Friday, April 18, 2008

Notices of defaults continue to grow

The most recent details of NOD's are available from Fidelity Title. For the week we had 432 defaults. If we continue at that pace we will have 22,464 defaults in Kern County this year. What a disaster. All of the bottom callers need to check their analysis before they continue with their mind numbing drivel about how "now is the time to buy".

With defaults increasing, unemployment increasing and credit continuing to be very tight there is no way we are at the bottom.

NOD list from


OtherSideofBellCurve said...

I agree, it's going to get much worse before it LEVELS OFF. That's what I don't get. Do people think that if they don't buy it's going to turn around and go right back up? It works that way on the way up in a real estate bubble, prices come crashing down as we have seen, but when this thing finally bottoms out it's going to stay there for quite some time.

My wife and I are waiting for some serious price stability before we purchase. of course, 2 or 3 months does not mean stability. We are thinking more like 9 months to a year of similar pricing.

Engineering Guy said...

OSBC - The other thing that we have to consider / add is that inflation is knocking on our door. Interest rates will go back up and will make borrowing money that much tougher. It will be interesting to see what else that does to our market. . .

also, welcome back mr bubble.

hankmeister said...

eek.. Stagflation. Bush is starting to make Carter look good.
Did anyone else notice the huge spike in new permits last month? I hear the fees got increased.

Bakersfield Bubble said...

More permits...more homes...more inventory...hello supply, meet demand... When will these guys learn?

OtherSideofBellCurve said...

It's classic though in all the different bubbles we have seen from the great depression to the tech bubble.

It crashes somewhat, then makes a mock comeback, then the real pain begins. I have to think this little uptick is just another example of how the bubble plays out.

Anyone read the Bakersfield Life article in the paper Sunday? Great little fluff piece. Interesting to see how all of a sudden that guy had a boat load of real estate ads in his mag when he does a story on "it's a good time to buy". Smart.

nddl04 said...

I have a real estate accounting question for you guys. As we all know, sales prices are public information. I remember reading somewhere that one of the big contributing problems during the boom was allocation of cost. For example, a buyer is going after a home listed for $200k. That is the amount the seller wants to walk away with in their pocket after all is said and done. The buyer has no assets (fresh out of school or unable to save) and no cash on hand so they work with the lender to lump in the closing costs. In addition, they get a bubble loan so they can upgrade the place right away (whether they do that or spend a month in Europe is up to them). Even more subtle are deals like "if you pay the listing price, seller will pay the closing costs." How is the total cost truly allocated?

If this is true, when the SP is listed, the reported values will be the inflated amount, not the true MV sale of the home. This creates a feedback cycle, increased prices open up bubble lending, which increases percieved sales prices (due to the error), sparking even higher prices and even more equity lending.

Anyway, I'm just looking for some clarification in the matter. I've become the real estate pontiff for many friends and family (several of whom are reaching or just recently in the home purchasing age/income group). I often get asked the question of "how did this happen in the first place?" I've asked this cost question to a few people in real estate, including a good friend, but every time I get a little bit of a hat dance around the issue.

OtherSideofBellCurve said...

1. The fed lowers the interest rates to ridiculous levels to lesson the blow from the tech bubble. This creates a massive amount of credit.

2. All of that credit goes into the next best thing, real estate.

3. Mortgage brokerage companies spring up like weeds because it becomes very easy for them to package these loans and sell them to wall street.

4. These same mortgage companies are making a killing for every loan they process, so they don't care that the buyer isn't qualified and neither did the investment house who purchased them. (although, if you ask the Bear Stearns employees now, they probably care a great deal!)

5. What you stated is absolutely correct. Because credit was so incredibly easy to get, buyers asked for and were given much more than they needed for the asking price, and again, nobody is watching because the packages are easily selling on wall street.

6. Appraisers and mortgage brokers were only too happy to give the consumer what they wanted as long as they could line their pockets while doing it.

7. The myth keeps getting reinforced by the real estate agents, appraisers, mortgage brokers and pretty much anybody with a financial interest in the scheme.