Deputy Dave - Corona Eastvale Norco Homes, Real Estate

You may find this blog offensive. I speak as an American who believes we can correct problems if we can identify the problem. Our country is in a political campaign and it appears that finger pointing and name calling are more common than any realistic discussion of the current situation.

Over the past few years, we have experienced a major decline in real estate prices. It is easy to blame one party or the other for the mess and defend our position with partisan sound bites.I am writing this blog with the hope that someone can enlighten me. Let me know what I am misunderstanding about how the crisis occurred. I am asking questions that lead me to different conclusions than the daily Democrat/Republican rage.

Please help me with some of my questions.

Who is the insurance company?As a Realtor, I have profited from the government promoted loans. It is personally profitable for me to sell to FHA buyers. As a home owner I have had FHA loans. When you get one of these loans, you pay a premium in the event that you faltered on the loan, the bank would be paid. I am asking you to explain to me why the government had to pay taxpayer money rather than the "insurance company" that collected the premiums.

Did greedy bankers cause the bubble?
This is a very interesting question. A greedy banker says, we will make a $10,000.00 commission on this loan. We will lose $200,000 when we foreclose on  the house. . . Let's go for it!!

Enter Derivities.
Simply put, you package the bad loans and resell them. Sell the trash to buyers who do not do any due dilligence. They are the rich people.

Why did our government feel compelled to bail out the rich people and not the struggling home owner?

Where were the bank regulators? Is this the kind of oversight you would expect? Am I the only one who can see this as the culmination of a long history of a our government's promotion policy encourage this foul plan? Now the partisan politicians want to blame a person not a bi-partisan policy.

Is it true that there were pressures placed on banks to make loans to certain groups of unqualified buyers or face being charged with civil rights violations?

Did government policies generate housing demand? 
Under FDR the government got into the the banking and housing industry. The government began promoting policies for home ownership. President L. B. Johnson continued the process. He declared a "War on Poverty." One feature of the war was to make housing affordable for almost anyone.

Since that time there have been various government policies the drive the home ownership programs.

 Is it possible that the government is behind the housing bubble? After all, no partisan Democrat is willing to admit that during the "Bush" years, we had a great, growing economy. Did the house of cards fall? Did anyone give warning? You only need to go as far as You Tube to see warnings about Fanny and Freedie being in trouble. Those people were reviled by Barney Frank and other social engineers.

Is it fair to say that the unifying thread in the run-up to this mess is the government policies of social engineering? 

I'm looking forward to reading your comments.

Buyers are looking for the Foreclosure. They have heard that the foreclosure is the real deal. Last year banks, in the Corona/Riverside area, dumped some badly damaged properties onto the market. They were accepting anything just to clear out their bad inventory. you could easily pick up a place and get some sweat equity. Today you need to think of those as "The good old days!" That was then this is now.

Today many banks are managing the rehabilitation of their vandalized properties. They paint and repair the home to make it a turnkey property. They are slowly releasing inventory of vacant properties onto the market. The banks new policy is to minimize the losses that they once realized because of their panic selling. Their new policy seems to be to release the vacant properties in determined and systemmatic manner. Their new policy is creating a consumer confidence in the market.

The banking industry has had major procedural changes since 2008. The government involvement has moved them from a rapid foreclosure procedure to a new process of placing emphasis on Loan Modification and Short Sale. Today banks use foreclosure as a last and least desirable solution.

Look at the numbers. In Corona - Eastvale there were 70 homes sold in January. Today there are nine Bank Owned properties listed. There are 79 Short Sale listings. The banks are not yet up to speed in handling short sales. They are under pressure to do loan modifications whenever possible. The sooner they take the hit on a short sale the sooner it is off their books. Most banks are gearing up to streamline the short sale process. The business as usual model for the next two to three years will be short sale. The result of this procedural shift is that it will smooth out the next spike anticipated by the loans that are pending a reset.

The market must anticapate not only the impact of the reseting loans but also the growing anger over upside down loans that are presently being paid monthly by responsible owners. Owners who are seriously considering a Strategic Default. Thus far the banks have succeeded in stabilizing the market locally. Prices are slowly climbing. Each month that passes with increased values creates a softens the impending blow of a wholesale Strategic Default spike.

Bad loans being considered, house values of today seem to be unrealistically low. Why? In today's dollars, a preponderance of the homes selling are selling at a price that is below their replacement cost. From an investment standpoint, many homes can be purchased and rented out for a gross return around 8% or more. Throw the inflation factor on top of that return and you may understand why so many homes only stay on the market for a few weeks.

As a Realtor in the Eastvale area I regularly have people tell me they do not want to get involved with a Short Sale transaction. Buyers know the facts. They have heard of the many short sale cases that drag on for months and just as they are ready to close the whole deal finally explodes! Believe it or not, the banks are moving to change that situation. It is taking time for them to retool for the new model.

2009 is behind us. We begin the new year with brisk sales. Eastvale posted some 70 closed sales in January. There are roughly 140 active listings. These numbers indicate there is a two month inventory. This is the pattern we have seen recently. That is, there seems to be a steady stream of homes coming onto the market to keep the inventory around a two month supply.

The lowest price was $304,900 and the highest recorded was $543,000.

 The smallest home is around 2100 square feet and the largest being 4,763. The cost per foot for the smaller homes is higher than the cost per square foot for the larger homes.Smaller homes sell for about $130-$140 per foot. Some of the larger homes sold for around $100 per foot.

 Most of the homes sold for more than the listing price. Some cash offers were above listing price. The majority of homes sold rather quickly. The oldest listing took 283 days to sell while the quickest sale was 3 days.

Presently homes are selling rather quickly. What is causing the buying spree? 
     1. The fact is that most of the homes are selling at a price that is below the replacement cost of the equivalent house. 
     2. The fact that the home loan available today is cheaper than can be expected in the near future. The anticipation of a loss of value in near future is offset by anticipation of increased loan interest. Roughly, if interest increases by one percent the payment will increase by about 10%.
     3. There is an incentive to get the tax credit for buying now.
     4. Presently, real estate is thought to be a good place to invest in an asset that should maintain current value or should grow in value. Real estate has historically been seen as a hedge against inflation

The big question is; are prices going up, down or staying level? Overall it appears that prices are inching upward slightly.

Eastvale is rapidly coming to be recognized as a desirable hometown. It is becoming a community of choice. It is a good time to consider buying a home or two in Eastvale.

The "Foreclosure Fire Sale" is over!

The first half of 2009 was a time to buy a distressed foreclosure house. The house was in "poor repair". That is politically correct for saying the house was "trashed!"

Common knowledge at that time was, to get a bargain on a house; buy a foreclosure. Those houses were sold "As Is".

Today in the Eastvale area, there are a few foreclosures that do not show well. They are the exception. The new business model of the banks is different. Most foreclosed homes are now cleaned, repaired, painted, landscaped and generally they are "move in" ready. Some banks do not want the property to be advertised as being a foreclosure.

The banks now manage the foreclosures in a much different manner than they did just a year ago.

Here is the good news and bad news about the change. The bad news is that if you missed the "Fire Sale," you missed out. It is over. The good news is that the new banking business model is creating a stable market. Do not expect to see more panic sales in the near future.

Most of the homes on the market today are "Short Sales." The bank controls the sale price to assure the house sells for a fair market price. Short sales are not panic, price slashing sales. The bank takes a loss,  but the house sells at a fair price.

The primary determining factor in today's market is affordability. Can the buyer afford the house. The buyer must realistically qualify to make the loan payments. That factor is an indication that we are in a standard housing market.

An additional factor is the appraisal of the home. Just because a buyer offers a given amount does not mean that the bank will loan on that price. This is just another indication of a stable market.

Many people have been fearful of the next wave of foreclosures to hit the market. It is estimated that it will about two or three years before all of the adjusting loans (toxic loans) are out of the system.

We are all aware of the out of control flood of foreclosed properties hitting the market about a year ago. Prices plummeted, properties languished and communities suffered.

Over the past several months there has been a freeze on foreclosures. During the freeze the inventories have dropped. Prices have increased.

At last the solution is in place. The banks are encouraged to modify loans whenever possible. If the owner can not qualify for a modified loan there is now a new option.

In the event the owner can pay market price rent and the rent does not exceed 31% of their income, the owner is offered the option of signing the deed back to the bank and becoming a tenant in their own home.

The length of the lease is not specified. The tenant is responsible to keep the property maintained to community standards. It can n ot become blighted.

These provisions allow the banks to systemmatically put the properties on the sale market without flooding the market. They can help to stabilize the market.

Loma Linda, California  -  We invite everyone to visit our open house at 11423 Campus St. on November 8 from 11:00 AM to 5:00 PM.

Property information

Tuesday October 27, 2009 the Eastvale Town Hall meeting was rather eventless.

The Sheriff is stopping tagging.

The CHP is receptive to knowing about our ongoing traffic concerns.

Code Enforcement is putting pressure on banks to keep the vacant properties looking good.

VanderMolen School has been recognized by Disneyland for their computer animation program for the elementary school students.

Bellegrave will not be completed through between Sumner and Hamner until the properties adjoining the missing road section are developed. The developers will provide the funds.

Eastvale Incorporation is moving along. The next LAFCO meeting is on January 21, 2010. There are some questions about fiscal neutrality since the economy slipped. The County may need to loan the new city some funds for a few years.

Since Eastvale is ahead of Jurupa in the incorporation process, we must now wait for them to catch up.

There were some residents from east of I-15 who attended. They want to be included in Eastvale. They point out that Jurupa has room to expand to the north and east. Eastvale is quite limited in its ability to expand.

Again this holiday season there will be a contest for holiday decorations. This year there will be two categories. One for exterior decor and one for interior decorations.

So for those of you who missed the meeting, this is Deputy Dave bringing you up to date!!

Eastvale is one of the areas that had a remarkable price growth during the housing price run-up. Eastvale, Corona, Norco and Riverside now appear to be at the bottom of the market. In the recent weeks, prices have increased in all 4 of these communities.

Every day someone asks me, "what is ahead?" They remind me that there are probably two more years of toxic loans yet to be dealt with. There is not anything that they can see to prevent the bottom from falling out again. I assure you that another round of bank owned panic "fire sales" will not happen. Those were the good old days for the investor.

Beginning roughly in March of 2009, the banks quit dumping foreclosures on the open market. Previously they had statutory deadlines to follow. A freeze was placed on foreclosures. It is not like nothing is happening. I am here to tell you, "Things are a changing."

You will notice that banks now have approval to hold properties. By holding them off the market, prices have again started to climb. That is only step one.

What about the toxic loan knot that is on the horizion? That problem is real. It is not being ignored. There really does seem to be a plan that is being put in place by the Obama Administration. And you well know that there is no lack of funds to underwrite the bailout plan.

Let's look at some of the things that are happening.

The Obama Administration is encouraging banks to modify loans. If a loan can not be modified, the house probably will become a short sale. The push is that the short sale will be the solution of choice.

The vast majority of homes for sale in Eastvale are short sales. Everyone knows that a short sale is a long drawn out process. Why? A bank is being asked to take a big loss on a loan. That loss reflects on their ability to borrow.

Since the Obama stopped the "fire sale" of repossessed houses, the house price drop is slowly reversing. Houses are again an appreciating asset. The longer the bank holds on to a house, the smaller their loss. 

We all know that a short sale is a big nightmare for the potential buyer. We have all lost customers because they have given up any hope that they can get a house. In a short sale, everyone gets a big run-around and is totally bogged down in bureaucracy.

Maybe I am cynical. I truly think that if it were beneficial to the bank to sell the house, it would happen immediately! I have heard of one bank that processes their short sales in a timely manner. It truly can be done. Banks know that the market is NOT about to crash. If it were (going to crash) wouldn't they hurry to dump problem properties? 

Also remember that the bank does not show a loss (hit on their credit score) until they dump the asset.

Market analysis shows that the prices are no longer falling. There is still the question of the pending toxic loans. What is the pressure relief valve for the toxic loans?

There are presently new business/government companies being formed. They are public/private non-profit corporations. These corporations are going to be able to buy bulk properties at wholesale from the banks. (Do you see stimulus money here?) Hundreds of these companies are currently being formed nationwide.

What will the non-profits do with the houses? Their corporate non-profit status will require them to sell homes to low income buyers. Can we see them selling them to low income families with a federal subsidy. Can you see them renting them to low income families who are getting section 8? Yes there is a plan for the toxic loans.

Conclusion. I believe we are past the housing price drop era. The banks are NOT just waiting do start another fire sale. The big buyer non-profits are the next piece of the puzzle.

What some consumers may not like this scenario is that the low-income buyer may have a better chance of getting a REO than a regular buyer. But, that is another discussion.

I'm Deputy Dave, Realtor DRE # 01852925. I look forward to reading your comments about this probable scenario.