sidelines waiting to enter the market, there may not be a better time than now. Prices in some markets may not have hit their lowest point, but they probably aren’t far off. In many areas, only the pace of sales has been affected while prices have held firm and in some cases, have gone up."
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OTOH, there are sure a lot of places in CA today that are toast (quite literally) 
