If You Make a Profit, Then It's All Good, Right?

Ok, one more before I leave on vacation.

The snippet of chart, below, is from The Mess Greenspan Made blog. It shows that notices of default (NOD) in Marin, as reported by DataQuick, are up over 100% from this time last year (yes, not as bad as other, less special counties; although foreclosures.com has Marin NODs closer to 150 which would make the percentage closer to 159%) along side the ethnic breakdown of the county according to the 2005 census data. If it is assumed that the NODs are evenly distributed across all ethnic groups (which I think is the safest assumption to make absent other data), then it suggests that the majority of NODs were issued to caucasians (which is what you would expect by chance alone). If so, it suggests that our caucasians have had need of "exotic" mortgages, possibly more than most folks want to admit (don't underestimate the power of making appearances).

Now consider these quotes from today's Chronicle (emphasis mine):

The number of Bay Area homes lost to foreclosure during the second quarter hit the highest level in almost two decades, and the region’s homeowners also received a record-high number of mortgage default notices, according to a report to be released today.

One ominous change is that notices of default increasingly are leading to foreclosure. This year almost half - 45.4 percent - of notices of default resulted in homes being lost to foreclosure. A year ago, only 12 percent of notices of default resulted in foreclosure.

Furthermore, consider that it is now being reluctantly admitted by some that the "subprime woes" are not in fact "contained" to subprime; that the problems infect the "highest quality loans" too. I don't know about you but I think we are entering some "interesting" times.

But That Was Then, Today It's Different

Well, I am heading out on a short vacation and seeing as how tempers are flying, people are getting scared, and because I don't want to babysit this blog while I'm gone, I am going to turn off comments for now. But I will leave you with this tidbit I found over in the DataQuick press release archives -- it's a snippet of a lengthy table:

Those percentages in the "Loss" columns are the percentage of sellers who lost money on the sale of their house... sellers who had to write a check at closing. Yep, Marin wasn't as bad as some other places (and I doubt it will be any different this time around), but tell that to all the people who lost money. I guess 13 years ago Marin wasn't immune or even all that special; not like today.

And just think, back then the market tanked for real reasons like a recession and job losses and all the rest. Today we don't even have that as an explanation; the economy is doing great we are told and everyone is so much wealthier today (thanks to all that "wealth creation technology").

But it seems prudent to take into consideration the facts that the numbers are so much bigger today, the debts (as compared to income) so much greater, and the loan types so much flakier...

Let's Make Fun of Some Marin Sellers

This POS has been on the market forever. It's described as "Tahoe in Marin". What could be better? Trendy Tahoe meets trendy Marin without the fuss of snow. Stats:

How's a $127,000 price reduction for you? But it's only a 15% reduction from the original asking price. These clueless sellers will have to drop more like 30% if they hope to sell. Given the days on market (DOM) statistic for this POS (DOM = 311 days) you would think the sellers would have figured that out by now. But I guess they are holding out betting on the stupidity of most buyers and Bay Aryians impulse to be trendy and impress friends and family.

* * *

Hey, it's Kentfield. It will impress your friends. If you are a lawyer or an investment banker or just someone who sold a trendy web site for way too much money to a trendy search engine company, this is where you want to live.

Eh! Only a 12% reduction. These fools have waited 173 days (if you believe that stat) and they can wait another year.

* * *

All I can say about this San Rafael seller is "Wow, after nine frenetic price drops and 265 days the best you could do in the end was a 15% reduction?" I really hope no buyer rewards these people.

* * *

San Anselmo seller wife says to San Anselmo seller hubby: "I thought you said we were going to be millionaires! With this price reduction we can't attend the parties!"

* * *

Oops, looks like these Novato sellers can't go to the parties either.

* * *

Neither can these San Rafael losers.

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Lagunitas too.

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Sausalito too.

* * *

That's another 25% price reduction in San Anselmo. But that DOM is nothing by Marin standards. Keep on waiting...

* * *

Who are these Novatoans trying to kid; that's only a 23% reduction.

* * *

Other than being ridiculously over price, the real reason why this Novoto POS hasn't sold is probably because no one can figure out what the actual asking price is.

* * *

What with a 26% price reduction and $476,000 dollars saved you could almost turn around and buy a low-end Marin POS with what you are saving! What are you waiting for?

Oh, but that's a price depreciation of about $1300 per day so if you keep on waiting before you know it this place will be priced properly.

* * *

And the list goes on and on and on and on... this is nothing.

Buyer Beware the DOM

I saw this over at the eFinanceDirectory.com site. Given that the Days on Market (DOM) statistic is near and dear to my heart:

Knowing how many days a home has been on the market is an important piece of information for buyers, but thanks to a new ruling, real estate agents are now able to deprive interested parties of this crucial data.

When looking at real estate, there are typically three MLS numbers buyers need most: price, square footage, and days on the market.

Unfortunately, only two out of three will be available to buyers in Southern California from here on out. The Southern California Multiple Listing Service has made the questionable decision to deprive buyers of crucial data and remove 'days on the market' statistics from listings. 'Combined days on the market' information will also be a thing of the past.

The decision was announced in the SoCal MLS online newsletter just a few days ago and has already been implemented.

Days on the market and combined days on the market statistics will still be available to real estate agents, but will no longer be included in client reports. According to the SoCal MLS BOD, in a 'changing market' days on the market stats hurt sellers and help buyers...

While there is currently no law that prohibits re-listing practices, there is no denying that such trickery is an underhanded way to make a profit. And it has to make you wonder...if there are realtors and sellers out there willing to go to such lengths to hide days on the market information, what else are they willing to do to sell a house?

Consider that yellow POS in Mill Valley in the previous post. It has been on the market for well over 1.5 years with no significant change to the property (other than its initial upgrades) yet the DOM indicates it has been on the market (this time around) for just 67 days. No doubt it will soon be taken off the listings and then relisted with a DOM of zero to make it look new and fresh as it has done many, many times over the last year and a half.

Or consider this Mill Valley shack which I first blogged back in July of 2006. It's been on the market for at least 365 days yet its DOM as of today indicates that it has been on the market for just 63 days. Nothing has been done to it; the heirs simply don't want to sell it for what it's really worth.

Pretend you are a buyer looking for a house. When you see that Mill Valley POS in the listings and then consider that its real, publicly documented (on this blog anyway) DOM is at least 570 days, what goes through your mind? Answer: "There must be something wrong with that place. I better look at other listings" or "The seller must be desperate; I bet I can get that house for a lot less than the asking price".

Now pretend you are the seller or seller's agent of that Mill Valley POS. You know that house has tried to sell for over a year and a half and failed. The seller is unwilling to lower their asking price below their loan amount (mid-$650Ks) which is essentially what the sellers are currently asking. So what do you do? You see the DOM has ticked up to around 75 so you delist the property, wait the minimum period required by law, and then relist it with a DOM of zero hoping buyers aren't paying attention.

Why, in a transitional market like ours today, is a low DOM important for sellers?

1. A low DOM suggests that a property is new to the market and therefore more desirable.
   
2. A low DOM conceals weakness in the marketplace.
3. A low DOM conceals problems with the house and its location.
4. A low DOM means the property has a greater chance of selling at a higher price and therefore resulting in larger commissions not only for the seller's agent but the buyer's agent as well.
   

Why is an accurate DOM important for buyers?

1. A high DOM indicates that a property is not new to the market and is therefore less desirable since it has not already sold.
   
2. A high DOM indicates likely problems with the property or its location and therefore greater caution should be taken by the potential buyer.
3. A high DOM indicates that the seller is likely distressed and more willing to make a deal.
4. A high DOM means that the current asking price is too high and that it is therefore justifiable to offer less.
   

It seems reasonable to me that if there have been some substantial changes to a property since the last time it tried to sell (e.g., a new roof, an addition, new floors, etc. but not lame things like new paint) then it may make sense to relist the property with a reset DOM as it can be argued that the house is in fact a new house, not like the old, previous listing and therefore needs to be re-evaluated by potential buyers.

Because it is no longer necessary to hire a middleman (i.e., real estate agent) to search for a house to buy nor is it even necessary to hire an agent to go into escrow, the sales attempt history of a house needs to be publicly available and easily attainable to the buying public and not coveted by real estate agents and doled out in controlled, potentially manipulable ways. A healthily functioning free market requires equal availability and access (by buyer and seller) to all relevant information if market pricing can be argued to be fair and justifiable.

At the very least, the DOM and other sales history info needs to be honest.

From Myth to Fact to ... ?

I wasn't really going to post much anymore as the "myth" of a housing bubble is now accepted fact (I just love this real estate agent quote -- "Just a couple of years ago, people were saying ... the housing bubble is a myth. That turned out to be absolutely incorrect."). But this article in the NY Times mentions Marin and only belatedly confirms what we already know to be happening now -- the bottom half of the market is tanking and the upper half is doing okay; county stats reflect the change in the mix in what's selling... primarily the pricier houses; as events proceed expect the upper half of the market to become less and less secure.

It's nice to see some in the main stream media (MSM) finally getting with the program, even if too late.

On a related note, I have enjoyed watching this San Rafael house's recent "sales" history:


This house has lots of curb appeal, it's reasonably sized by Marin standards (3 br, 1 ba, 1108 sq ft), and, considering its location, its lot is not even all that small at 2788 sq ft. Nevertheless, it's current wishing price is only $675,000. That's down from its peak wishing price of $884,000 in mid-2006. (I would bet at the bubble's peak that house would have fetched around $900K.) So its mark-down from it's known peak value is -24% and probably more since we don't know what it will actually sell for. So don't believe all the hype from the housing bulls who are still in denial. This house is firmly within the "bottom half" of the market and if the esteemed NY Times can use a single house in Mill Valley to argue that the upper half of the market is still doing fine then I can use a single house to show that the bottom half is not doing fine.

Oh, and then there is my all-time favorite in Mill Valley... it still hasn't sold putting its real days-on-market statistic well in excess of 1.5 years:


The above house was originally bought and sold within a five month span... a classic Marin flip gone flop.

I think the above floplords might want to check out Dr. Mort Gage's Burn Creme:

S&P Finally Says Subprime is Mostly Junk

This is just too huge not to post:

WASHINGTON (MarketWatch) -- Standard & Poor's just drove a huge harpoon into the heart of the mortgage credit bubble, and it's going to take a long time to clean up the mess once the beast finally dies.

S&P, one of the three main credit-rating agencies that served as enablers of the subprime-mortgage boom, announced Tuesday that it would lower its ratings on 612 bonds, a small portion of the mortgage-backed securities it had given its seal of approval to. See full story.

But the bigger news is that S&P isn't going along with the charade anymore. S&P said it would change its methodology for rating hundreds of billions of dollars in residential-mortgage-backed securities. And it would review its ratings on hundreds of billions of dollars in the more complex collateralized debt obligations based on those subprime loans.

A lot of debt will be downgraded to junk status. A lot of that debt will have to be sold at fire-sale prices. A lot of pension funds and hedge funds that once thrived on the high returns they could get from investing in subprime junk will now lose a lot of money.

S&P's announcement is a death warrant for the subprime industry. No longer will mortgage brokers be able to help buyers lie their way into a home. Fewer stressed homeowners will be able to refinance their mortgage, thus extending and exacerbating the housing bust.

"We do not foresee the poor performance abating," S&P said.

Prices will fall, and foreclosures will rise. More mortgage fraud will be uncovered as the tide goes out.

And hedge funds will have to find another way to beat the market -- if they survive this blow, that is.