Thursday, January 31, 2008

L.A. Times: Homeowner credit evaporates - "if they're upside down we'll definitely cut them off"

The financial system is starting to make the Titanic look like the model of stability. Home lenders are seriously tightening HELOC standards, according to this January 31 article by Kathy M. Kristof and E. Scott Reckard. Sinking values have put many homeowners upside down on their mortgages. Countrywide and others are turning off the cash spigots.

Economist Peter Morici at the University of Maryland says that when credit is contracting, the Federal Reserve's lowering of interest rates is not going to help much. "The Fed is pushing on a string."

Chase Home lending customers this week who were able to borrow 90% of the value of their home will next week only be able to borrow 70% if they live in certain parts of California - care to guess where?

Chase is turning down many many requests for refinancing. It'll be interesting to see how many of those mortgage applications that we've seen surging in the last few weeks really bear any fruit.

Note: I have data collected for dollar volume transactions for January, and I've updated my Excel workbook. However, chart publishing will be slightly delayed because this weekend I will be terribly busy canvassing for Ron Paul before the Tuesday primary. We'll be hitting district 35, which has a relatively low percentage of Republicans compared to district 36 (where I live). We stand a better chance of earning 3 national delegates out of district 35. if you're interested in helping out, check out the Hermosa Beach Ron Paul meetup.


Blogger Judicious said...


The correction is just beginning in the South Bay, IMO. A house just around the corner from us just sold for far less than it did in 2005 ($1.65M down to $1.4M). It was a short sale that was on the market for 8 or 9 months. Nice house, great ocean view, etc. The fact that lenders were allowing buyers to purchase homes like this with no money down is a big part of the reason prices spiraled so far out of control. I think we're only in the second or third inning here, and prices will fall much further. There are a number of factors that will drive prices much lower over the next several years (ARM resets, recession, higher lending standards, market psychology, etc.). Until prices get in line with incomes and people's ability to pay with traditional financing the decline in prices will continue.

I'm so glad we didn't buy in 2005, we would have been financially slaughtered by this slow moving train wreck.

Good luck to you and keep up the great blog!

9:16 AM, February 02, 2008  
Blogger bearmaster said...

Until prices get in line with incomes...

Yes, and I would add that even this is optimistic since it assumes that people will continue earning the incomes they are earning.

Thanks for the support!

10:29 AM, February 02, 2008  
Blogger wannabuy said...


Have you noticed inventory shot up like I've never seen before since the superbowl?!?

Is ziprealty broken?

I'm serious, my artilce is called a dam break for a reason. 40% spikes!

Or did I get bad data?

This is either bad data or huge.

Got popcorn?

10:15 AM, February 05, 2008  
Blogger bearmaster said...

Hi Neil,

I think the Zip Realty system is whacked. They keep relisting crap they just listed a few weeks ago.

My records do show 70 genuinely new listings for January. But that understates things because not all the pack-em-in senior condos are listed - only a handful.

FWIW, I have 96 new inventory listings recorded for January of 2007, but as my database was still pretty young then, I am not sure how comparable that is.

I am late with charts for January. There will be a delay of another day or so - sorry about that. I had an accident today and I need to kind of take it easy for a day or so.

3:03 PM, February 05, 2008  

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