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Let Me Talk To My Manager, I Think We Can Get You Into A House Today

December 5, 2007 By 1 Comment
adjustable rate

It is becoming apparent that we will soon know what the government’s response will be to the growing real estate mortgage crisis. In this upcoming election year, nobody wants to appear insensitive to homeowners possibly losing their homes, so many knee jerk reactions are being formulated. How will a plan of this magnitude even become close to being fair?

As you can see from the chart below, many adjustable rate mortgages are about to reset and foreclosures are expected to increase as these loans adjust to higher interest rates. Adjustable rate mortgages have been around a long time, and we have never experienced this amount of properties that are in some stage of foreclosure.

Why Are So Many Homeowner’s in Distress?

What haven’t been around a long time were subprime loans. The chart indicates the majority of these loans are the high risk loans which are about to increase. Plus the industry introduced new products such as the option arm allowing borrowers to make the smallest of monthly payments. So when you provide 100% financing to someone who has less than ideal credit, and then allow them to make the minimum of minimum payment’s you have the recipe for disaster. It’s like providing an all you can eat buffet at a weight watcher’s meeting!

adjustable rate

Notice how subprime loans diminish as part of the overall lending portfolio. Someone finally said “Oh my God, What Have We Done?”

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Pasadena Housing Market Foreclosure Update

November 26, 2007 By 1 Comment
up2daterealestate preforeclosure

In the current housing market the only segment that is showing any growth has to do with the foreclosure market. Looking as far back as 1990 in Los Angeles County, foreclosure activity peaked in the third quarter of 1996 and did not begin to level off until approximately one year later. The foreclosure market hit bottom in the third quarter of 2005, but since then has been steadily increasing. When home prices are rising at 15 – 20% per year the amount of foreclosure activity is almost nonexistent as increasing equity can offset rising debt.

What is Happening in Pasadena?

The chart below indicates the amount of monthly foreclosure activity. For the most part, the foreclosure filings have steadily been increasing for about a year now. The activity appears to have peaked in August, however the data could be about to change. The largest number of adjustable rate mortgages are set to reset in late 2007 to early 2008 with many of those being subprime.up2daterelestate foreclosure

Foreclosure Activity by Zip Code

Analyzing the activity in Pasadena, the greatest numbers are found in zip codes 91103 and 91104. Overall there are 259 properties that are in some stage of the foreclosure process. These consist of single family, condo/townhome, multi-family or commercial. The majority are single family homes followed by townhomes or condominiums. This represents approximately 95% of the foreclosure market.

up2daterealestate preforeclosure

The zip codes of 91103, 91104, 91106 and 91107 represent 90% of the current activity and you can see how the numbers are growing month by month. Also many homes are in the initial “preforeclosure” stage. This means that the homeowner has missed one to several payments and a notice of default has been filed. This period will allow a property owner an opportunity to correct the situation. Sometimes a home is sold or refinanced while it is in the default process. The important thing for someone to understand is that there are options available. Most lenders do not want to foreclose and take the property back. The worst thing someone can do is to ignore a dire situation and hope it goes away.

up2daterealestate zip codes

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What Does Starbucks Have In Common With The Housing Market?

November 19, 2007 By 2 Comments
starbucks.jpg

StarbucksWhatever is good for General Motors Starbucks, is good for the US economy.

I cannot think of any US companies that have been able to build a brand that has become so ubiquitous. And in the manner in which they have done it. Think about it. When was the last time you saw a Starbucks ad or flier in the newspaper offering a discounted price on a cup of coffee to get you into the store? What if Target or Best Buy could generate increased store traffic week after week without those fancy colorful 12 page Sunday circulars? It just can’t be done. The American economy is built on advertising and promotion. However, their strategy is to blanket an area with retail stores and forgo the advertising. Or at least it was.

Has Starbucks become the new American icon?

Here in Pasadena I count 9 freestanding Starbucks stores to only 3 McDonald’s. Some of the stores are so close you can walk from one to the other. However there may be storm clouds brewing. Starbucks introduced this week a national TV campaign and indicated that sales growth may be slipping. Other fast food competitors see the margin to be made in a $2.00 cup of coffee and who better to go after than the company that created it. Is the sale of a single cup of coffee impacted by competition or by the economy?

Has the Housing Market affected Starbucks?

A slowing housing market impacts many industries. It may not be felt immediately but over time its bound to catch up. Consumers have a choice to make in the morning. Spend $3.50 on a jumbo half caf, double down latte or buy a gallon of gas. Spend $4 for an extra espresso shot or buy a gallon of milk. There comes a point when external forces place too much financial pressure on the American consumer, then they step back and say UNCLE. No mas. Enough already.

Could this be the scenario in the housing market? Are consumer’s saying prices are too high, and homes are unaffordable? The price of money is fairly inexpensive and thereby the housing market should be much more bullish if past history would be any indication. Consumers may just be feeling uneasy about the economy and thereby avoiding a 30 year commitment in the form of a mortgage.

As we drift into unchartered water, consumer buying habits may become harder to predict. Gas prices previously flirted with $3.50 to $4.00 a gallon, but last time we had a housing market. Oh well, enough analysis for the evening. It’s getting late and if I am going to finish my other projects tonight, I need a cup of coffee.

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Pasadena Home Values Near 2005 Levels?

November 15, 2007 By Leave a Comment
up2date real estate blog median price

The Los Angles Times reported today that home levels are near their April 2005 levels.

Just for kicks we went back in time to April 2005 when there were approximately 180 recorded residential sales made up of single family, condos and townhomes. I found that the median price was $598,000. Then I looked at where the median price for Pasadena was in October 2007. Again, I merged the data using single family, condos and townhomes. The median price was $655,000, with 54 units sold. Not quite near April ’05 prices.

A lot of the analysis we feature here at up2date separates the reporting of single family compared to condos and townhomes. I simply feel it provides a much more accurate snapshot of the market. The point they were attempting to make is that the market is in an awful slump and as a result prices are coming down and may continue to come down.

However, all real estate markets are local just as we see certain disparities within the zip codes of Pasadena. Below is a chart that looks at listing prices in the single family market
up2date real estate blog median price

and also listing prices of condo / townhomes
up2daterealestate blog condo townhome

The data definitely makes a compelling case for lower prices, but then again it is that time of year. So relax for now Pasadena, we still have a ways to go before we reach April 2005.

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