patrick.net

I’ll guess a 700 sqft 1BR condo.

I thought SF condos cost 800/sqft and up. 392K may get you a 500 sqft studio.

Kurt, long time no see.

Did everyone see this?
http://calculatedrisk.blogspot.com/2007/03/segmentation-of-residential-mortgage.html

Now this would certainly make a nice t-shirt graphic. :)

With the new bankrupcy laws in effect, people will now be financial serfs. The banks don't need a bailout, they got their changes in the bankrupcy laws.

I say let people who screwed up bad learn the hard way and dig themselves out from the debt they took on. It may take 20 years to fix their messup, but I think it is a pain our nation must endure to change our ways. The people who commited mortgage fraud should be held accountable as well. I am starting to think that state sponsored labor camps/programs would be a good idea. I don't want to pay to lock these morons/clowns up over fraud.

I’ll guess a 700 sqft 1BR condo.

I thought SF condos cost 800/sqft and up. 392K may get you a 500 sqft studio.

I did a search on SFARMLS for properties between $390-400 in SF and there were 17 properties in total. One of them was actually a 3/2 1050sqft:

Listing #319415
$390,000 (LP)

Price/SqFt: 371.43
65 Western Shore Ln #5, San Francisco, CA 94115 Active
Beds: 3 Baths: 2 Sq Ft: 1050 Lot Sz:
District: 6-D Yr: 1964

Great Value! Top floor unit of the St. Francis Square Cooperative that is centrally located in San Francisco's Western Addition. Walking distance to Buchanan Street YMCA, Japantown, Fillmore St. shopping and dining and St. Mary's Cathedral. Easy public transportation via MUNI from Geary St. Open Sunday February 4th from 1-4pm with Fresh Baked Cookies and Milk!!!

SF experts - What's wrong with this unit?

Hey PeterP-

Yeah, I'm sure that's too cheap for an SF condo. Maybe a studio apt conversion?

Waterfront Marin condos can be had for about $600/sqft and upwards, but that probably pales to SF prices (I haven't checked lately). Still, damn expensive for a glorified apt.

PAR :

It that’s what we are talking about, and it comes to this, we will probably be thankful that it happens.

I think I might agree with that. Lesser of 2 evils kind of logic.

BTW, the chart on CR shows Alt-A as big as subprime. From what has been coming out, Alt-A looks like only marginally better than subprime. So more fun seems to be ahead.

eburbed,

It's dead center of Western Addition. This is a weekly occurance in Western Addition: http://tinyurl.com/ypkgn3

The neighborhood is situated north of Hayes Valley, south of Lower Pacific Heights (Lower Heights???) and west of the performing arts area.

$390/square foot is too pricey for this:

Examiner, March 5, 2007

"The San Francisco Police Department increased its presence in the Western Addition last month, following a spike in violence that included the shooting of a 13-year-old girl.

That victim survived her shooting.

At a recent community meeting with police, Western Addition residents expressed concern about the heavy violence.

This year to date, there have been five homicides and 197 aggravated assaults in the Park and Northern police districts, which both serve the Western Addition area, according to the San Francisco Police Department’s CrimeMAPS Web site."

Forget about being afraid to go out at night, these people shoot you at noon.

eburbed said:
SF experts - What’s wrong with this unit?
I am no coop expert, but will take a stab. Coop financing is a lot harder to come by so the buyer will have to put down a lot more to find a willing lender (for your coop share -- you don't acutally own the space in your unit like a condo). You also have to pass an interview by the coop board. Oh, and HOA fees are $751. Part of this is probably the actual mortgage being paid off by the coop. The good news is the HOA fee should include taxes and insurance.

Oh, and what SFWoman said: LOCATION, LOCATION, LOCATION!

Does anyone else feel that this is happening too fast ? I certainly feel so. WSJ once used the word "catastrophic" to describe the meltdown. NEW was a 1.5 BILLION company just a month ago. Today it is virtually non-existent.

If things unraveled at this speed, will there anyone be left to bailout ? ;-)

Great - once they solve this crime problem, prices will go up!

I hope it unravels fast. Like a band-aid, you know? If house prices plummet, they'll hit bottom faster, and that will set the stage for a normal market faster. 10+ years of festering pain doesn't sound much like fun.

Of course, 10 years of festering pain may be preferrable to society as a whole than a short, sharp correction. Destroying equity slowly would spread the pain a little as people who move in and out of areas because of jobs and so are selling/buying suffer a thousand little deaths, taking smaller hits on selling than if housing corrected abruptly and totally ruined people who bought in the last few years and CAN'T keep the house because of job moves/or liar loans.

I have no sympathy to liar loan people going down in flames, but people who bought with the idea of keeping the house and wind up moving because of jobs/etc, I DO feel a little bad for.

PAR,

The fact that it's the credit side crumbling before market sentiment could be a reason why it may collapse instead of deflate. When a large chunk of the buying population gets yanked, and a large number of foreclosures start hitting, people who recently bought but aren't in trouble yet might start trying to sell just to get out from behind the cueball of their OWN upcoming ARM.

Previous bubbles were tiny compared to this one in many substantive ways, and it won't be people refusing to buy that pops this, but people being unable to buy, which could start a STEEP slide. And once the steep slide starts, it could be hard to stop, bail outs or no.

More WSJ:
Food for thought:
• If you bought a house in Los Angeles in 1990, just as the real-estate market turned downward, you would have had to wait a decade for your home’s value to return to what you paid.
I would like to point that you read it first on patrick.net in my commentary on the S&P Case Shiller Home Price Index for LA on Friday (March 9).
Okay, I didn't explicitly say it but I did point out:
Peak: 100.24 (June 1990)
All indexes are at 100 for January 2000. We are a smart bunch so I'm sure you folks figured it out :-)
Still trying to stay one step ahead of the man.

"I always thought buyer psychology would turn first"

"it won't be people refusing to buy.... but people being unable to buy"

Agreed. It's just so sad and counter productive that as an asset class, as a country we refused to mend our ways until we flat out hit the wall at top speed! True, a turn in buyer psychology would've been more "orderly". That time has come and gone. Now that we're seeing this cut off cold turkey the only upside I can see is that it will be swift.

Joe JBR is not going to be impacted by Congress. I think this is misguided speculation. If anything, Congress may pass some laws to protect future FBs, the horse is out of the barn. All of the fraud stuff will get brand new scrutiny and you may see some Sarbox-like crap legislation, but Sarbox didn’t do squat for Enron’s employees or it’s investors. Same deal here, IMHO.

PAR,

While I don't think Joe FBR is going to get off 100% scott-free, I disagree with your Sarbox-Enron analogy. There are significant differences between the housing bubble and the NASDAQ/tech bubble:

--70% of Americans are homoaners, and most of those are Loanowners who have refi-ed and/or HELOCs over the past six years. Nowhere NEAR 70% of Americans were tech employees, much less former Enron employees.
--As a group, homoaners tend to vote much more often than renters, which makes their political clout even greater than raw numbers suggest.
--The single greatest asset/investment the vast majority of working & middle-class Americans "own" is their house, which far outweighs the value of all stocks, bonds, savings (hah!), IRAs & 401ks put together. Housing is by far the greatest metric of household "wealth" most non-rich Americans have.

If enough of this politically-powerful loanowning supermajority screams loudly enough, rest assured there WILL be federal, state and local bailouts in the works. As a JBR/saver, I don't want to believe this, but raw numbers and history tells me otherwise. Precisely what FORM the bailout(s) will take is hard to predict though. Given the press we've recently seen about voluntary lender "emergency workouts" for underwater FBs, my guess is, this trend may accelerate, and eventually may become the official law of the land.

We might even see the bankruptcy bill revisited, with some special clauses added specifically granting FBs the right to seek chapter 7 (full discharge) and still keep their homes (with the taxpayer covering the lender's losses), even when they fail to pass the "means" test and have refi'd into a full-recourse loan.

We are living in a blame-free culture, where it is political suicide to say anything bad about borrowing or the Uh-merikan Dream, or to imply that people's financial problems are largely a result of them living beyond their means.

HARM,

Charles Hugh Smith did a great piece on how the SPMD (TM) will most definitely impact the wealthy more than lower income folks. Particularly recent buyers that came with nothing.... and will leave with nothing.

To be sure the wealthiest among us will be doing plenty of bitchin' as well. They're both wrong, but in as much as possible, they'll each get their way.

@DinOR,

Sorry, but what was SPMD?

Sub Prime Melt Down! :)

I have always had tremendous confidence in the US government's willingness and ability to bail out failed banks, funds, companies, etc. That's why I have less than 10% of my money in USD. Real assets like oil, agriculture and gold are where I park my savings.

FBs won't be left off the hook. The government has to bow to the political pressure from big banks, because honestly, that saves my ass as well, how would you feel if you wake up the next morning and half of your savings parked at a bank / brokerage is gone due to a collapse of the financial system? Those who owe money will still owe money, just less in terms of real purchasing power, but not in terms of their pay, which will stay stagnant nevertheless. So FBs will get their fair share of misery.

So in general I am pro-bailout, only that I personally won't be participating that much in the bailout effort, because I keep my USD reserve to the minimum. A bailout is good for the savers as long as you don't park your savings in USD. A weakening USD is also good for us, because you can exchange your real asset for more USD when that happens, exchanging for more USD-denominated assets, including a SFH. Plus, a weakening USD means more jobs, so that the economy can get a head start in another cycle.

China has always been very cautious about moving away from USD, because as the ultimate bag holder, a depreciating USD means evaporating buying power for them as well. However, that stance eventually started to change.

In the first couple of months of the year, Chinese government set up an overseas investment fund amounting to initially $200B, that specifically focuses on investing in overseas assets, primarily in resources and also in technology. It is less than 1/5 of their total USD holdings, and so far the $200B is not fully invested yet, but it signals a change of attitude.

Japan, our second largest bag holder, stops adding USD reserve since end 2005.

We've gotta find some more bag holders, fast. Perhaps Iraq? Oh, I forgot, we are the bag holder for Iraq, not the other way around.

OO,

What do you think of DBA ?

Waterfront Marin condos can be had for about $600/sqft and upwards, but that probably pales to SF prices (I haven’t checked lately). Still, damn expensive for a glorified apt.

Tempting. I like waterfront Marin. :)

The “piggyback” lender will end up with little, if any, of the sale proceeds. The lender can’t pursue the borrowner, because California is a nondeficiency state.
Please check here http://www.housingeducation.org/edi/secondaryoptions.html:
In California there is no deficiency judgment allowed on foreclosure of purchase money mortgages (the one you use to buy your home) but there may be deficiency judgments on refinanced home loans, VA loans, or junior lien loans (2nd mortgages).

PAR,

Japan is still falling. Except for the core of Tokyo which started rising about from about 2004, the rest of the country has still not hit a bottom. Osaka has sort of stabilized.

You can find plenty of SFHs in the outskirts of Tokyo (about 1.5-2 hours train ride) STILL valued at about 20% of their peak NOMINAL value 17 years after the bubble popped.

I will be very intrigued to see what our situation will turn out to be for Tracy and the likes, especially when oil price starts climbing again. But since USD is still the world's reserve currency, so somehow I don't think our nominal value will be pounded down so much.

StuckinBA,

I bought some DBA near 26 when it first started a couple of months ago. I think it is a good bet given the increasingly unpredictable weather.

This whole discussion makes me quite angry (the topic, not those commenting on it). It's like a Pilate for cynicism. My shortened routine:

Topics affecting home owners are a particularly reliable voting indicator, at state and less so federal levels.

A majority of the total population are home owners.

Home owners are age skewed towards the elder. Elder groups are similarly reliable voting indicators.

Our modern "democracy" is one in which election engineering/vote engineering is a well refined science & art of persuasion.

Persuading home owners and elders of the imperativeness of an issue, so long as it's well presented and repeated enough times, is an almost certain bet.

Legislators are largely interested not ultimately in satisfying their constituents, but instead in satisficing their constituents while satisfying their benefactors.

Therefore, we are most likely to see a big "bail out" that makes lots of FBs feel like they're being bailed out, while actually benefiting the irresponsible industry that enabled the "F" in FBs.

The net result is the worst possible case for deliberate, responsible savers. We'll pay through monetary inflation. We'll pay through credit tightening and through overadjusted risk premiums. We'll pay through taxes, which will have to rise in order to fill the deficits left by FBs leaving the taxpaying ranks. We'll pay through more taxes forced by sinking home purchase prices. And then we'll pay through even more taxes finally levied as FBs receive their "bail outs", which will amount to something like "middle class tax cuts" -- meaning a couple hundred dollars annually for the average Joe, and they drop into ever lower tax brackets, all while discovering their newly found apatite to 'eat the rich', which will incidentally be anyone who saved their stones while they were all skipping them.

The net result is the worst possible case for deliberate, responsible savers.

Perhaps we have been wrong all along. Perhaps there is no point saving. Let's have sushi.

Most of his clients could only afford 100 % finance deals last year in the Richmond/Berkely/San Pablo areas.

Isn't 100% financing more difficult to afford? The payment is much higher than that of one with 20% down.

Weather in the Bay Area is getting really bad lately. It is almost 80 today. I am now steaming even with A/C on. I need to start thinking about moving to a cooler place.

Randolph Harrison, banzai!

Sushi. Fred. Robata. Let me know when you'll be up this way Peter P.

That gives me an idea. Any tentative interest from anyone in Marin Brewing Company this Friday after work?

So is the deficiency judgment allowed on piggyback mortgages (junior lien) in California or not. I think this is the key question that we need to clarify, because I have a feeling that many 0% down FB’s can’t just mail the keys to the bank.

I don't think a deficiency is allowed in a nonjudicial foreclosure where the 2nd is a purchase money mortgage. It would be a different story if the FB obtained a refi. Then they could get a judgment and garnish her wages until she either paid in full or went BK. This website has a good explanation:

http://www.the1031attorney.com/publications/shortsales.html

That gives me an idea. Any tentative interest from anyone in Marin Brewing Company this Friday after work?

I would love to come, but I doubt I can get there before 7 or 8.

Ladies and gentlemen.

Homeownership is a national issue. It is the foundation of American culture and the cornerstone of the American family. We can't just turn parents out onto the streets with their kids because crooked mortgage brokers tricked them with lies about exotic loans. And what about the elderly who are using home equity to pay for medical expenses and fund their retirement? A true housing collapse would be catastrophic for the American economy, and especially for the hardworking middle-class taxpayer, most of whom are homeowners.

I for one think something needs to be done to alleviate the impending stress this lending implosion will cause on the fabric of American society. It is the duty of our government to let off the pressure slowly, in a way that allows all American homeowners to keep their homes. Not only do families need shelter, but Americans nearing retirement age need their elected officials to protect their nest egg. Turning these people out on the street will wreak much greater havoc with the U.S. economy, and by extension the global financial markets. Is that something we can live with, given the availability of better alternatives?

That is precisely why I am proposing a Homeowners Bill of Rights. Congress needs to approve tax writeoffs for all underwater home loans and a mortgage payment guarantee system for homeowners temporarily unable to make their loan payments. The FED will print more money to keep the major banks afloat, but if we let the little guy sink during inflation, we have lost the point of this great nation. It will be easier to help America back onto its feet if we don't let it fall far in the first place. We must stand shoulder to shoulder in this time of trials and bear the burden equally.

My fellow Americans, it is our responsibility as a free and loyal nation to uphold our responsibilities to our fellow citizens. By the People, Of the People, For the People.

Thank you.

Paid for by the Committee for Brand for U.S. Congress, Colorado 2008

hymie Says:

"Not sure if anyone posted anything like this. Sorry to repeat if anyone did. But this graph in pretty amazing..."
_____

Haven't seen one of those since the Nasdaq collapse of 2000.

G-d almighty...

The horror!

The horror!

I think a moment of temptation might be at hand this week. Two condos have gone up for sale less than one mile walk from work. One is a HUD home, 716 sq.ft. 1/1 for $89K (-$16K vs. nearest comp). The other is an REO property, 936 sq.ft. 2/2 for $111K (-$25K vs. nearest comp). Both have an HOA fee of approximately $150/month.

This brings up an interesting question. We seem to be in a worst-case scenario mode lately, predicting some sort of large scale collapse and government bailout. However, does it make sense to buy a property at a 20-25% discount if you could enjoy living there?

A colleague pointed out that if subprime and Alt-A start to implode, we could be awash in even better real estate deals on single family homes. But what if I could talk the bank down to $100K for a nice 2/2 condo with gas fireplace within walking distance from my job? That alone would save me at least $100-150/month just in gasoline. And with 20% down, the PITI would actually be lower than my current rent on a 2/2 apartment of 900 sq.ft.

But if better deals are in the pipeline, I wouldn't want to miss out...

There is no use in trying to time the market to get the absolute bottom. If you find a place you really would like owning, and are definitely getting a big discount, and can AFFORD the downside, I'd say go ahead.

Figure that you'll wind up having to sell your 100k condo for, say, 60k. If that doesn't make you balk, you might consider it.

Of course, you might consider trying to rent a condo in those buildings. I bet you can find some for cheap rent right now.

OO (or anyone who has invested in DBC etc)

How the heck the taxation works for these things ? I received a grantor trust letter for DBC and I am trying to make some sense out of it. My taxes are easy and can be done with TurboTax. So I am trying to figure out what to fill where. This headache alone is enough deterrent to invest in any more commodity ETFs. :-(