Living the California debt based dream – adjustable rate mortgages and bankruptcies. Bankruptcies in California increased 557 percent from 2006 to 2011.

The California housing market sits in an odd stage of limbo.  You can see that the public for the most part is fully aware of the situation like an Alamo standoff in real estate.  People fully acknowledge now that banks are holding off a tremendous amount of inventory.  There is little that is secretive about the shadow inventory at this point.  Yet with all the distressed properties, people are looking at artificially low rates and are wondering if this is the time to buy (assuming they are not one of the 20+ percent that are underemployed).  Adjustable rate mortgage use is at all-time lows and why would you not go with a fixed rate given the insanely low rates?  Yet the market and economy is not healthy.  Mortgage rates and low inventory would be signs of a healthy market in other times but the opposite is the case.  What does this mean for housing going forward?

Low use of adjustable rate mortgages

The use of adjustable rate mortgage is at all-time lows:

arms as california loans

Source:  First Tuesday

The use of ARMs is practically non-existent when at the peak it was nearly reaching 80 percent of all loan originations.  This is the Alt-A and option ARM universe that we once inhabited.  The low usage of ARMs might be obvious on the surface but I think it tells us more about the market.  Some ARMs currently have incredibly low rates (yet many go under conventional underwriting standards requiring a larger down payment).  The argument coming from some is that mortgage rates will remain low for a very long time similar to what Japan has experienced.  If this is the case, then wouldn’t you think that going for an ARM with a 1 to 2 percent cut in APR would make sense?  My take from this is that the public doesn’t believe that the Fed can keep this artificially low rate going for a long-time so grab those fixed rates while you can.  Take a look at all the bailouts and actions the Fed has had to do to keep rates low:

fed actions mortgages easing

Source:  Bruce Kasting        

In other words, the Fed has had to become incredibly active and become even more aggressive just to keep rate at where they stand today.  The low usage of ARMs reflects the notion that this is the rock bottom for interest rates and people need to lock in before something happens.  Yet the bigger question is, what is happening?  The economy is still facing tough challenges ahead.  State and Federal governments will get a piece of their pie.  Even if you look at some places in Orange County with high HOAs and Mello-Roos the fees are already starting to add up in non-mortgage related items.

The state of the California economy

Everything would seem to favor a booming housing market but that is not happening.  You essentially have a sub-group of folks with equity in their homes trying to trade to one another and first time buyers trying to scrape together enough for that 3.5 percent down payment FHA insured loan.  This is a reflection of a poor economy more than a healthy one.  Take a look at bankruptcies in the state:

bankruptcies in california

Keep in mind that the falloff in 2006 hit because of the rush to file in 2005 before bankruptcy law became tougher and more difficult to process.  We are very much near peak levels under these new stringent requirements.  In 2006 we were closer to 35,000 bankruptcy filings while last year we hit 230,000 (an increase of 557%).  What this dramatic change signifies is that the underlying economy is still very weak and many people are unable to meet their current debts.  A large part of this is driven by housing debt via mortgages or HELOCs or other forms of debt based spending.  Keep in mind over 30 percent of California mortgage holders are currently underwater owing more on their home than it is currently worth.

Again the question remains, who can pay for these homes with a poor economy?  The major growth group in the state is from baby boomers:

california population growth by group

You have an aging population that essentially can sell to one another and transfer equity to each other and a much less affluent younger population that is mired in other forms of debt including student debt.  The above chart highlights where the growth will be.  People form households in the 25 to 44 age range and you see growth in this segment is not exactly dramatic.  Household incomes are flat for over a decade:

california-median-household-income-2010

Moving forward this is very important.  The leverage being afforded to the current market is driven by a few artificial items:

-Federal Reserve market actions as shown by a previous chart (risk of market disruptions become larger when confidence starts breaking)

-FHA insured loans requiring very little down (this is getting more expensive with default rates)   

-Controlled shadow inventory by banks artificially restricting supply.  This is artificial because accounting standards and bailouts were essentially developed to change the way banks did business at the expense of the public.

The public now largely realizes that banks are operating in a pseudo-market and prime properties are being allocated even before they hit the MLS.  I’ve gotten a few e-mails from folks seeing some interesting action in the short sale process especially when it comes to more prime properties.  Again, this is not a “free market” but one that is being carefully managed.  Yet you need to ask to what end?  The real economy doesn’t seem to be producing the jobs to sustain current prices.  This November taxes will be on the table.  When money is running short and employment opportunities seem limited you can expect the unexpected.  Those that think housing is balancing itself out on its own need to look at that Fed chart again and examine FHA insured loan default rates.

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70 Responses to “Living the California debt based dream – adjustable rate mortgages and bankruptcies. Bankruptcies in California increased 557 percent from 2006 to 2011.”

  • Any question why it is harder to declare bankruptcy now then just a few years ago?

    • Gee, it’s almost like the financial industry planned it that way as they ramped up an insane housing bubble for fast bucks…

    • To answer your question as to why it is more difficult to file bankruptcy now than a few years back, I need to clarify something: I am not a Democrat or Republican, I am a thinking American.

      It is harder to file bankruptcy now because of the legislation authored by a banking stooge from a banking stooge state, Senator Joe Biden of Delaware, to make it more difficult to unburden one’s self of debt. Please note well the timing: 2005, the year before the bubble popped. Planned.

      Does any thinking American truly not understand these cretins are under orders to dismantle our republic?

      What is left unsaid in this fine article is why the artificial interest rates cannot hold for long: US Treasury Bond sales have actually collapsed, and the Fed is virtually giving TBTF banks “loans” to purchase these bonds, and make fees for doing so. Private money has left the auction building.

      The Fed is targeting (officially) a 2% per year “inflation target”, an effort to debase the US dollar and make unpayable debt look almost payable. In other words, if they could keep a 2% lid on the inflation caused by QE/hyperinflation causing mass creation of fiat notes/computer credit to TBTF banks, which they cannot, in 20 years you could count on losing 40% of your current purchasing power.

      Combine that with a controlled msm telling you there is no inflation while you fill up your tank or buy groceries….and charts proving there is no earnings growth for decades…..

      America is under siege. Best folks quit the brain-washed denial of the msm-created “conspiracy theory” nonsense, and wake the F up.

      Fascism reigns. They are a single party, with orders to dismantle and control.

      Only the blind cannot see.

      • You just made this up. George Bush Jr. and his buddies at the credit card companies made it almost impossible for the average citizen to declare bankruptcy while at the same time making it easier for corporations to do so. They did this because they saw the horror show we are no in coming and realized what would happen when people decided to stop paying their credit card bills. You can absolutely lay blame on the republicans for this one. And you sir, are a republican.

      • Thank you for your intelligent post. Nice to see there are a few Americans out there that understand how this scam was done!

      • Patiently Waiting and Waiting

        Correction: He did not make it up. FAUX news made it up. He’s just the brainless parrot repeating the garbage without bothering to check the facts. Oh, and I’m not a Republican or a Democrat either.

      • You’re a bad liar. The history is on Wikipedia. The Dems pocket-vetoed it, and it was revived and passed under Bush.

        http://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and_Consumer_Protection_Act#Legislative_history

  • Foreclosed Houses Become Homes for Indoor Marijuana Farms
    By NORIMITSU ONISHI

    Interesting article from the NYT.

  • oliver clothesov

    I was saying this in 2006. I knew egg xactly what the banks were going to do… sadly, I still was not able to protect myself even though I knew what was happening. I was coming back from Vegas in 2005 and there was a house listed in Bakersfield for 500.000!!! I knew at that moment that the whole thing was going to collapse… yet I did nothing… kicking myself 7 fn years later.

    • The telling moment for me was when they were advertizing 110% mortgages. Something inside of me said “this ain’t right”

      • Marketing strategy stolen right from the automobile industry. Back in the day of 20% down autos were the same – 20% required to finance. Yet when they developed credit reports they found they could cull good creditors and sell them 100% financing increasing their profits on the loaned money. And for those who couldn’t pay they just repossessed the cars and resold adding more to their profits. Credit not equity became the commodity. Enter mortgage backed securities, 0 down, and stated income because after all homes did not depreciate like cars – so how could they lose?

        They couldn’t cause they blocked losses with rescinding of mark to market, shorting the MBS’s, bailouts and….. drum roll….. draconian personal bankruptcy terms.

    • The egg zact same thing happened to me. Planned to sell in Las Vegas in 2006 then a family member became ill and decided to postpone selling till after treatment and of course by then the bubble burst and we no longer could sell. Our 400k in equity made some Bankster wealthy along with the trillions they stole from my fellow Americans. They very smartly had those pesky bankruptcy laws changed just in time to keep the suckers in their underwater mortgages too! Prior to the new BK law in 2005, a judge could require the banksters to lower the mortgage to current market value. The banksters knew in order to hawk their MBS’s to investors they had to keep the mortgages at the inflated value which is also the reason the banks are not releasing the houses on the market because then the reality of what they are worth would be known! God forbid we have a free market in America! Lol

      • Your 400k in equity didn’t make some bankster rich… It either disappeared into thin air, just like it came to exist (after all, the value of the place is all in people’s heads) if you paid much less than that – OR, if you actually paid close to that for it, then your ‘equity’ went into the pockets of the seller you bought from. Tons of regular people made out like bandits in the bubble, buying in 2000 and selling in 2006 and walking away with tens or hundreds of thousands of dollars out of thin air, dollars that no longer exist because those homes are now worth much less and that ‘equity’ is *POOF* – gone. Those are the people who made the most money. What did the banksters get? Interest payments? REO properties? Writeoffs? Where did the banks’ riches come from?

    • I had a similar realization in 2005 when I moved back to OC after college and found economic news celebrating the $600,000 median prices on the same pages as articles showing the $60,000 median and started doing the math… 80/20 fixed 30 year on a $600,000 would take at least 3 median incomes to cover.

      At the time, I was half-jokingly saying we needed a big earthquake to scare off the non-californians but it wasn’t long before that turned into predictions for a new economic depression. Little did I realize just how willing the legislature and voting public would be to facilitate just that.

      Now I’m getting to the point where I’m about ready to pull up the old stakes, pack up, and hit the road. If I don’t do it before November, I have very little doubt the results of the election will provide the last push I need.

    • Lord Blankfein

      I knew we were in a massive housing bubble in the summer of 05 when a younger couple we knew (late 20s, recently married) was family pressured into buying. They bought a condo conversion in South OC (was previously an apartment complex). They paid 530K for a 2 bedroom apartment. That place is worth less than half today and their marriage went south due to all the financial strain. The human toll brought on by the housing bubble is sad! Greed knows no boundaries.

  • American dream / California dream should be about freedom – including financial freedom and freedom from debt. It’s sad to see this once great country improde from within… we are doing it to ourselves with the help from the gov’t and wall street elites.

    http://www.youtube.com/watch?v=ZPWH5TlbloU

  • Im Not POTUS

    The powers that be have painted themselves in a corner with housing.

    If Rates go UP:
    If the 10 year goes up again to 4 or beyond everyone is underwater no matter if you got a fixed or an ARM. The guy you sell to if the rate goes higher has to buy less house (The P in PITI) if his interest expense is bigger.
    Results = Game over. All mortgages become walk away probable.

    Rates go nowhere:
    If they succeed in suppressing the ten year to what it is now then housing goes nowhere if they can keep the shadow inventory in the shadows.
    A likley event since the FED gave their blessing to private bagholders of MBS 10 years of limbo with a rent to own scheme. They will hide the shadow inventory to their deaths. Bleeding the housing market slowly keeps them in charge.
    Ben Bernake is just paying you with leverage to incubate the socialized losses for as long as you let him do it by not throwing the bums out of CONgress.
    Results= more of the same as now, a very weird Japanese Limbo. No clearing of markets, no resolution, no price discovery, just an endless loop of churning the blood letting from one eligible FICO score holder to the next.

    Rates go down:
    Too crazy to think you can get negative yields, some people already agree to that for short term notes, why is it not possible for them to wait 10 years.
    Then even more people can scrape together 3.5% down, Heck you can talk granma into giving 18 year old Jr. the 3.5% down and in 5 years she gets back more than Uncle Sam will give her, just get Granny a REaltard License and both ends of the sale and POOF she has doubled her money and is way ahead of the game. Zero appreciation is still better than negative return UST notes and bonds. Granny can run her own FED issuing 5 year notes to all the rugrats. (FHA says you can rinse and repeat the 3.5% EVERY 2 YEARS, 5/1 ARMS cut a lot if expense for Jr., he can save enough in 2 years to do it again for the summer house.) Slow down Grandma, if Heli Ben catches wind of your “competition” he will stomp on you hard.

    If reality can never be allowed to cast its’ glare on the housing market than the impossible, however unlikely, is inevitable.

    • Rates going up will probably be in response to increasing inflation. The inflation will provide the nominal increase in home value so that sellers don’t feel screwed — though of course they are in real dollars.

      • But what about cost inflation for insurance, taxes, HOA dues, maintenance and the like?

        Where is the free cash flow going to come from to pay to maintain a home if wages are stagnant/descreasing?

        Here is what I call the “Rich Uncle test”

        If a rich uncle *GAVE* away title to a $1mm property, free and clear, would Joe Average be able to afford it? I believe the answer is a solid NO, simply because a median income doesn’t provide enough cash flow to maintain a $1mm home.

        So at what level do house prices have to drop to make *ANY* home intrinsically affordable?

    • TPTB have painted themselves in a corner, true. Your observations are very valid.

      But what about yours/our individual lives? As everyday ticks by, we are closer to death, and missing out on things. And when that day comes, interest rates and values wont matter. All that will matter is looking back and either being glad we actaully lived somewhere nice, or regretting we didn’t.

      • PTB
        No truer words ever spoken, and this housing/finance bubble has already robbed us of precious memories and the ability to buy a HOME. We’re not infestors, just frugal sensible families, who want a place to call home.I see no end in sight to this madness.
        We can’t find a suitable home. No inventory, and homes that should be $400K are $500K. Who the heck can afford that?

        We had a $320K mortgage, and we had a very strong 6 figure hh income (2 people), and that amount scared the h*ll out of us. We don’t like debt and avoid it as much as possible. I guess when you plan to not perform, the decisions come easier.

      • Mad,

        We are in similiar situations.

        Phoenix has been looking better and better…..

      • PTB, I’m with you on that dilemma. I need a roof over my head, I have no debt.
        Problem is, can I trust a landlord who is foolish enough to be in debt.
        I think it is more of a certainty to take up Bernmakes put at the FHA and have the same landlord you pay rent to for all the Principal Interest Insurance Taxes, be the same guy who gives you a tax break for the interest.
        You can take your chances with a private sector landlord or go with the government landlord who has more leverage to keep the lights on at your rental unit.
        You don’t own squat in this country if you have to pay the government to keep it.

        I say get an FHA 3.5% find anything affordable, render unto Ceasar his monthly PITI fortify the ever loving heck out of it. And wait it out. The rest of the planet is going to fall apart before the US will, not because we are any better than anyone else, it is because we are completely apathetic. No massive riots will take place here, no giant protests, just 65% of the population trapped inside their homes watching 24 hour news being perpetually scared to death while they watch the rest of the world burn down with Nero’s fiat collapse. Everyone nibbling on fast food that they walked 3 blocks to get, paid for with EBT cards. All the while TPTB reminding you on free cable TV how great full you should be that they are managing the “situation” and just look how much worse it is over there.

        Just hope you are lucky enough to find something decent to buy with the rigged market we have. I am not having any luck here in So Cal.

      • I bought in 2004, knowing the market was way way overblown. Last collapse was from 89 to 94, and I was fully invested in housing. After that, I said no way would I buy again. However, rents got too high so I decided to buy. I’m single, a CPA in the San Fernando Valley and work as a controller in a Chapter 13 Trustee office (Bankruptcy). I bought in Woodland Hills, a home high on a hill with an indescribable view of the city and canyons. Paid $642,000 for a 22oo sq ft 4 bedroom home.
        I can’t wait to get home every day because it is the closest thing I can imagine to heaven. Back yard is full of bunnies, squirrels and a variety of birds that I feed every day. Mature trees and shrubs make it even more beautiful. I feel extremely blessed to be in this home. So you are right, who knows how long we have on this beautiful planet, but make the best of it and owning this home has greatly increased my quality of life.

    • @ I am not POTUS You should be!! Great post!

  • I’ve seen several properties in better parts of the Inland Empire which show as “pending” the day they are listed… AND they are supposedly short sales. Something has to be going on behind the scenes.

    • There might be no big conspiracy. I work for a foreclosure flip group and we have agents that bring in NON FHA buyers before our houses hit the MLS. We list it and change it to pending the same day. Nothing shady, the buyers agent will take a 2.5% commission for a heads up on prime houses, we know the agent and the loan broker and have faith the deal will close so we sell for a little less.

      • What’s shady is very often these short sales are pre-arranged deals at prices below the competitive market price in the hopes the servicer will approve it anyway. i have tried to inject a bid into the process of some of these short sales (well above the listing prices, knowing it is well above what the “arms length” buyer offered) and the “selling agent” stonewalled like crazy.

        These “listings” are meant to discourage legitimate bidders from even considering putting in an offer (many fewer people will bid on a pending listing). Of course the seller doesn’t care, because they have no equity.

        I’d guess 80% of short sales in some areas, like Vegas, are frauds in this way.

        In my case, I am in the mortgage industry and know enough people at the large servicers to interject myself in the process. Boy, are those selling agents pissed when I do that.

      • Maybe you should let the rest of us buy homes instead of being greedy.

      • Dave HB-Renter

        Want to see a very current example of likely short-sale fraud in Dana Point?

        http://www.redfin.com/CA/Dana-Point/32442-Ascension-Rd-92629/home/4954127

        Hit the market today, as pending – for $990k. It was last removed from the MLS at a $1.5Million listing price after chasing the market down since 2007. Current owners bought it for $2.3 Million.

        Would be a great house for DHB’s “homes of genius” award

  • And housing prices will continue to fall as jobs are still going down as a percentage of the working age population. This is a world wide crisis. No country is immune, even illegals are leaving! End the Fed, end the IRS, end fractional reserve banking, etc.

  • The fix is definitely in. Our local Bank Of America Home Loans office (formerly Countrywide) is essentially shutting down with only two employees left. When I saw this announcement in the newspaper, I laughed and told my wife they are probably tasked with shredding documents or otherwise burying evidence for the higher-ups that were transferred.

    If BAC is doing this, I suspect Citi and Wells Fargo, are not far behind. These cretins have cut a deal at the highest levels, and when the dust settles narry a one will face indictment — there won’t be a shed of evidence!

    • Jon,
      Are you talking about the huge Countrywide building in Simi Valley on Tapo Canyon?
      Or is it the Countrywide/BOA office at Madera and American Way in Simi Valley?
      Please define the location for me.

  • Step 1. Ban all Wall Street and other out of state banks from doing business in California
    Step 2. Create a California State Bank.

  • This is all just going to take a while to unwind, folks. Extend and pretend can actually work when the government is giving you billions over time, in the form of low interest loans you can use to buy higher interest treasuries. Expect another 5-10 years of paying for the follies of the “naughtiest”

    • Why should Americans pay for the banksters bad bets? They used OPM and gambled our assets and made trillions in the process and then now are passing along the losses to the taxpayers!!! It’s like borrowing money to gamble with , taking the winnings off the table. and then after you lose big time, then taxpayers pays for your losses. It’s good to be a bank.

  • Here’s the pickle a lot of people are in. They have a job, but they have a lot of liabilities as well. Food, utilities, rent, etc. At the end of the month, there just isn’t a lot left. Then you throw in unexpecteds, like car repairs, b-days, etc…Now, since things like this tend to happen often, they aren’t really unexpected so they should be budgeted for. However…

    What happens when, for example, a Sweet 16 is coming up? There isn’t anything in the bank, yet this one day will only happen once in you and your childs lifetime. You can’t go back and make up for it. You can’t break their heart and not celebrate it, or tell them you are broke and look like a lame-o loser, and your employer isn’t offering any overtime. Even if they were, with all the activities in life, there isn’t a lot of time to work more anyway.

    So out comes the credit card. This is the American life. Sometimes there is no other way.

    I’m pretty darn responsible, my FICO is 804, but I will admit that I have some CC debt from things like this. A little perspective is you can’t forget about LIFE, and that we all die. Yes debt is bad, but dying after missing things is worse. I’d rather have a little debt that will get written off from death, than live a lame life.

    • Dude, PTB, you may be onto something. Nobody threw me any birthday parties and I do feel like a loser.

      I feel more like a loser now, however, because I worked my way out of the poverty I grew up in and I can’t buy a lean-to in a crummy neighborhood because some jerk with cash will come along and buy it with priority. I grew up by the beach and my family owned their home and we were BROKE. Fast forward 20 years – I have a professional degree and make a decent income and I can’t even buy a condo. Part of this has to do with the fact that I am self-employed now and financing is tough, but I’m doing okay and I don’t want a 9-5 slave job (even if I could find one!) I am PO’d that I have to continue paying more for rent than I would on a mortgage, get no tax breaks, and I am sick of living in someone else’s property with no washer/dryer and no back yard. I’m going to be 40 this year and I feel like I have nothing to show for my life so far because I never got to buy the house I’ve been working for all these years. At least I got my education relatively cheap, today’s kids don’t have that option …

      • I have some advice for you. I can’t help you get a loan to buy a house but perhaps I can point you in a direction that will make your living circumstances better. You say your self employed. That means you can work from home at least in part. This equates to a tax right off. You don’t like not having laundry at home. I was in that boat for many years so I can relate. A place I lived in was dirt cheap in the 90s and the first I had with laundry in a long time. Suddenly I was faced with a life crises, one of things that’s puts stress on you. A mentor suggested I move to a better place to relieve the stress. I did. I actually moved to a large apartment complex. However this place had laundry on site with easy access and the most incredible yard with pine trees, grass, grill, pool and jacuzzi. I increased my rent by 40% (remember coming out of dirt cheap) but I was happy. When I needed to move again I wanted a shorter commute with good public trans, a second bedroom, local shops within walking, under market rent and a good neighborhood. I diligently searched and found a great place. Your getting my advice I hope. Plan out what you want, perhaps an SFR. Prep your budget, a renters curriculum vitae and begin a search for your new “home”. Hold out for 80% of your wants. Negotiate terms when you rent. Your resume and references and credit will help. Trust me it is worth it

  • Do you think the scumbags that are called politicians knew this? How about the sub-humans known as banksters? Sure they did, and they are also manipulating society to make everyone slaves, don’t believe, how about the timing of PERSONAL BANKRUPTCY laws that went into effect in 2005.

    http://money.cnn.com/2005/10/17/pf/debt/bankruptcy_law/index.htm

  • I am part of a phenomenon you don’t mention. It’s a hybrid of your boomer-owner and younger-poor. I am boomer who didn’t buy during the madness and, before that, I was living in Japan while they were having their madness, so I couldn’t buy there either. Now I would like to, having lived small and been careful (and, truthfully, having read your blog) and stayed out of debt. Every house I am looking at this year is owned by very young people with one or two babies and they bought in the last 10 years at luxurious prices so they can sell for luxurious prices to other people who have been euphemistically described me as “not first time buyers”. I am closed out. But people almost half my age can live like kings. Where did they get this money? They didn’t earn and save it here in southeast Portland Oregon. Salaries here are not high enough to support California house prices. They must have had help from parents that I never got. Or, in the case of the short sale we looked at (enormous main house, outbuildings, chickens, and one child under one), they joined in the craziness and are going to walk away and dump that one the banks/taxpayers. Not all boomers are to blame. Not all the young are innocent victims.

    • You have a point. There is a hugh personal moral dilemna going on as we speak.

      1) Do you play by the rules? Feel better about yourself?

      2) Play “the game”? Break the rules and ‘do what you gotta do’ to live? By that I mean take unreasonable risks, knowing you are doing it, with the walk-away mentality.

      If you are honest and living right, yes it feels good but honestly you are flat out not living as high as you can, and are “missing out” on the finer things. To me, #2 is in the ballpark of theft and/or fraud if you intentionally live your life taking outrageous amounts of money you know you can not pay back. (anything over small CC debt). But look, bottom line, if people are lying or not Maruchan is right, people are living like kings if they earn it or not. But they are still “experiencing” it which is not fair for those who earn it.

      Here’s the problem – Wall St and Washington are stealing money and not getting punished. If your parents set certain examples for you in life, you will follow. What does the population expect to happen when the leaders are corrupt theives? The population will do it as well, and not feel bad about it. I have friends like this.

      As the ponzi and can kicking continue to grow, it will happen until it flat out breaks. Do you do what’s right? Do you join in and get your piece regardless of consequence to self and country? Only you can answer that…

      • We Don't Make Those Drinks No More

        I find this quote helpful and useful in my life. Interpret as you will..

        “If there is another world, he lives in bliss. If there is none, he made the best of this.”

        Robert Burns (1759 – 1796)

    • Oh yes I have 2 friends that live in Cali, bought homes after they got married in 2005-2006, they don’t have good jobs, any money saved, how did it happen….. parents gave them the downpayment money. And since the PITI was not too much more than rent they could afford the jump buy they never accumulated a downpayment.

      Now I’m sure they are underwater, they cant save-never could, and are still living paycheck to paycheck and are in a huge negative equity position on their homes.

  • calidreaming

    get ready for a massive sellers market in california soon. Nevada adopted nv 284 in legislature last fall. what has hapenned now is that banks cannot foreclose in nevada. what that has meant now this spring is we have 3 weeks of inventory in vegas and losing 100-150 homes per day off the market. No one is paying their mortgage and no one has to worry about it as they have no risk of getting foreclosed.
    California is adopting their own version of ab 284 shortly – within 60 days it will be passed. Get ready for more bidding wars like you havent seen since 2004. In vegas on my few remaining REO listings i am getting offers 25% over my latest bpo bvalue. Gee its great to be in america. how messed up it is!

  • “The low usage of ARMs reflects the notion that this is the rock bottom for interest rates and people need to lock in before something happens.” So what happens to home prices when those rates start trending up? Home prices will continue to trend lower in mid and high-tier areas and then remain suppressed for years to come. The only thing people are “locking in” today is what’s still a very high price for a home in Southern California.

  • so broke bleeding principle, i may try to sell myself out as fall guy on some wall st crime.!

  • From Surfaddict
    May 8, 2012 at 12:16 pm

    I believe stupidity knows no boundries either!!

    I disagree. Actually stupidity is all about boundaries. It is however quite ubiquitous like weeds. Think about it.

    • Yes, I stand corrected, stupid eventually hits a brick wall. Gravity, math, or physics can’t be defied!

  • It’s a sad state of affairs for California and the rest of the country. When home prices are finally affordable in some parts of the country, there are no jobs. However, SOMEONE made out by selling high and buying low so that money must re-enter the economy somehow. It will take time and the country will need to rebalance, maybe at a lower economic situation than we’re used to, but it will happen.

  • We have saved and waited for the prices to drop but they are still
    way too high for us. We are looking under $500K in Encino, Tarzana,
    Woddland Hills area. I don’t “have” to live on the southside of the
    Ventura Blvd. From what I’m reading it’s all cash buyers and no
    one else has a chance. Is there any light at the end of the tunnel?

    • DebtFree
      I hear ya, and so does PapaToBe. In 1998 we bought an almost 4,000 st ft home in east Ventura County. Fireplace in master, built in refridge, Beverly Hills circular stairs, and a view of Thousand Oaks from 6 rooms and a deck. Truly a knock out home. We PAID $400K on a high hh income. The economy was semi-normal back then. Fastforward to the down trend on this side of the bubble. A dump is $400K and the economy is in shambles.

      We’re in the same boat as you and the rest of the posters. We are paying cash, and the FHA idiots will overbid us. They are the future walk-aways. What a freak’in nightmare. PapToBe is spot on. This is time we’re not getting back. It sucks.

      Add our eye disease issue, and a paid off home will keep us from being homeless.

    • Im Not POTUS

      It’s called Metrolink, you can buy a place in Santa Clarita, take the train to Union Station (sleep on the way) leave a beater commuter car in a parking lot overnight downtown. Then drive to work against traffic. Sleeping and a fast drive to work is about the best thing I can offer you.

      I live downtown and fly on the freeway to work. It is a stress relief to watch the blur of other sheeple as you whiz by going the wrong way at rush hour. I am part of the one percenters if you just count people who don’t sit in traffic to go to work. It is a very exclusive club. None of you should join it and spoil my fun. Okay maybe a few of you but thats’ it.

  • TPTB want you and NEED you in their system, it is required for their survival. The borrower is slave to the lender!

    It’s obvious why the Gov wants to ged rid of cash and have digital currency. Inflation is much easier, and tracking is much easier. If you’ve ever dealt with an evil or amipulatuive person, you know that there is NOTHIGN worse on this earth than dealing with someone who “doesn’t give a ****”. Think about it. People with nothing to lose have no feelings, no shame, no guilt, and our system is built upon honesty and intergity. It relies on caring about about your FICO and wanting to do whats right. When you deal with people who hit bottom, you can not sink to their level and they know it. The worst thing is someone who wont pay their bills, and the threat of creditors and garnishments is useless. This is whya cash society is dangerous to the Gov. If someone files BK now, has trashed credit, but the ability to live and pay their bills using cash in an underground sort of economy, the collection of past debts becomes useless. But if currency is all digital, there is no escape. The slave will be forever ruined until their debts are paid.

    • Patiently Waiting and Waiting

      Wow, paranoid much? I agree about not getting in debt, but WOW what a stretch to drag in electronic forms of storing money. Lemme guess – you invest in gold too?

      • Alex Jones, Gerald Celente, Karl Denninger, and MiSh are my financial mentors. So far so good.

  • I am amazed by all the comments about how mad people are that they cannot buy a house. In a short period in America, homeownership was great, but now it is questionable. Nothing is secure now, not jobs, not family, etc. and this is the new norm, all marriages 50% or more lead to divorce (end of house) it takes two incomes now to just survive, if one loses their job, oops (end of house) If one gets sick, WoW high medical bills (end of house) If one dies (end of house) EVEN if a married couple stays married, raises kids and stays in the same house and it is paid off, and one spouse dies and the other is in their 80′s well, high cost of care for them (old folks home) well gotta sell the house, so we can put Granny in the home. In the End Game, no home left. The smartest cultures are the ones that go against the system, and the house stays in the family. They stayed married, Grandparents live with family, family takes care of elders and property gets passed down. They WIN in the End.

  • How the housing equity stripping ponzi scheme was done in 2 sentences. It’s done like this:
    The banks got other peoples money (investors) to go to the casino with and when they were winnning they took the profits off the table and put them safely into their own pockets. Then when the table turned and they had insurmountable losses, rather than dipping into the profits they already took off the table to cover their losses, they simply passed the losses to the taxpayer.

    That’s it. That’s how it is done. It’s good to be a bank.

  • bakersfieldman

    How long is this goverment induced bubble going to last? I just about have enough cash to purchase a home, but theres no inventory. I refuse to get into bidding wars for a property that is over-priced anyway. I live in Bakersfield, Ca and just about every decent house is pending. Any ideas if this goverment induced mess is going to inflate home prices to 05 / 06 price levels? In the three month house prices have risen by at least 25%. How high can it go and will when it stop, another 5 years?

    • I hear ya on the inventory part, brother. There is nothing out there. But rising values? All data and stats point to still falling values except for rich locations like San Marino, Brentwood, places like that. I’ve heard nothing, nor can I imagine why, prices would go up in Bakersfield. And I’m not knocking Bak-o, I like the Inland Empire myself, and Bak-o is like the IE. Hot, far, plently of land. No reason for prices to rise.

      Spend enough time on this forum and others on the net, you will begin to see prices wont reach there fake 05/06 peaks for decades. There are no supporting fundamentals! Short story – interest rates and taxes have nowhere to go but up in the future, and that will most likely be sooner rather than later. Although they are good at kicking the can. Wages are depressed as well. Older baby boomers will want to sell their homes, but graduating students will have no money to buy as wages are low and student loan payments suck up all their income.

      Best case scenario is drudging through like this for many years to come.

      As life is only so long, you will eventually have to make a decision. Time is not on your side! We are looking to take our chances in the next year or so, we will see what happens. I’ll know more about my long term employment, and in our desired zip in the IE prices are around 3X per capita income which is (well, “was”) considered normal. The only way to tell how this new world economy will play out is seeing as it goes along.

    • I don’t know if prices are going to go up to 05/06 levels but here in Northeast Los Angeles, prices the past several months have been going up (LA Times). The increases make no sense, yet they are happening. I’m sure we’ll start seeing the bidding wars coming soon if this nonsense keeps up.

  • This housing market is wearing on me as well. However, why does anyone in their right mind think that the government can stop the market from falling back to equilibrium? Have they really stopped the decline with all the king’s horses and all the king’s men? Have we forgotten the false bottoms that were called in 2009, 2010, 2011, etc? I think we all can agree “the housing market” is really too big for even the all-powerful Oz to control over the long haul. I am sure that if we look back 10 years from now we will see a couple of blips on a steady downward trend. I have no problem renting nice houses for the time being. If it is economically viable, I would consider buying a house but for the short term I will hold on to my cash/freedom and enjoy the ride…

  • Like so many others, I also took a financial hit on housing through a different investment vehicle. In late 2003 it was becoming obvious that house prices were escalating at an unsustainable rate. Naively believing that Greenspan had at least a tiny bit of integrity and honestly, it seemed logical that the Fed would begin to slowly ratchet up long term interest rates and begin to put a lid on the rapid price increases.

    I laid in a number of short positions (betting rates would go up) on the 30 year bond and took a beating. The Fed has a huge staff of economic experts, they absolutely knew that housing was spiraling out of control. They let it happen because they are handmaidens to the incredibily corrupt financial institutions. The US is totally screwed until we have a complete purging of the Fed, Treasury, and FIRE industry.

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