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Our Sister H P I Market In California Is In Big Trouble

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Just change the names of the location in California to the similar market in the UK and you have the exact same conditions. They are just 6 months ahead of us, that is all. We went down in 1989 with them and we stayed at the bottom until 1996 just as they did.


Saturday, July 8, 2006
Refi loans could prove costly in foreclosure
Law allows lenders to go after personal savings as well as the house, unlike original mortgage.
The Orange County Register
WORD OF ADVICE: "This is going to become a hot topic," says Bradford L. Hall, managing director of Hall & Co. in Irvine, of recourse loans.
Tips for overextended homeowners
Some homeowners are just now getting behind on their mortgage payments. Experts suggest several actions:
• Talk to your lender: Some may be willing to make an adjustment on your loan or payments.
• Get financial counseling: There may be ways to cut your spending to free up money for your mortgage payments.
• Consider selling:
Better to sell now on your own terms than go into foreclosure later and lose much more.
Homeowners behind in their mortgage payments after hocking the house to pay for a major remodel or a new boat or car may be in for a rude awakening.
If they previously refinanced and their lender decides to foreclose, they may not only lose their house, but the bank also may be able to go after their other financial assets including stocks, savings and their paycheck.
Trouble ahead
Signs of trouble ahead are just beginning to appear. Lenders only sent out 444 local default notices in May, the most recent figures available, but that was 57 percent more than May of last year, according to DataQuick, the real estate information company. Foreclosures ticked up to 37 in May from an average of 25 a month.
Those figures don't even come close to the record 2,320 default notices and 674 foreclosures DataQuick recorded at the peak of the last downturn in the fall of 1996. But as thousands of adjustable loans adjust to higher – sometimes significantly higher – rates over the next two years, the situation is expected to get worse.
In a study released in February, First American Real Estate Solutions in Santa Ana estimated as many as 8,000 Orange County homeowners could lose their homes to foreclosure over the next four years.
Some homeowners with little of their own money in their homes may think they will do what strapped homeowners in the '90s did: turn over the keys to their lender if things get really bad and walk away.

A leading Realtor's website, amazing honesty about the dire condition of the market. Its going to be worse than the Great Crash of 1989-96:


Second Quarter 2006: San Diego Housing Market - single family detached and attached homes: June home sales were 2,947, down 33% from June 2005. The second quarter sales were 8,822 homes sold down 30% from the second quarter last year. As a matter of fact our second quarter sales were slightly below the fourth quarter of 2005. Who would have thought that the peak April, May and June months would have lower sales than the winter/holiday months of October, November and December. That provides a very good picture of what has happened to the demand for housing. The inventory on July 1 stood at 22,049, up from 20,635 a month earlier. For the past few months we have been adding inventory at a rate of about 1,500 homes per month. The growth has been caused by the decline in demand having homes stay on the market longer, causing new listings to stack on top of the unsold listings. One of the major issues for our market is what does the future demand look like, and only time will tell. I did a rough check on July to date (July 9) to see where it stands,
I debated about putting this in this writing because the numbers are scary and they will close somewhat by the end of the month.
I decided to put it in so that we can see the mountain ahead to maintain some level of reasonable demand. The first 9 days of July have 303 homes sold for an average price of $559,577 and an average size of 1781 sq ft; the first 9 days of July 2005 had sales of 933 and an average price of $629,168 and an average size of 1749 sq ft.
Last July's 933 sales represented 25% of the month's sales, if that were to hold this year, well suffice it to say that would be a disaster.
I think this July will stay in the 30% to 35% down from last year region and that would put July sales at about 2,700 homes sold, keeping us a path to about 30,000 home sold for the year, down about 30% from last year.
Markets can not sustain 30% declines in demand over a period of time and not have price erosion. Here is a trend to consider; sales in the fourth quarter of 2005 was down 10% from prior year, sales of the first quarter 2006 was down 20% from prior year and the second quarter of 2006 was down 30% from last year third quarter of 2006 ???, anybody's guess. Another issue that will impact price pressures is that about 30% of our listings are vacant and
heaven help the Fed continue to raise interest rates.
Help comes in the form of something that will increase demand or reduce inventory.

The market is getting hotter for some aspects of the housing market:


MT. PLEASANT, Pa., July 11 /PRNewswire/ -- The Gold Rush of 1849 is
long gone. According to Default Research (
http://www.defaultresearch.com' rel="external nofollow">
) though,
the rapidly growing real estate research company for foreclosure
properties, there is a lot more wealth to be gained out west 157 years
"Investors looking to profit and help homeowners in financial distress
can ride into California and parts of Arizona and capitalize on the spiking
foreclosure market," said Serdar Bankaci, president and chief executive
officer of Default Research, Inc. "The Wild West, at least in terms of
foreclosures, lives again."
The number of
foreclosures continued to soar through California
, and in
Arizona, Pima and Maricopa counties have seen an increase of 40 and 30
percent respectively since January 2006.

I am seriously thinking about buying another house in San Diego after this next crash blows through as it is shaping up to be horrendous. IR are pushing it off the cliff and we can expect the same when Gordon is forced to raise the rates to protect sterling and combat inflation. Both of which are raising their ugly heads as the economy enters the down cycyle.

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"we can expect the same when Gordon is forced to raise the rates to protect sterling and combat inflation"


When will you STOP saying GB and IRs in the same sentence. HE IS NOT THE MPC

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But were not going to have all those consecutive IR rises as they have, so how will our market follow theirs this time without them?

It strikes me there are two scenarios:

1) We eventually follow the yanks and get higher interest rates - which does the job.

2) What is happening is that we have a sea-change in the way property is owned and more and more of the UK's property stock is owned by less and less people.

I am beginning to rule 1) out - because Sterling has shown remarkable strength against the dollar - rising when it should have been falling. Also the Yanks are near the top of the interest rate cycle by all accounts. You raise interests to control a booming economy. Doesn't look like a booming economy any more.

That leaves us with 2). We may even get lower interest rates as people become more 'borrowed out' and consumer spending has to be stimulated with lower rates. In which case the structural change in property ownership here will just carry on.

"we can expect the same when Gordon is forced to raise the rates to protect sterling and combat inflation"

Protect sterling from what exactly? Sterling has gone up against the dollar while their rates were rising and ours were static. Odd behaviour to say the least. Combat inflation? Pressures in the economy are largely deflationary. Every one I know in business has a hell of a job putting their prices up (builders excepted in recent years) because since the demise of the unions, the economy is ruthlessly competitive. That's why wages for admin/semi-skilled jobs haven't gone up for 20 years.

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I so want you to be right, but haven't they had a succession of IR rises, which have tipped the market over, now being fuelled by fear of its demise?

Because of the strength of the pound, they can't put interest rates up too much over here. If anything they look like coming down medium term, which might fuel another rally. GB may well relish this, just long enough to get him into Nunber 10, then let the Tories take the fallout when it all goes horribly wrong in about 5 - 10 yrs time.

Look at Ireland, they have just sustained stupid house prices for almost a decade because of the unsuitability of the Eurozone interest rate. The only way out of it is an excess of supply, which over in the US is possible, but here is unlikely with orgs like the CPRE.

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