bubbleinfo.com

From the U-T:

Yet that’s what happened Feb. 13 when Chevy Chase Bank put a 15-bedroom, 17-bathroom Encinitas property on the block with an opening bid of $2.275 million. The 16,330 square-foot home, which has a library, yoga room, swimming pool, fountains, lush landscaping and much more, is described by local foreclosure experts as the county’s current largest home foreclosure.

Vivienda Estate, built between 2004 and 2006 on Fortuna Ranch Road in Olivenhain, was the dream of Suzy Brown, who originally partnered with the Deepak Chopra organization and 60 investors to create a spiritual healing drug rehab center on par with Promises in Malibu. Neighbors fought against the project, however, dubbing her property “the monster house.”

She searched unsuccessfully for other uses. Brown eventually defaulted on her mortgage payments a year ago but still maintains and lives in the home with several tenants. She says she knows of buyers willing to pay well over the auction price who have been unsuccessful in getting the bank to act on their offers.

James Dunn, a Southern California asset manager for the Washington, D.C.-area bank, says the Vivienda Estate is now being analyzed by a real estate broker and will be put on the market – probably some time next month.

Meanwhile, Brown, who designed a sophisticated computer-controlled “brain” that operates the estate’s heating, lighting, air conditioning, audio-visual systems and security, says the home’s value will plummet if she is evicted and takes furnishings with her.

“I’ve shown the property to several prospective buyers, and no one wants it empty,” she says. “It takes the life, breath and soul out of it.”

Despite having lost a fortune on the project, she is trying to keep a positive attitude and remains willing to work with the bank and with new buyers.

Brown says she originally was devastated by the demise of the project she had so lovingly nurtured. As time passed, however, the monetary loss became far less important and she forged friendships and underwent a personal spiritual transformation that she says has made her a better person.

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How many other high-end sellers are completely delusional about their property’s value?

Stats on the properties listed at $1,000,000 and higher:

ACTIVES = 2,238

PENDINGS = 178

SOLDS BETWEEN JAN 1 AND FEB 27:

2001 – 84

2002 – 116

2003 – 151

2004 – 272

2005 – 331

2006 – 332

2007 – 322

2008 – 213

2009 – 121

With an A/P ratio over 12:1, and only 121 properties closed this year, the million-dollar-plus market is in VERY unstable territory.

If you’re selling, drop your price early and often until you start getting offers.  These days, you don’t really have any idea what the market will bear.

The mortgage-interest deduction is on the table, how do you fee about it?

If your ability to write off your mortgage interest was diminished or eliminated, would it change your mind about buying and sellig real estate?  What would change for you?

We’ll all have some guesses on how any change might affect the overall market, but it would also be interesting to hear how it would impact your individual decision-making too.

We already had this anonymous comment left:

“If this goes through I am officially out of the housing market. Not only that, but either me or my wife will quit working; there is no incentive since one of us will be working full time just to pay the taxes.”

Dear Fellow REALTOR®,

You may have seen news reports about President Obama’s budget proposal that was released today at 11:30 AM Eastern Time. A small section of the sweeping budget plan has the potential to become a major impediment to a recovery in real estate markets across the nation. NAR is 100% opposed to the provision that modifies the Mortgage Interest Deduction and is prepared to use its formidable array of resources against its enactment.

As currently drafted, the plan changes the Mortgage Interest Deduction by reducing the amount of mortgage deductibility on families earning over $250,000. This proposed change in the Mortgage Interest Deduction will result in further erosion of home prices and home values. If this proposal is enacted it will lead to a new round of price depreciation, will cause greater distress on the balance sheets of banks as the collateral value of mortgage backed securities declines. A second credit crisis could emerge before the first one is resolved.

As you read this NAR is launching a multiphase plan of action to eliminate this provision from the budget plan. In the next 24 hours, NAR will be expressing our concerns directly to President Obama, to all members of the United States House of Representatives and the Senate, placing advertisements in the publications read by Washington, DC decision makers. Additionally, NAR will be forming a coalition with other groups affected by this proposal.

This communication is the first part of our response, we will continue to update you as the situation and events warrant.

Sincerely,

Charles McMillan, CIPS, GRI
2009 NAR President

Peter Hong was in town yesterday.

To give him a sampling of the local Carlsbad market, we looked at this retro-1980′s classic, a 6,500 square footer at the top of the hill in La Costa:

(bold added)

CALREDD™ LAUNCHES NEW WEB SITE

calREDD™, a service provided by CALMLS, the statewide Multiple Listing Service, launched its new Web site today at www.calredd.com. The site provides information for REALTORS® about calREDD™ products, services, rules, policies, and much more. The calREDD™ site also includes product demos and videos, a calendar of upcoming events and product demonstrations, a Frequently Asked Questions section, and dedicated informational sections for brokers and local REALTOR® associations

“For many years it has been the vision of California REALTORS® to have one database to input and search all California real property, regardless of property type, location, or status,” said Mike Silvas, CALMLS chairman. “The calREDD™ Web site presents us with a one-stop portal to introduce members to this critical initiative.”

from the FAQs:

Q: What is the vision for calREDD™?

A: To provide California REALTORS® with one complete and innovative property information and MLS solution so that California REALTORS® are the source for all California real property information.

 
Q: What are some of the key advantages of calREDD™?

A: The calREDD™ system is anticipated to create much-needed efficiencies, increased security, and new technology opportunities through the creation of one common database of California real property information.

• Control of the MLS stays within the hands of California REALTORS®.
• Every participating local associaton of REALTORS® and MLS (collectively “participating AORs/MLSs”) will have voting rights and the board of directors of C.A.R. retain ultimate control of calREDD™.
• The 17 initial voting members of the California MLS (calREDD™) board of directors are a diverse group of practicing REALTORS® (by geography, firm affiliation, firm size, and practice).
• The scale and reputation of C.A.R. creates unique technology partnership opportunities.

Q: Will calREDD™ offer a public Web site?

A: It is anticipated that a stand-alone consumer Web site will be necessary to compete with the existing consumer Web sites. MLS consumer Web sites traditionally provide more accurate information and therefore are more attractive to the consumer. No decision on when to create a consumer Web site and how it will function will be made without further study and input from C.A.R. members. However, calREDD™ will continue to feed listings, with listing broker consent, to marketing sites that are consistent with REALTOR® interests.

 
Q: Will the calREDD™ real property database be licensed to third-party aggregators?

A: C.A.R. and calREDD™ firmly respect the right of individual brokers to decide whether or not to syndicate their listings to third-party aggregation sites. For those who elect to syndicate their listings, calREDD™ will offer services to facilitate that process. For example, most California brokers and agents direct their MLS to feed listings to REALTOR.com®, and calREDD™ anticipates doing the same.

The hits just keep on coming!   From today’s Dow Jones Newswires:

WASHINGTON (Dow Jones)–The Obama administration is working on regulatory changes to allow the Federal Housing Administration to assist homeowners faced with “more than just temporary” losses in income, a senior U.S. housing official testified Tuesday to a U.S. House panel.   The Department of Housing and Urban Development is also requesting authority to allow the FHA to buy down balances of troubled mortgage loans, according to written testimony by HUD Director for Single Family Asset Management Vance T. Morris.   The remarks reveal fresh details of the administration’s strategy to assist homeowners at risk of foreclosure.

FHA = America’s lender. They’re slipping everything they can into an FHA-something.

NEW YORK (Dow Jones)–Fannie Mae (FNM) on Wednesday announced a two-year, benchmark-size bond issue.   This is the second bond deal this month from the mortgage finance company, and it is offered in a favorable environment.   The voracious investor demand for these issues have driven up the sizes of the handful of previous debt offerings by both Fannie and Freddie Mac (FRE) this year.   Earlier this month, Fannie sold a larger-than-expected $7 billion of five-year benchmark note. The Fed’s support of this market through its purchase of debt securities issued by Fannie, Freddie and FHLB, and the perceived tightening of ties between the government and the two mortgage enterprises have boosted investor interest.   Previously, concerns over the extent of government backing of the two mortgage giants, which were taken over by their regulator last fall, had kept investors at bay.    The central bank to date has bought $35.7 billion of these debt securities from investors, and is expected to buy $100 billion worth, or more, if necessary.

The Fed buying Fannie paper is boosting investor interest? 

WASHINGTON (Dow Jones)–Strapped borrowers would have to provide mortgage servicers some basic financial information before having their mortgage debts reduced by a bankruptcy judge, under an amendment to so-called “cram-down” legislation offered by its chief U.S. House sponsor.   The amendment could dampen slightly the impact of the legislation, by ensuring that fewer people qualify to have the principal balance of their mortgage loan reduced by a judge – known as a cram down.   Proponents say the bill will act like a stick, spurring mortgage servicers to modify more loans voluntarily, particularly once the newly announced Obama administration incentives for such modifications are in place.   The financial industry contends that it will raise mortgage rates for all borrowers. Current law allows mortgages backed by vacation properties to be crammed down in bankruptcy, but not primary residences.

Loan Servicer to Obama: “Fannie’s loan mods are defaulting at a 57% clip after six months, and you want to give me $1,000 to do one?  No thanks!”

I’m taking an hour today at lunch to spend with Peter Hong of the L.A. Times looking at good blog material for both of us – stay tuned. 

In the meantime, this from Bloomberg:

WASHINGTON — Fannie Mae and Freddie Mac need to relax rules for a loan-modification program that promised to cut mortgage interest rates and lengthen terms for troubled borrowers, the chief economist for the companies’ regulator said.

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) have sent 90,000 letters to borrowers who have missed at least three payments, inviting them to participate in the so-called streamlined loan-modification program, since the plan was announced in November.

“Early indications are that several of the program guidelines should be liberalized to reach a broader population and to create a lower, more affordable payment,” Patrick Lawler, the chief economist of the Federal Housing Finance Agency, said in written testimony Tuesday in Washington to a House Financial Services Committee panel on housing.

The program is separate from an initiative proposed by President Barack Obama last week to have Fannie and Freddie refinance or modify more mortgages.  The existing loan-modification program is designed to reduce a borrower’s monthly payment to 38 percent of salary by reducing interest rates, extending repayment terms and, in some cases, reducing the outstanding principal.

Joseph Evers, deputy comptroller at the Office of the Comptroller of the Currency, told lawmakers Tuesday that roughly 57 percent of Fannie and Freddie’s loan modifications made in the first quarter of last year defaulted again within six months of the modification.

Fannie Mae and Freddie Mac own or guarantee about $5.3 trillion of the $12 trillion in U.S. residential mortgage debt.  Rep. Maxine Waters of California, a Democrat and chairwoman of the housing subcommittee, said companies that collect payments, deal with delinquencies and provide other services for overseeing loans aren’t working hard enough to prevent foreclosures.  “I have experienced firsthand the challenges faced by borrowers who want to stay in their homes and who want to get current on their mortgages, but they either can’t get their servicer to pick up the phone or they get wrong, misleading or unapproved information,” Waters said.

Mortgage executives from JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. also testified.  Molly Sheehan, a senior vice president for JPMorgan’s (NYSE: JPM) home lending business told the panel that the unit has averted 330,000 foreclosures through modifications, repayment plans and other means.

The business has hired 300 new loan counselors, opened 13 homeownership centers in regions with high default rates, and expects to prevent a total of 650,000 foreclosures on $110 billion of loans by the end of 2010, she said.

It looks like PruCa has a new president and CEO.  He was featured in Sunday’s UT touting the benefits of value-range marketing:

From coast to coast, range pricing has changed the face of real estate.  The approach, an alternative to the traditional way homes are bought and sold, markets properties within price ranges, rather than at set prices.

One advantage of range pricing is that it allows interested buyers to focus their negotiations within a minimum and maximum price span, rather than trying to guess the price at which the owner will sell.

Another benefit of range pricing is that the seller promises to entertain any offer within the set price range.  That assurance opens the door to negotiations and, most likely, a transaction.  With a fixed-price listing, the seller is free to refuse any offer, and negotiations may not even begin.

Range pricing gives sellers the privilege of determining their home’s market value.  It also enables them to obtain the maximum price possible while keeping their property competitive in the market.

Homes listed with range pricing routinely sell in a fraction of the time it normally takes to sell traditionally priced homes. 

For real estate professionals, range pricing eliminates the listing agent’s two greatest fears: underpricing, which results in the sellers leaving money on the table; and overpricing, which attracts the wrong buyers to the home.

Guys who are president and CEO of a big real estate firm aren’t on the street every day selling homes – they are administrative folks, running the corporation from the ivory tower.  So I won’t blame him for waxing on about their little niche without knowing exactly how the buyers feel about range-pricing.

But I can tell you that buyer view range-pricing with great skepticism, and if they do make an offer, they look at the lower price, and want to go down from there.

A review of the homes in Carlsbad and Encinitas:

Currently pending:

196 not using range-pricing, 77 days on market

32 on range-pricing, averaging 85 days on market

Closed since January 1:

120 not using range-pricing, averaging 73 days on market and 96% SP:LP

28 on range pricing, averaging 78 days on market and 93% SP:LP

Of the 28 that closed, ONLY SEVEN SOLD ABOVE the original low end of the range. 

While the range-pricing might have appeared to be beneficial to sellers in a hot, rising market, today it is one more hurdle thrown in the path.   Today buyers are looking for any reason NOT to buy, and range-pricing gives them another one. 

It should occur to those touting the range-pricing that if some buyers are turned off by range-pricing, that is bad for the sellers! 

Check the stats, it isn’t producing the benefit you think it is.

75% of recent solds closed below the original bottom of the range!

Range-pricing is the lazy man’s way to pricing a home.  Don’t risk alienating any buyers, hire an agent who can pinpoint the value.

We were talking about the possibility of the feds doing some sort of tax credit to spur home-buying, and I forgot to mention that the State of California snuck a $10,000 tax credit into their sauce last week – but just for new homes bought in the next 12 months.

Here is the FAQs from the California BIA – not sure how much they paid for the special treatment:

How much is the state tax credit?
The state tax credit is for $10,000 or 5 percent of the purchase price of a newly built home, whichever is less. The home must be the principal residence of the buyer, and the sale must close between March 1, 2009 and March 1, 2010.

How does the tax credit work?
The credit will be provided in equal amounts (up to $3,333) per year, over three successive tax years, beginning with the year the purchase is made.

Will I receive the credit if I buy an existing home?
The credit is only for the purchase of a newly built home that has never been occupied. That is because building a new home generates more tax revenues than the credit will cost the state.

Are there any other restrictions?
The taxpayer must live in the home as their principal residence for at least two years. If he/she does not, he/she will have to repay the credit.

How much money is available under the program?
The law limits the total amount of credits that can be claimed to $100 million. Credit reservations will be allowed on a first-come, first-served basis. It is likely that the full amount will be exhausted this year, so prospective buyers should move quickly.

Can the credit be used in conjunction with the recently enacted federal tax credit?
Yes. If you buy a new home between March 1 and Dec. 31 and are a first-time homebuyer, you can take advantage of both the $10,000 state credit and the $8,000 federal tax credit.

Why is the credit needed?
Confidence in the housing market needs to be restored. Consumers, fearing declining home values, have been afraid to buy, which keeps prices spiraling downward. But a similar federal tax credit, enacted during similar circumstances in 1975, caused buyers to jump back into the market, leading to a doubling of home sales and quickly stabilizing the market.

How can the state afford a tax credit while trying to close a massive budget deficit?
A study coauthored by a former state finance director shows that, on average, every home built in California generates $16,000 in state revenues and another $3,000 in revenues to local governments. That means that even after providing the tax credit, the state will receive a net $6,000 in additional revenues. Furthermore, the $16,000 will be generated when the home is built, and the credit will be spread over three years.

Why should we build new homes when there are so many foreclosed homes on the market?
There are two reasons. First of all, building homes generates tax revenues and puts people back to work. The state has lost more than 300,000 homebuilding-related jobs during the past 2½ years, which has been a major factor in causing the current economic recession and rapidly rising unemployment rates. Second, the unsold inventory of existing homes has fallen sharply during the past year and in December stood at less than six-month’s supply, down from almost 17 months’ supply at the beginning of 2008. Economists say when supply drops to the current level, it’s time to start building again.

(hat tip to RE for the reminder!)