Sunday, May 31, 2009

Alt-A Bomb

I haven't done this in a while, so lets do some detective work and poke at house debtors.

Here was the story:
2009-05-30: Alt-A Loans, Second wave of foreclosures ahead
Refinancing three years ago into a pay-option loan allowed Kristi and Marvin Laron to avert a jump in the monthly cost on the original loan the couple used to purchase their Cloverdale home. The loan’s minimum payment was $400 lower than their previous mortgage payment.

Our whole goal was to pay less,” Kristi Laron said. “We figured we were going to refinance again. Who knew what was going to happen.”

Now the Larons are stuck with the loan and face a $1,000 hike in their monthly mortgage payment, boosting it to about $3,200. The couple can’t refinance because they owe more than the house is worth. Their lender has denied requests to change the loan and avert the payment jump, primarily because the couple has not fallen behind on payments and doesn’t have a financial hardship.

“We’re trying to avoid foreclosing on our house. We’re trying to do the right thing and nobody wants to help,” Kristi Laron said. “We both have jobs and we can’t really complain except for wondering what the future holds.”

Here is the house:
433 Reisling, Cloverdale, CA
Z-Estimate: $340,000
Sold: 1/20/2005
Sale Price: $400,000
2008 Property Tax: $5,361

There is a house for sale in the neighborhood for $300K. As the bomb starts going off, how many houses in this neighborhood will succumb to foreclosure? And check out the property taxes; the price of "ownership".

Was their long-term plan to continue refinancing to keep their house ponzi going?

Final Question: Who will help the Larons?
(click HERE for answer)

Wednesday, May 27, 2009

Pink-Slip Capitals

#4: Los Angeles, Calif
Mass Layoffs: 100
Workers Affected: 10,594
A state budget crisis is hurting government budgets. In April, the Los Angeles Unified School District voted to lay off 5,000 teachers, school administrators, counselors and other employees.

#6: San Francisco, Calif
Mass Layoffs: 50
Workers Affected: 7736
The City by the Bay is being hit by market turmoil as financial heavyweights headquartered there, like Wells Fargo, Barclays Global Investors, Charles Schwab and Visa thin their ranks to survive hard times.

#10: Riverside, Calif
Mass Layoffs: 19
Workers Affected: 4,107
Collapsing home prices have caused mayhem in the inland empire economy leading to sweeping reductions in payrolls. State budget cuts have hit construction projects and government workers, too.

Sunday, May 24, 2009

Silicon Valley: Cracks in the Foundation

Silicon Valley... it's different here.

No, not really, but that is the kind of ridiculous thinking that permeates the mentality of people living here.

Silicon Valley, AKA 'Self-Entitlement Valley', 'Silly Valley', etc...

I know someone in Santa Clara that paid $850K for a house in '05--one of those new, packed-in, little communities. They owe $750K and the Z-est is $600K; maybe it would sell for $550K today. I then searched 18 houses immediately surrounding this one; all purchased in '05 for $750K-850K. Unless they put massive dollars down, every house debtor is seriously underwater and ALL should walk away. But this is Silicon Silly Valley, it's different here. Wrong. At bottom, these boxes should be priced around $350K. Things are just starting to get interesting, but most of the debtors are in serious denial.

After the dot-com garbage and now the exploding real estate debacle, where will the next phony injection of wealth come from for Silicon Valley?

2009-05-24: Recession suddenly humbles high-tech sector
Five miles away, former indoor plant specialist Michael A. Jones is having what he calls "a humbling experience" at a nonprofit food pantry, choosing dented cans of corn and tuna, a crunched box of Rice Krispies and some soon-to-expire milk to supplement his food stamps.

Jones used to gross $12,000 a month as an indoor horticulturist for high tech companies, restaurants and car dealerships
(SAY WHAT?? $12K/month for a glorified gardener?!), although not Silicon Valley Auto Group. Then "everyone cut back all at once and we had to shut down," he said. "It happened fast."

The Associated Press Economic Stress Index, a month-by-month analysis of foreclosure, bankruptcy and unemployment rates in more than 3,000 U.S. counties, shows that last year, as the national economy tanked, high tech economic centers from California's Silicon Valley to North Carolina's Research Triangle were apparently "recession-proof" with increasing jobs and stable housing prices.

Last fall, everything changed. When previously invested funds petered out, there was no new capital. Bankruptcies, foreclosures and unemployment in high tech regions spiked, and are now at some of the highest levels in the country.

For example:
-- Santa Clara County, home to Silicon Valley, saw bankruptcies soar 59 percent in the past 12 months, and projections are that they're still climbing;

"We had hoped we might stay insulated from the global economic crisis, and for a long time we were," said Silicon Valley Network president Russell Hancock. "But then it caught up with us and now everyone is laying off."
"There isn't anybody who isn't laying off," he said, then draws a long breath before reciting this list: "Microsoft, Intel, Hewlett Packard, Sun, Yahoo, Apple, Google." He pauses a moment to consider that. "Google. When Google is laying off you know something is going very wrong." (
What's wrong is Google, itself.)

"Folks believe that because we're in the Silicon Valley with million-dollar homes and billion-dollar businesses, hunger and homelessness don't exist. But in fact it's getting much worse, and it's just really frightening," he said.

Wednesday, May 20, 2009

Timothy Geithner

Timothy Geithner
And the taxpayer continues to pick up the tab for the mistakes, recklessness, and stupidity of others.

2009-05-20: Geithner Says Toxic-Asset Plan to Start in Six Weeks
May 20 (Bloomberg) -- Treasury Secretary Timothy Geithner said policy makers plan by early July to begin helping banks dispose of illiquid assets, in the U.S. government’s next step to end the worst credit crisis in decades.

“Working with the Federal Reserve and the FDIC, we expect these programs to begin operating over the next six weeks,” Geithner said in testimony to the Senate Banking Committee today in Washington.

The Treasury’s Public-Private Investment Program will use $75 billion to $100 billion of government funds to finance sales of as much as $1 trillion in distressed mortgage-backed securities and other assets. The effort has two components, which the Treasury will manage in conjunction with the Fed and the Federal Deposit Insurance Corp.

Sunday, May 17, 2009

UCLA Anderson Forecast

Why does this group continue to be published? But if it's predicitions you want, here are 10 that are probably much more accurate than Anderson Forecast
America By 2012: 10 Dire Predictions

And follow the link for Mark Shniepp. Is this the kind of "expert" you want to follow?

2009-05-15: Home price fall nears bottom
Although 2009 will be a “throwaway year” for San Diego County, with double-digit unemployment, growing office vacancies and declining retail sales, local housing prices will hit bottom this fall, heralding an eventual recovery, UCLA's Anderson Forecast predicted in a report to be released today.

The Anderson Forecast, one of the state's most followed teams of economic analysts, predicted that housing prices will start rising steadily by the second quarter of the year, starting with a rebound in the price of existing single-family homes.

“When it is generally perceived that selling values have reached a bottom, sideline buyers will enter the market and conventional home sales will dominate the real estate recovery,” UCLA economist Mark Schniepp said. “Reported selling values for homes will reverse, slowly at first, and then rise more convincingly.”

Oh, yeah, Anderson Forecast?

2008-03-11: Experts' forecast sees no recession
UCLA's Anderson Forecast, which previously has been ahead of the curve in forecasting the downturn of the California housing market and the resulting decline in the economy, predicted yesterday that the state and nation would not fall into a recession.

The data don't yet add up to a recession, and there is nothing to challenge the basic story of sluggishness that we have had for two years. Don't worry, be happy,” said Edward Leamer, director of the forecast, the state's best-known economic report.

Tell us more, WHORES!

2006-05-04: County home prices to flatten
With home sales sharply declining and values hitting a plateau, economists from the UCLA Anderson Forecast predicted yesterday that residential real estate prices in San Diego County will remain flat through 2011.

Ratcliff said no crash in prices is likely since the economy is so healthy. Generally, home prices fall only when large numbers of workers lose their jobs.

“Home prices will plateau but not depreciate,”
Ratcliff said. “Home prices only fall during recessions.”

Saturday, May 16, 2009

Trampled Green Shoots

I like lists of things. Here is one from Jim Willie...

2009-05-15: Trampled Green Shoots
What follows is a laundry list that puts the USEconomy halfway between the Intensive Care Ward and the National Morgue:

  • Endless War spending could subsidize every household in America with $1000 per year
  • Income is trending down in the United States, England, and Japan
  • US banks loan loss reserves are at a 20-year low while profound losses continue
  • Of the nearly 9000 US banks, 1575 of them posted a Q1 loss
  • Bernanke claims $2 trillion is needed by the big US banks, but they pass the Stress Test
  • Municipal bonds and state finances are disasters, as they each appeal for USGovt aid
  • A shocking 20% of US homeowners have loan balances greater than their home values
  • Half of modified loans result in foreclosure within several months
  • Jobs report for April revealed jobless level at 8.9% (massaged) and 15.8% (actual)
  • Jobs Report for April included 66k worse revised job losses for March and February
  • Continuing jobless claims at 6.56 million, grew 220k just last week
  • CALPERS pension fund is insolvent, USGovt pension PBGC guarantee fund in deep deficit
  • FDIC requested $500 billion in additional funds to cover bank failures (giant failure coming)
  • Car sales still down 40% annually, with steep Japanese car sales declines also
  • Detroit carmakers are closing down plants, with huge ripples through entire supply chain
  • GM & Chrysler restructures are extremely likely to result in Chapter 7 liquidation in time
  • GM burned $1.3B in Q1, burns $113 million per day, unable to transition to green cars
  • Business investment down 38% in Q1, a RELIABLE LEADING INDICATOR
  • Durable goods up 9% in Q1, but only after Q4 was pushed down from bank shock
  • Inventory reduction not key, but rather inventory/sales ratio, since sales way down
  • Economic contraction despite lower energy costs from crude oil, natural gas, gasoline
  • Housing was false foundation since 2002, now in stubborn decline, the Giant Albatross
  • Distress sales make up 40% of all housing sales, led by underwater sales and foreclosures
  • Cramdown Law rejection means open season on foreclosures, more huge bank losses
  • Banks admit that home loan are not modified after all, a revolving door to foreclosure
  • Option ARMs, Jumbos, and Commercial mortgage defaults are ramping up fast
  • Commercial mortgage bonds have $70-100 billion that cannot be refinanced, sure to default
  • Staggering decline in consumer credit, -80% in Q3, minus $31.7B in Q4/Q1

Wednesday, May 13, 2009

Monday, May 11, 2009

2009: Credit Cards and California

From Welcome to 2009, here is more supporting information for the downtown.
  • * Credit Card Debt and Credit Contraction
  • * Reduced State/Government Tax Revenue

    2009-05-10: Credit card losses
    Mr. Ward lost his job at a retail warehouse in April and so far has managed to make minimum payments on his credit card debt, which he estimates at $15,000 to $20,000. Asked if he thinks he will be able to pay off his balance, he said, “Not unless I win the lottery.”

    In the meantime, he said, “I’m just doing what I can.”

    Even if Mr. Ward can pay off his debts, experts predict that tens of thousands of Americans will not be able to, leaving a gaping hole at ailing banks still trying to recover from the housing bust.
    The bank stress test, released last Thursday, found that the nation’s 19 biggest banks could expect nearly $82.4 billion in credit card losses by the end of 2010 under what federal regulators called a “worst-case” economic situation.

    But if unemployment breaches 10 percent, as many economists predict, the rate of uncollectible balances at some banks could far exceed that level. At American Express, Citigroup, and J.P. Morgan Chase, one-fifth of the credit card balances are expected to go bad over the next 20 months, according to stress test results. At Bank of America and Wells Fargo, about a quarter of card loans are expected to sour.

    (hat tip to Exurban Nation)
    2009-May: CA State Revenue in April 2009
    * The State’s revenues continued to deteriorate in April. Total General Fund revenues were down $1.89 billion (-16%) from the latest estimates found in the 2009-10 Budget Act.
    * Personal income taxes were $1.06 billion below the estimate (-12.6%), corporate taxes were below the estimate by $831 million (-35.6%) and sales taxes lagged the estimate by $108 million (-19.9%).
    * Compared to April 2008, General Fund revenue in April 2009 was down $6.3 billion (-39%). The total for the three largest taxes was below 2008 levels by $6.3 billion (-40.3%). Sales taxes were $452 million lower (-50.9%) than last April, and personal income taxes were down $5.7 billion (-43.6%). Corporate taxes were $142 million below (-8.6%) April of 2008.
    * Sales tax collections year to date are short $327 million (-1.8%) from the 2009-10 Budget Act. Income taxes were $653 million lower (-1.7%) than expected, and corporate taxes were $788 million lower than expected (-9.5%). The State’s other revenue streams were $299 million below (-6.7%) the estimates.

Friday, May 1, 2009


ACORN,, ACORN Housing Services
And as the Housing Bubble enters the later stages of its destruction, a group has to insert its stupidity in hopes of saving house debtors. Fools, morons, monkeys, and jackasses... welcome, ACORN.
(hat tip to Sacramento Land(ing) )

2009-05-01: Protesters disrupt foreclosure auctions in Sacramento
Protesters disrupted several foreclosure auctions Tuesday on the Sacramento County Courthouse steps, winning a temporary cancellation of one and sending an unidentified auctioneer to the hospital with chest pains.

An ACORN official said the activist group simply wants more time for struggling borrowers it claims were often targeted for dangerous loans.

"Many of the sales that are happening now are around houses that could be saved by the (loan modification and refinance) plans starting to be implemented," said Amy Schur, California director of ACORN.