bubbleinfo.com

From NMN:

Nearly four out of every ten homes sold in 2011 have been purchased for cash on the barrelhead, according to a preliminary count by Housing Intelligence.

Despite record low mortgage rates for most of the year, 38% of all homes sold will be all greenbacks, no mortgage involved, HI reports. That’s up from 34% in 2010 and double the rate of all-cash deals recorded in 2006.

And the trend is likely to continue, at least in the near term, the research wing of the Hanley-Wood publishing company suggests, as long as investors continue to take down a big share of the properties for sale, especially in which the previous owner was in some sort of duress.

For the record, 20% of all housing sales in 2007 were for cash. In 2008, the figure jumped to 26%. And in 2009, it moved up again to 31%.

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How did we do around San Diego County in 2011?

I haven’t come across one buyer yet who had to pay cash because they couldn’t qualify for a loan. 

The Case-Shiller Index for October, 2011 was published today, and the media is swamped with negativity.  CR prefers the seasonally-adjusted; here are both for San Diego:

There’s the soundbite – “prices” are still going down, according to the Case-Shiller Index.

We’ve picked apart their methodology before - today let’s examine how many sales are excluded in their rolling three-month counts. 

They compare the most recent sales price to the previous sales price of existing single-family homes only (no condos).  They then weight the data based on the time interval, and any extreme price changes.  Typically 85% to 90% of the sales pairs receive no down-weighting. 

But they also exclude sales too.

They state that the excluded ‘non-arms-length’ sales pairs are “usually less than 5%” of the total, and that new-builts and flippers could exclude another 0 to 15% of the total sales too. (See pages 8 and 19 here). 

So let’s say that they think 2% to 20% of the actual sales are left out.  Or is it more?

Standard & Poors/Case-Shiller does publish their counts of sales pairs, but they don’t add up:

Their published counts can’t be just the one-month total, because they are way too high.  If their published number is the 3-month total, then they are excluding more than half of the detached sales, according to the MLS count.

Sure, a survey of half of the sales is worthy. But when the index is only moving 1% to 2% per month, it wouldn’t take many of the excluded sales to drastically influence the outcome in either direction. Yet, that isn’t mentioned anywhere – instead, the media uses the CSI like it is a gold-plated AAA-rated fact about “prices”.

Just like with the NAR data, don’t make decisions solely based on what you think the Case-Shiller index says.  The best gauge is the on-the-ground survey done with your own eyes and ears.

What’s in store for 2012? I think we can assume that 80% or more of the listings are going to come on the market priced at least 10% to 20% too high over the next 4-6 months. 

The banks aren’t pushing defaulters, and the elective sellers aren’t going to give it away. 

But sellers have been like that for a while now – heck, it’s another example of how market conditions are fairly normal, or at least they aren’t radically out of kilter.  Mortgages are available at the most attractive rates ever, buyers are using healthy down payments, and the inventory is tight. 

There is no problem with the demand - it’s just the price: 

From usatoday.com:

Three conspirators in a Valley mortgage-fraud ring say a Mesa minister with a worldwide following masterminded the scheme.

A former loan officer, escrow agent and straw buyer who have pleaded guilty as part of a deal with federal authorities say they helped Clint Rogers launder millions of dollars through his ministry.

In a plea agreement made public this week, former Scottsdale loan officer Ernest Babbini told prosecutors that he submitted $5.5 million in phony mortgage-loan documents on 15 homes purchased by Rogers and his wife, Angela Faith Rogers.

The plea agreements provide insight into a form of mortgage fraud commonly referred to by authorities as a cash-back operation, in which participants lie on applications about home values, transfer title from one buyer to another while obtaining loans on the bloated price and then pocket the difference.

Babbini, along with former Scottsdale escrow agent Drew Hull and Tempe homebuyer Shannon Kato, admitted in court documents that they used “double escrow” transactions and sales to bogus family trusts in order to artificially inflate the values of the properties and hide the identity of the purchaser from banks.

Clint Rogers is the head of Mesa-based Clint Rogers Ministries and conducts faith-healing events at churches throughout the United States, Africa, Asia, Europe and elsewhere. He and his wife are scheduled for trial on Valentine’s Day 2012.

“My client has always maintained his innocence and does so to this day,” Rogers’ lawyer, Eric Kessler, said this week.

Rogers and his wife were indicted by a federal grand jury in March, accused of fraudulently obtaining $5.5million in financing for 15 homes bought in 2006 and 2007. Authorities say they got about $2.5million in cash, which they concealed in ministry accounts.

Federal authorities said the case against the Rogerses is significant because of the number of homes involved and the amount of cash they generated. They said the defendants obtained anywhere from $113,000 to $530,000 in cash back from each home sale.

The couple’s home purchases were detailed in a 2009 investigation by The Arizona Republic, which found that they bought 26 homes in less than two years and that nearly all of them went into foreclosure.

Property records show that Rogers and his wife bought homes that other sellers had purchased for thousands of dollars less just hours, days or weeks earlier.  Records show that 15 of the homes were sold to Rogers by Tempe resident Shannon Kato.

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For Law enforcement officers, pre-Kindergarten through 12th grade teachers and firefighters/emergency medical technicians, HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return you must commit to live in the property for 36 months as your sole residence. 

When a law enforcement officer, teacher, firefighter, or emergency medical technician chooses to use an FHA- insured mortgage, the down payment is $100.

Eligible Single Family homes located in revitalization areas are listed exclusively for sales through the Good Neighbor Next Door Sales program.  GNND buyers can bid in lottery, exclusive, and extended phases, but can bid exclusively on insured single unit homes in revitalization areas in the lottery phase. GNND buyers are given preference over government agencies and nonprofits in the selection of a bid-winner in the lottery phase.   

Search for available properties at www.hudhomestore.com. Enter State and Buyer Type: Good Neighbor Next Door. 

Good Neighbor Next Door program Q&A here.

Here are the available HUD properties in SD County: HUD foreclosures in SD County

A recent sale that closed for about 12% under its original list price after 34 days on market.  In the new year, you can expect that the sellers will come out high on price…..keep an eye on them and try to lowball 30-60 days later when their showings drop to zero – some will really need to sell:

I appreciate you being here – thanks for participating, and have a great 2012!

One of the better-looking houses that sold this year in Carlsbad:

From the Contemporist.com:

This contemporary residence is designed to seamlessly open unto the panoramic coastal ridge-top site via expansive operable glazed walls. The glazed transparency is balanced and the home is anchored in place by substantial cut native sandstone walls. The architectural design evolved from our client’s desire for a home that is a tranquil place for living, art and retreat.

The project site is located on a ridge in the foothills of Carpinteria, ten miles down the coast from Santa Barbara. The program asked for a master suite, one guest room, a study for two, a more contained den and an informal open living space they could share with their children and grand children.

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From Bloombergbusinessweek.com:

Dec. 23 (Bloomberg) — The 30-year fixed-rate mortgage, the most common way U.S. buyers finance a home purchase, isn’t the ideal instrument its supporters claim it to be.

First, its dominance requires permanent government subsidies. Second, it amortizes slowly, exposing homebuyers to years of unnecessary default risk. Third, it was responsible for two taxpayer bailouts in the last 20 years.

Most important, these mortgages may be behind a new bubble.

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