bubbleinfo.com

From the wsj.com

PALMDALE, Calif. — Schoolteacher Shana Richey misses the playroom she decorated with Glamour Girl decals for her daughters. Fireman Jay Fernandez misses the custom putting green he installed in his backyard.

But ever since they quit paying their mortgages and walked away from their homes, they’ve discovered that giving up on the American dream has its benefits.

Both now live on the 3100 block of Club Rancho Drive in Palmdale, where a terrible housing market lets them rent luxurious homes — one with a pool for the kids, the other with a golf-course view — for a fraction of their former monthly payments.

“It’s just a better life. It really is,” says Ms. Richey. Before defaulting on her mortgage, she owed about $230,000 more than the home was worth.

People’s increasing willingness to abandon their own piece of America illustrates a paradoxical change wrought by the housing bust: Even as it tarnishes the near-sacred image of home ownership, it might be clearing the way for an economic recovery.

Thanks to a rare confluence of factors — mortgages that far exceed home values and bargain-basement rents — a growing number of families are concluding that the new American dream home is a rental.

Some are leaving behind their homes and mortgages right away, while others are simply halting payments until the bank kicks them out. That’s freeing up cash to use in other ways.

Ms. Richey’s family of five used some of the money to buy season tickets to Disneyland, and plans to take a Carnival cruise to Mexico in March. Mr. Fernandez takes his girlfriend out to dinner more frequently. “We’re saving lots of money,” Ms. Richey says.

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The FAA and the San Diego County Regional Airport Authority have been installing sound attenuation treatments to mitigate aircraft noise in homes around the airport.  The goal is to reduce interior noise levels by at least 5 decibels inside the home, providing a noticeable reduction in noise level.

Here’s how one turned out:

San Diego International is the busiest single-runway commercial service airport in the United States, and second in the world after London Gatwick, with approximately 600 departures and arrivals carrying 50,000 passengers each day, and a total of 18.3 million passengers in 2007.

The low inventories and fewer sales make it harder to determine values, and pricing – especially in popular areas like Carmel Valley, 92130, where there are wholesale and retail-priced sales happening at the same time.

Here are some additional examples to assist you:

from the U-T:

As housing experts cross off 2009 as the fourth year of the real estate downturn, they see a “dim light at the end of the tunnel” and a “glimmer of hope” in 2010.

“It’s not great, but it’s less bad than it was six months ago,” said Alan Gin, a University of San Diego economist who addressed USD’s annual real estate outlook conference yesterday.

Gin said his glimmer of hope means that San Diego “is on the verge of bottoming out” in the economic downturn. USD economist Ryan Ratcliff’s dim light means, “The recovery is about to begin, but we have a long way to go.”

Alan Jay Brinkmann, chief economist at the Mortgage Bankers Association in Washington, said California will find recovery difficult because it, along with Arizona, Florida and Nevada, saw high housing price appreciation and construction during the boom and now is wrestling with massive foreclosures and widespread construction shutdowns.

He said homes for sale have dropped from 322,000 in October 2007 to 187,000 this past October. That’s a sign that buyers have reduced the large inventory of unsold properties that existed at the outset of the recession. But, over the same two-year period, distressed properties that are 90 days delinquent or in foreclosure have skyrocketed to 690,000 from 160,000. If 75 percent of those properties — 517,500 — eventually end up on the market, that would swell inventories and depress prices.

“I see the market holding on in the low end,” he said, but falling at the high end, above the $700,000 mark.

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I bumped into the listing agent Marc on this one – just in time for a tour! The last sale in complex was two doors down on same floor but slightly larger square footage for $1.6 million in June:

How many chances are you going to have?

How much worse could the local real estate markets get in 2010?

The folks at TransUnion noted last week that approximately 10% of California mortgage borrowers were at least 60 days late in the third quarter of 2009:

Let’s try to quantify what that means for the near future, and 2010.  How many more homes are lurking in the inventory shadows?

Can the local markets handle more distressed inventory?

The city-data charts show how many people in each zip code have a mortgage.  Hypothetically, let’s take 10% of the total mortgage holders in each zip code, and compare to the MLS sales, Y-T-D:

It looks like the local markets could have to endure substantial increases in distressed offerings next year. How many have already received a foreclosure notice, and are on the NOD or NOT lists?

60-day lates – NOD/NOT = Shadows

With the truth finally coming out about how lousy the loan-mod results have been, you can’t really hope that many of these defaulters will find a way to save themselves. Even if there are a few who are just loan-mod bluffing, and are willing to go back to making their regular payments instead of being foreclosed, it can’t be many – maybe 10% to 20% tops?

For things to stay the same in 2010 as they were this year, the banks will either have to slow down the drip, or regular sellers will have to step aside to let the distressed sales through. I don’t think either one of those will happen – it’s been surprising to me how many regular equity sellers have been willing to sell these days. I’ll try to get a count of those next, but any way you look at it, next year should bring relief for buyers!

Hat tip to Rob, who has been here!

From sdlookup.com:

Enormous 6 br/8 ba, 6,309 sf San Diego estate! A level 0.70-acre parcel, lushly landscaped, overlooking Balboa Park in an ideal Hillcrest location in Marston Hills on a prime corner lot. Pool, spa, pool house w/steam & a bar, and massive waterfall system. Three bedrooms downstairs (including master), secondary master upstairs, and an east wing with 2 additional bedrooms upstairs. Huge deck and a balcony overlooking the park. Lots of space inside and out. This is a must see! 

Bill Walton’s house, for sale on the range $2,950,000 to $3,290,000:

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The type and method of financing should indicate something about the buyers’ intentions – if they are putting down a boatload of money, they’re probably planning to stay a while. As we’ve seen all year, the big down payments are the preference in North SD County Coastal.

Here’s a check of the last 100 SFR sales in Carlsbad, Encinitas, Cardiff, Solana Beach, Del Mar, and Carmel Valley (omitting RSF and LJ) that occured between November 12th and December 1st:

DOWN PAYMENT AMOUNTS:

0-5%:  12

6-19%:  6

20%:  23

25%:  10

30%:  10

40+%: 26

Cash:  13

Total: 100

Eighty-two percent of the buyers used at least a 20% down, and nearly half (49%) used a down payment of 30% or more.

LOAN TYPES:

VA: 1

FHA:  11

Conv:  75

Cash:  13

You can’t say the govies are carrying the SD North County Coastal market.

OWNER-OCCUPIED vs. NON-OWNER

O/O:  75

N/O/O – local:  18

N/O/O – out of state:  7

Based on their mailing address on the tax rolls.

SELLERS SOLD FOR MORE OR LESS THAN THEY PAID

More: 70

Less:  30

The average drop in price for the 30 who sold for less was $144,000, after throwing out the high and low number.

OF THE 30 THAT LOST, YEAR PURCHASED:

2004:  4

2005:  16

2006:  5

2007:  3

2008:  2

You can’t really say we’re back to 2003 prices currently.

TYPE OF SALE

REO:  9

SS:  11

Reg:  80

It’ll be interesting to see how these split this time next year!

The caboose is a 1,801 sf condo in Oceanside, asking mid-$400,000s:

Seen on CR, this summary on Bloomberg discusses the recent developments with short sales, DILs, and loan modifications. 

The article’s ending:

Short sales benefit a neighborhood because they clear out stagnant properties that may have an adverse effect on values, said Sean Shallis, a senior real estate strategist (ed. note: he’s a realtor) with Weichert Realtors in Hoboken, New Jersey. Shallis has one home with bank approval for a short sale and three others waiting approval on the same street in Jersey City with views of the Manhattan skyline.

“In every case we had multiple offers from people who had plenty of money to put down,” Shallis said. “Americans are out there still buying homes and trying to move it along.”

Short sales also help the bank, because foreclosed properties lose more value when they are vacant or a homeowner vandalizes a house on the way out, Sunlin said.

“We typically expect a 10 to 15 percent decrease of loss severity with a short sale,” Sunlin said.

Losses on prime loans going through the foreclosure process averaged 49 percent versus 34 percent for a short sale as of Oct. 1, according to a Nov. 10 report by Laurie S. Goodman, senior managing director of Amherst Securities Group LP. For subprime loans, losses averaged 73 percent for a foreclosure compared with 59 percent for a short sale.

“The loss severity of short sales is lower but it’s not low,” Goodman said.

For a borrower’s credit history, a short sale is typically reported as “settled” and considered as severe as a foreclosure, said Maxine Sweet, vice president of public education for Experian PLC, the world’s largest credit-reporting company. The impact of a short sale on a credit score is similar to that of a foreclosure. It may drop a credit score of 780 to 620, according to Minneapolis-based FICO Corp.

For sellers like Drew Schlosser, who bought 10 properties in Florida as investments during the housing bubble, getting a short sale was a relief even if the process was difficult.

Schlosser said he had to provide Wells Fargo a hardship letter, demonstrating that his financial situation merited a short sale. He also had to provide pay stubs, bank account information and past tax returns. To avoid fraud, the bank also required evidence that the transaction was an arms-length sale and not to one of his relatives, he said.

“They don’t agree to do it because you’re upside down,” Schlosser said. “If they think you can pay for it they’re not going to let you out of it.”

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The article also has a link to the government’s assistance package, which includes $1,500 moving incentive to the borrower, $1,000 to the servicer, and $1,000 to the lender for every short sale or deed-in-lieu processed successfully.

The most shocking requirement? The government is hoping to get borrowers off the hook:

With either the HAFA short sale or DIL, the servicer may not require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower.

Will lenders/servicers agree to forfeit deficiency judgements for a measy $1,000 per loan?