With both prices and interest rates going down, affordability is expected to improve throughout 2011.

Irvine Home Address ... 29 EARLY Lgt Irvine, CA 92620
Resale Home Price ...... $1,000,000

You're holding me down (Oh Oh)
Turning me round(Oh Oh)
Filling me up with your rules(Oooh)

I've got to admit it's getting better (Better)
A little better all the time (It can't get no worse)
I have to admit it's getting better (better)
It's getting better

Beatles -- Getting Better

With falling interest rates and falling prices, affordability in many markets is better than before the bubble began to inflate. Affordability has never been as good as it is now in Las Vegas. Even Orange County is affordable relative to its unaffordable history. If interest rates remain low and prices continue to fall, affordability will continue to improve throughout the year.

Zillow 30-year FRMs hit new low at 4.07%

by CHRISTINE RICCIARDI -- Tuesday, November 9th, 2010, 3:48 pm

The 30-year, fixed-mortgage rate decreased after a stable two weeks, to new record low at 4.07%, according to the Zillow Mortgage Marketplace weekly update.

Zillow said the current 15-year, fixed average rate is 3.51% and the rate for a 5-1 adjustable rate mortgage is 2.91%. That type of mortgage maintains a steady rate for five years and then is adjusted annually thereafter.

Regionally, 30-year rates vary, but the majority of states witnessed a deflation. New York's average rate fell 30 basis points to 3.98% last week, down from 4.28%. Rates in Florida fell substantially also, down to 4.02% from 4.13% the previous week, California's rate decreased to 4.04% from 4.15%, and Texas saw its average rate disintegrate to 4.11% from 4.17%.

Pennsylvania's current rate of 4.08% is down from 4.11% last week. Colorado's average rate for a 30-year fixed mortgage shrunk to 4.10% from 4.14% at Nov. 2.

Washington's 30-year FRM increased to 4.12%.

Zillow bases its averages on real-time mortgage quotes from lenders registered with the company. The national average comes from thousands of daily quotes by anonymous borrowers through the Seattle-based company's website.

As mortgage demand continues to flag at historic lows, the pool of available money chasing that demand has been lowering its interest rate asking price to find a borrower. Each lower level increases payment affordability for buyers. Of course, this affordability is somewhat illusory because the debts are still very large. And Low Interest Rates Are Not Clearing the Market Inventory. Therefore prices will continue to fall, and as they do, affordability will improve even more.

Zillow: Home price depreciation to worsen market into 2011

by CHRISTINE RICCIARDI -- Wednesday, November 10th, 2010, 10:53 am

Predictions for the fourth quarter housing market continue to dim as Zillow's third quarter market report released Wednesday suggests further house price depreciation through the end of the year.

September home prices depreciated 0.4% from August and 4.3% from one year a go to a national average of $179,900, according to the report. This is the 17th consecutive quarter of home price declines.

Zillow reported that nearly two-thirds (64.2%) of homes in the U.S. lost value between the third quarter of 2009 and the third quarter of 2010, and 27.3% of home sold in September were sold for a loss.

On Tuesday Foresight Analytics said residential, commercial, and construction loan delinquencies are expected to rise.

Delaware witnessed the most home price depreciation since 2009, down 18.5% to $174,700 in September 2010. California's home prices appreciated since 2009, up 1.9% to $337,200.

Approximately one in every 1,000 mortgaged homes in the U.S. was liquidated in September, according to Zillow, marking the highest liquidation rate the firm has recorded since it started tracking data in 1996.

The chart above is a good illustration of the workings of the banking cartel. Up through mid 2008, they kept pace with delinquencies so foreclosure rates rose quickly. When lenders saw that this was doing to prices in subprime areas where the delinquencies were concentrated, they collectively decided to stop  foreclosing, allow squatting, and form a massive shadow inventory of unprocessed foreclosures on delinquent loans.

At first they were successful as the foreclosure rate declined, and prices began to stabilize. However, with any cartel, there is incentive to cheat and liquidate your holdings while prices are still high. The foreclosure rate has crept higher since the market superficially bottomed in early 2009. The result has been elevated inventories, and finally a reduction in prices.

Each of the last five years, housing inventory bottomed on December 31 and rose steadily through the spring. In 2008 and 2009, inventory was restricted and took out the end-of-year low. In 2010, we are poised to finish the year at levels similar to 2007 when the inventory rose from 795 houses to nearly 1300 in July of 2007. If we see inventory climb that high again next year, prices will certainly move lower.

The firm sees the liquidation rate remaining elevated because of an increase in negative equity rates. According to the report, the negative equity rate during the third quarter was 23.2%, up from 22.5% in the second quarter.

Foreclosure resales reached a near-peak level in September accounting for 20.1% of all sales made during the month. The peak percentage of sales attributable to foreclosure resales was in March 2009 at 20.5%.

Zillow said the firm doesn't expect home prices to hit rock bottom until the first half of 2011, but concluded that "the length and severity of the current turndown is fast approaching the length and depth of the Depression-era."

Zillow data is based on real-time mortgage quotes from lenders registered with the company. The third quarter report is available on their website and includes interactive charts and graphs broken down by state and by metropolitan statistical area.

Once prices are below rental parity for an owner occupant, how much lower does it have to go before you are motivated to buy? It is going to take a combination of enticed owner occupants and cashflow investors to stabilize the housing market.

What most people fail to understand is that this purging of debt and the economic problems that entails is for the long term benefit of the economy. As affordability improves, new buyers are spending less of their income on housing and more of it on other goods and services. The economy will not improve until the debt is purged, but the process will not be painless.

Freddie Mac says foreclosure problems may drain recovery

by JON PRIOR -- Friday, November 12th, 2010, 10:46 am

Freddie Mac economists said recent problems in the banks' foreclosure processes could slow what little momentum the recovery holds, and perhaps send the housing market down to a new low.

In the broader economy, October payrolls, manufacturing production and consumer spending picked up in the third quarter. Housing, the October job report and struggles in other major economies are keeping the recovery too gradual.

"There has been a spate of good news in recent weeks that suggests the fears earlier in the year about a so-called 'double dip' recession were overblown," according to the report. "The recovery, though, remains too sluggish to do much good right now for the unemployment rate or the housing market."

Banks and the government-sponsored enterprises, including Freddie Mac, are working through the glut of foreclosures that is hampering credit lines. Many including Bank of America, JPMorgan Chase, Ally Financial and Wells Fargo had to begin resubmitting improperly signed affidavits in many states, delaying that work and pushing down foreclosures in October.

Freddie Mac, itself reported $120.1 billion in nonperforming assets in the third quarter, up 33% from a year ago, and more than $6 billion in REO that needs to be sold.

Even with the Federal Reserve's plan to purchase $600 billion in Treasury securities through quantitative easing, Freddie still expects "sub-par" growth in GDP over the near term with a slow acceleration through 2011.

"The sluggish nature of the recovery means the unemployment rate will likely remain at or above 9% through much or all of next year, with a decline in unemployment only gradually providing relief to the housing market," according to the report.

Investors buying in safe haven markets like Orange County are betting that incomes are going to rise. With 9% unemployment and no real prospect for recovery, it isn't likely that salaries will be going up soon. We will likely see some inflation as the Federal Reserve tries to print enough money to jumpstart the economy. This inflation will not make its way into wages; therefore, it will not put upward pressure on house prices.

Tell the second mortgage holder to pound sand

The reason short sales take so long is because the holder of a worthless second mortgage is trying to get money from insolvent debtors. The only power the second mortgage holder has is the ability to say no to a short sale.

In a foreclosure, the second mortgage's lien against the property is extinguished. Many borrowers think this means their debts are gone, but that is not the case. The debt survives as unsecured. Only the real estate is released from the debt claim.

If you look at the mortgage history and the listing history on this property, you see the negotiation and posturing of the borrower and the holder of the impaired second mortgage note. The final price reduction is the borrower giving that lender the bird.

• This house was purchased for $1,482,500 on 12/29/2005. The owner used a $1,000,000 first mortgage and a $482,500 down payment.
• On 8/7/2006 he refinanced the first mortgage for $1,000,000.
• On 2/6/2007 the obtained a $500,000 HELOC. I don't think he used the HELOC.
• On 10/19/2009 -- about a year ago -- he obtained a $444,507 second mortgage.

I think it is this mortgage lien holder that is negotiating with the insolvent borrower to resolve the debt. The asking price history is each player betting their cards in this negotiation of bluffing and posturing. The end game is often a delayed sale or a foreclosure. The bickering parties need to release the property back into the system.

If this lender and seller had someone willing to pay $1,390,000 back in May, they should have taken the deal. When they relisted, they found no takers.

The last price drop was the seller telling the second lien holder, "this is your problem, you figure out what you can get for it." If the house sells for $1,000,000, the first mortgage would be made whole, and the second mortgage would be entirely wiped out. Whatever this house nets for over $1,000,000 is how much of the lenders $444,507 they will get back.

Irvine Home Address ... 29 EARLY Lgt Irvine, CA 92620   

Resale Home Price ... $1,000,000

Home Purchase Price … $1,482,500
Home Purchase Date .... 12/29/2005

Net Gain (Loss) .......... $(542,500)
Percent Change .......... -36.6%
Annual Appreciation … -8.0%

Cost of Ownership
-------------------------------------------------
$1,000,000 .......... Asking Price
$200,000 .......... 20% Down Conventional
4.38% ............... Mortgage Interest Rate
$800,000 .......... 30-Year Mortgage
$192,695 .......... Income Requirement

$3,997 .......... Monthly Mortgage Payment

$867 .......... Property Tax
$325 .......... Special Taxes and Levies (Mello Roos)
$167 .......... Homeowners Insurance
$142 .......... Homeowners Association Fees
============================================
$5,497 .......... Monthly Cash Outlays

-$947 .......... Tax Savings (% of Interest and Property Tax)
-$1077 .......... Equity Hidden in Payment
$320 .......... Lost Income to Down Payment (net of taxes)
$125 .......... Maintenance and Replacement Reserves
============================================
$3,919 .......... Monthly Cost of Ownership

Cash Acquisition Demands
------------------------------------------------------------------------------
$10,000 .......... Furnishing and Move In @1%
$10,000 .......... Closing Costs @1%
$8,000 ............ Interest Points @1% of Loan
$200,000 .......... Down Payment
============================================
$228,000 .......... Total Cash Costs
$60,000 ............ Emergency Cash Reserves
============================================
$288,000 .......... Total Savings Needed

Property Details for 29 EARLY Lgt Irvine, CA 92620
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Beds: 5
Baths: 4 full 1 part baths
Home size: 4,162 sq ft
($240 / sq ft)
Lot Size: 6,180 sq ft
Year Built: 2005
Days on Market: 209
Listing Updated: 40494
MLS Number: S10041925
Property Type: Single Family, Residential
Community: Northwood
Tract: Pt
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According to the listing agent, this listing may be a pre-foreclosure or short sale.

Luxurious estate in northwood gated community built by Fieldstone homes. Open floor plan has spacious living room and dining area. Hardwood flooring throughout the house. Attractive gourmet kitchen has upgraded Cabinet, Counter top, wine cooler, and Appliances. Each bedroom has built-in cabinets in the closet. Additionally cabinets in the garage area provides even more storage space. You will enjoy upgraded bathrooms with stone tiles. Built in media center in the family room. Outdoor amusement park style Swimming Pool and Spa, and Built-in BBQ grill with refrigerator. Wine cooler and Built in cabinet & bathroom in the attic (3rd floor). Owner spend over $200,000 in upgrade thoughout the house. Already Bank approved and ready to close ASAP. Property sold "as is". The house is in good condition.