March 2, 2013

Ever wonder why the East Bay isn’t in the RBA?

This is why.


This is Zillow’s map of negative equity by county in Central California.  The more red, the more they bled.  You can look at the map by state, by county, and by zip code.  At the county level, we can see that the only Bay Area regions that aren’t about to terminate from failure to clot are Santa Clara, San Mateo, San Francisco and Marin Counties.  Santa Cruz County is looking a little pink around the neck (it’s 22% underwater) but it’s downright alabaster compared to the abattoir north and east of San Jose.  Here are the county by county numbers for 2012.

Bay Area County Percent of homes w/mortgage underwater Median Zillow Home Value Index Decline from peak value
Alameda 25% $447,100 -30%
Contra Costa 33% (highest 20% in US) $334,200 -46%
Marin 16% $716,500 -20%
Napa 30% $365,100 42%
San Francisco 10% $771,100 -3%
San Mateo 15% $689.900 -15%
Santa Clara 15% $642,600 -13%
Santa Cruz* 23% $503,400 -31%
Solano 54% (highest 1% in US) $202,400 -58%
Sonoma 29% $357,800 40%

And here’s a live version for you to play with, although you can also head over to Zillow and see it in action wherever you want to examine.

Comments (9) -- Posted by: madhaus @ 5:14 am

November 19, 2011

FICO Now Predicting Mortgage Walkaway Likelihood

imageOwe more than your house is worth?  Is your credit otherwise good?  Do you have few credit cards but pay them on time?

Congrats.  You’re a likely candidate for strategic default, according to FICO (formerly Fair, Isaac), the company synonymous with credit scoring.  And now Moody’s took a look at the mortgage market and said the most likely homeloaner to default is sitting on an upside down jumbo mortgage.  Why?  Because the subprime mortgages already shook out the people who couldn’t pay, the prime market has some risk of strategic default, but the Jumbo pool lost the highest quality mortgages due to refinancing.  Most mortgages left didn’t refinance because they couldn’t.  And this is spooking the PrimeX, the index fund of prime RMBS (Residential Mortgage Backed Securities).

Given how Special it is here with our high prices, we have plenty of Jumbos both in the Real Bay Area and outside it.  That means Walking Away all around the Bay.

Jumbo mortgages may be next in line to default

By Kenneth R. Harney, Washington Post, Published: November 11

Do you have a big mortgage and good credit scores but not much equity — maybe you’re even underwater? Do you see little chance that your home’s market value will improve much during the coming three to seven years?

If you answered yes to both questions — and thousands of homeowners across the country could do so — new research suggests that you are in a category that lenders need to worry about most: prime jumbo borrowers who once were thought to be among the safest bets but who now are the most likely to opt for a strategic default and walk away from their homes.

In a study released Oct. 31, the ratings agency Moody’s said that based on its analysis of mortgage-backed bond portfolios, homeowners with jumbos now constitute “greater strategic default risk” than any other type of borrowers, including subprime. That’s because an exceptionally high number of jumbo owners — many in high-cost markets hit by real estate deflation over the past several years — are stuck with persistent negative equity. More than half of the jumbos analyzed by Moody’s where owners are still making payments have home market values lower than their outstanding loan balances.

Whoa.  More than half the current jumbos are on upside down homes?  Good thing that doesn’t happen in the RBA!  Instead, we concentrate the upside down jumbos in subprime territory: Vallejo, Oakland, Antioch, Concord, Salinas, Fremont, Hayward, East Palo Alto and Redwood City!  And South San Francisco and Daly City and most of San Jose and half of Sunnyvale and three-quarters of Santa Clara and San Mateo, but it’s not like you should be worried, I am sure your house  is just fine!  And if it isn’t, let’s find out what FICO is doing to predict your behavior so you can stay a few steps ahead of them.

imageFICO says 67% of strategic defaulters are within the bottom quintile of nondelinquent mortgage holders, and 76% within the bottom 30% of late payers, ranked according to their model.  Obviously they’re not going to give away their Secret Formula of Doom, but they admit defaulters have high FICO scores.  That’s right, the more likely their other model says you’re a great credit risk, the more likely you are to be a terrible mortgage risk to the innocent dupes at the hapless bank.  Although this isn’t exactly rocket science here: why would someone default on their mortgage for nonstrategic reasons if they have a FICO of 845?  A high score means excellent ability to pay, so this chart really says among mortgage deadbeats, the better your credit, the more likely you’re playing the bank instead of vice versa.  I think Occupy Wall Street has been telling us the same thing for a couple of months now.

Here are the other “red flags” FICO admits to using in creating their new predictive model:

  • Lower utilization, as shown in the chart below. We also saw less overlimits on credit cards, reflecting better credit management behavior.

imageThis means, duh, people with high credit scores don’t use more credit than they need, which is, duh, why they have high credit scores in the first place (see above).  This also means that Joanne Gaskin, who developed this model, doesn’t understand the difference between less and fewer

(Free grammar clue: Use fewer for quantifiable amounts and less for amorphous abstracts.  Example: FICO has fewer exogenous variables in this model than the blog entry suggests, as utilization is directly linked to FICO score.  That makes their claims of this Predictive Deadbeat Model’s awesomeness less believable.)

  • Less retail balance—chances are that they spend money carefully.

Does spending less than the typical But I Want It Now consumer contribute to a higher or a lower credit score?  I’ll give you three guesses here.  (This is also an exception to the fewer vs. less rule. Time, money, and distance, while countable, use the term less because they still have abstract tendencies as opposed to, say, the 14.6 million underwater houses in this country.)

  • Shorter length of residence in the property—and thus, likely less attachment to that property.

The real estate market peaking between 2005-2008 (depending on where the house is) should have absolutely nothing to do with this brilliant insight (which only coincidentally has a high correlation with an individual’s Loan to Value ratio).

  • More open credit in the past six months—perhaps in anticipation of damaging their credit?

imageOkay, this one makes complete sense.  If you’re going to Walk Away on purpose, you might as well be ready for it by piling up on credit, because it’s going to dry up as soon as the first NOD hits.  Renting an alternate place to live before pulling the trigger is another thing to look for. 

If I were coming up with a model for strategic defaulters, I’d just look at the advice on the Walk Away discussion boards and see how many can be quantified via credit reporting tools. Opened new lines of credit in the last six months? You’re giving FICO too much lead time. Better open them in the last week if you’re going to walk.

Comments (33) -- Posted by: madhaus @ 5:14 am

October 27, 2011

Los Gatos home with 45% negative equity, great for family and kids

Thanks very much to Burbed reader nomadic for this rather intriguing high-price, low-photo listing in Los Gatos!


14880 LAS FLORES Ln, Los Gatos, CA 95032


SQ. FT.: 4,428
$/SQ. FT.: $497
LOT SIZE: 1 Acre
PROPERTY TYPE: Detached Single Family
STYLE: Mediterranean
VIEW: Mountains, Neighborhood
COMMUNITY: Los Gatos/Monte Sereno
COUNTY: Santa Clara
MLS#: 81141712
STATUS: Pending With Release
ON REDFIN: 4 days

country location four bedrooms and four baths three car garage huge yard great for family and kids

Here’s why nomadic thought you’d like to see this house:

  • Weird history
  • $3.4M in loans
  • Short sale listed at $2.2M
  • Last “sold” in 2010 for $600k

Let’s have a look at that history.


What? No previous foreclosures?  No “not an arms-length transaction”? The seller isn’t a licensed real estate agent?  It wasn’t sold in 2006 for twice the asking price?  The Zillow history makes the above look a little stranger.  Note the July, 2010 sale.


And $3.4 million in loans on the house sounds like something straight from Irvine Housing Blog.  But here’s something you won’t see on IHB:


Yes, that’s this house in Google Streetview plus Burbed KawlumVision.  No wonder the place went pending in only 4 days.  I’m sure the bank will rush that offer right on through.

Comments (13) -- Posted by: madhaus @ 5:10 am

August 13, 2011

More Deep-Sea Diving Opportunities!

If you enjoy underwater adventure, here’s plenty of good news!

Report finds increase in negative equity in Bay Area

By Eve Mitchell, Contra Costa Times
Posted: 08/09/2011 12:00:00 AM PDT, Updated: 08/09/2011 10:10:44 AM PDT

The percentage of Bay Area homeowners who are underwater — which means their mortgage is higher than the home’s value — edged up from a year ago, as the housing market continues to struggle to get out of its long slump.

Some 22.8 percent of single-family houses with mortgages were in negative-equity territory during the second quarter, up from 21.1 percent a year ago, according to a report released Tuesday by Zillow, a real estate information website.

"Negative equity is growing because you still have foreclosures happening so the housing values are still declining," said Svenja Gudell, senior economist for Zillow. "As home values decline, negative equity will increase."

imageThanks for setting us straight, Svenja!  I thought as home values decline, more and more people would just walk away and take their game pieces off the board.  Forums like this one make participants feel it’s just fine to strategically default.

Anyone have any theories why some Bay Area counties are up and some are down?  Why, for example, is Santa Clara County down but San Mateo County up in submarine living?

Wow, more than 1 out of every 5 homes in the Bay Area that have a mortgage owe more than the house is worth.  Looks like Solano County, home of Vallejo and its bankruptcy woes, got hit a bit harder than the average.

This is an open thread.

Comments (15) -- Posted by: madhaus @ 5:15 am

September 22, 2010

Where’s the negative equity share at in the Top 10 Metros?


Thanks to the anonymous Burbed reader who sent this in.

Uh… so… yeah it turns out that there may be some negative equity here in the Bay Area after all. But this is just a snap shot in time. And it’s probably skewed by places like Gilroy. Come winter bounce, this will all be gone! You just wait.

In fact, they’ll need to come up with a new chart to show how awesome house prices are in the Bay Area!

Comments (9) -- Posted by: burbed @ 5:04 am

September 19, 2010

California has 2.3M homes underwater–but what about the Real Bay Area?

California has 2.3M ‘underwater’ homes

San Francisco Business Times – by Steven E.F. Brown

California is one of five states with the most “negative equity” in its home market, according to a report by CoreLogic Inc.

The Santa Ana business (NYSE: CLGX) said 33 percent of residential properties with mortgages in the Golden State were “underwater,” meaning the property is worth less than is owed on the loan. The figures are for the end of the second quarter.

That works out to 2.26 million underwater properties in the state. Another 286,000 homes were “near negative equity.”

Total outstanding mortgage debt in California was $2.03 trillion at the end of the second quarter, according to the report.

Though California’s rate of negative equity dropped 1.3 percent from the first quarter to the second, a quick rate of decrease, that was “primarily due to foreclosure, not the stabilization or small increases in prices in some markets,” the report said.

Thanks to Burbed reader Mark for this find!

Now sure this might seem gloomy at first, but think about it – this is about California as a whole. This includes places like… the Indio and the East Bay. Of course it’s going to look bad.

The real question, of course, is: what is it like in the Real Bay Area?

My hunch – 102% of houses (maybe not condos or townhouses) are above water.

Does anyone have data on this?

Comments (12) -- Posted by: burbed @ 5:48 am

July 10, 2010

feel trapped in my house with this market

Recently someone found this site by searching for: feel trapped in my house with this market

It’s true! Many Real Bay Area citizens feel trapped! What do you do when you’re sitting on this enormous gold mine of equity, in a land where all the smart people and great sushi restaurants are? How can you move anywhere else, which would be a step backwards? A move that might force you to resume paying your fair share of property tax, instead of 1/10 of your neighbors?

Like the great philosopher The Notorious B.I.G. said, “Mo Money Mo Problems”. Word.

Comments (5) -- Posted by: burbed @ 5:15 am

November 26, 2007

Subprime mortgages, Citigroup, Acorn, NACA

Citigroup Feels Heat To Modify Mortgages –
In Granada Hills, Calif., Natalie Brandon is fighting to keep the three-bedroom ranch house she bought in 1985 for $105,000. Mrs. Brandon, 51, does medical billing for doctors; her husband is a dispatcher for a local gas utility. Last year, she got a $625,500 mortgage from Argent, now owned by Citigroup. Her 7.99% interest rate isn’t set to rise until next June, but she already is behind on payments.

Over the past five years, she has refinanced her home five times, each time taking out cash and paying prepayment penalties. Last year, all she had to do to refinance was state that she and her husband earned a combined $100,000. She says she used the proceeds to pay off $30,000 owed on her white Lexus.

This year, she says, their income fell after she suffered a short-term disability. Mrs. Brandon figures if she sold her home today, she wouldn’t get more than $450,000 — what a nearby home sold for in foreclosure.

She has tried for months to get her loan modified, and missed her June and September payments. Last month, Damien Gutierrez, a Citi Residential home-retention manager, offered to fix her interest rate at 6% for 40 years, she says. One week later, she says, he said he was authorized only to offer her a five-year fixed rate. Earlier this month, Citigroup offered her a six-month trial at 6%, saying it would extend the modification to three years if she keeps up with her payments, she says. Mr. Gutierrez didn’t return calls seeking comment.


Ana Cecillia Marin, a 36-year-old single mother of three, owns a 20-year-old ranch house on a dusty, garbage-strewn acre in Palmdale, Calif. She says she earns $34,000 a year managing flower sales at a Los Angeles food store and selling clothes on the side. She bought her house in 2005 for $385,000. By taking out a first and second mortgage, she was able to buy it for no money down.

At first, her ex-boyfriend helped make mortgage payments, she says, but his construction jobs dried up. She hasn’t paid anything for months on the $76,426 second mortgage serviced by Citigroup, and she has also fallen behind on her $308,000 first mortgage, serviced by a unit of Bear Stearns Cos.

Ms. Marin says she got a foreclosure notice on her first mortgage. Judging from recent sales of similar homes in the area, it’s unlikely that Citi Residential will be able to recoup money owed on the second mortgage in the event of a foreclosure sale, because the first-mortgage lender gets its money first.

“I’m afraid I’m going to lose it,” Ms. Marin said recently of the house. Already, she had moved most of her belongings into a wooden crate in the yard. All that remained inside were the mattresses on which she and her children sleep.


For years, groups such as Acorn and NACA have pressed Citigroup and other lenders to step up mortgage lending to lower-income customers. When subprime mortgages began going bad, these groups began pushing banks not to lower the boom on borrowers. They have leverage. The Community Reinvestment Act requires banks to help meet the credit needs of communities in which they operate, and regulators often seek feedback from the groups when deciding whether to permit financial institutions to open new branches. The groups sometimes organize boycotts.

None of this has anything to do with the Bay Area, but I thought I’d just post it for fun so you can learn more about what’s going on in subprime land.

Comments (9) -- Posted by: burbed @ 12:36 am