Greg Fielding

This market is red hot.

Home sales remained stable with the total sales for Contra Costa and Alameda County at 2,284 for the month of October 2009. This was down less that 1% from September. Though it was down from 2,482 sales in October of 2008, the total was more than double October 2007's 1,010 sales. Inventory continued to tighten. Both Alameda and Contra Costa County are now just above 2 months of inventory. These are numbers similar to what we saw from 2002-2006. As you can see from the chart above, REO numbers remain way down. Without foreclosures being brought to market, lack of inventory is creating bidding-wars on property - especially at the low end. As long as this pattern continues, expect the low-end to strengthen, and the mid-range to hold stable. High-end prices will likely continue to soften as financing is scarce and there are a lack of move-up buyers. Here are break-downs by city:

11/1/2009	MLS Active	SHORT SALE	REO	% Distressed
Alameda County	2406	657	415	44.56%
Contra Costa County	2644	739	412	43.53%
Alameda	90	14	7	23.33%
Alamo	106	11	8	17.92%
Albany	41	4	4	19.51%
Antioch	206	97	66	79.13%
Bay Point	37	20	11	83.78%
Berkeley	91	12	11	25.27%
Blackhawk	58	2	3	8.62%
Brentwood	156	57	30	55.77%
Castro Valley	120	28	15	35.83%
Clayton	37	7	1	21.62%
Concord	165	68	33	61.21%
Danville	164	24	6	18.29%
Diablo	16	0	0	0.00%
Discovery Bay	74	31	9	54.05%
Dublin	96	31	12	44.79%
El Cerrito	34	3	5	23.53%
El Sobrante	27	9	4	48.15%
Emeryville	58	13	4	29.31%
Fremont	279	66	26	32.97%
Hayward	240	104	49	63.75%
Hercules	45	33	5	84.44%
Lafayette	81	3	4	8.64%
Livermore	191	59	30	46.60%
Martinez	129	33	25	44.96%
Moraga	48	4	1	10.42%
Newark	51	20	14	66.67%
Oakland	729	191	171	49.66%
Oakley	112	34	36	62.50%
Orinda	73	3	3	8.22%
Piedmont	18	0	0	0.00%
Pinole	42	13	10	54.76%
Pittsburg	137	65	33	71.53%
Pleasant Hill	62	21	10	50.00%
Pleasanton	147	17	5	14.97%
Richmond	251	92	58	59.76%
Rodeo	16	9	4	81.25%
Rossmoor	143	4	2	4.20%
San Leandro	136	48	41	65.44%
San Pablo	52	19	20	75.00%
San Ramon	122	32	11	35.25%
Union City	82	33	17	60.98%
Walnut Creek	205	41	12	25.85%

11/1/2009	MLS Active	MLS Sold Last Month	Months Inventory
Alameda County	2406	1080	2.23
Contra Costa County	2644	1204	2.20
Alameda	90	59	1.53
Alamo	106	17	6.24
Albany	41	6	6.83
Antioch	206	147	1.40
Bay Point	37	18	2.23
Berkeley	91	34	2.68
Blackhawk	58	6	9.67
Brentwood	156	97	1.61
Castro Valley	120	33	3.64
Clayton	37	7	5.29
Concord	165	120	1.38
Danville	164	44	3.73
Diablo	16	0
Discovery Bay	74	27	2.74
Dublin	96	36	2.67
El Cerrito	34	18	1.89
El Sobrante	27	14	1.93
Emeryville	58	10	5.80
Fremont	279	164	1.70
Hayward	240	137	1.75
Hercules	45	32	1.41
Lafayette	81	30	2.70
Livermore	191	74	2.58
Martinez	129	43	3.00
Moraga	48	11	4.36
Newark	51	37	1.38
Oakland	729	270	2.70
Oakley	112	77	1.45
Orinda	73	16	4.56
Piedmont	18	10	1.80
Pinole	42	7	6.00
Pittsburg	137	78	1.76
Pleasant Hill	62	30	2.07
Pleasanton	147	54	2.72
Richmond	251	109	2.30
Rodeo	16	6	2.67
Rossmoor	143	48	2.98
San Leandro	136	76	1.79
San Pablo	52	45	1.16
San Ramon	122	73	1.67
Union City	82	56	1.46
Walnut Creek	205	71	2.89

By next summer, it's going to cost more to cross the Bay Bridge. The toll with either rise to $5.00 OR there will be "congestion pricing", where the price is even higher during peak commute hours.

The Contra Costa Times reports Bridge operators consider raising tolls in Bay Area

...The practice of charging higher fees in peak periods is used by some water, telephone and electrical utilities, Heminger said. "It's worth getting the test in place, and seeing the response of real-world travelers," he said.

The 16-member Bay Area Toll Authority will hold public hearings on the toll increase in November, and then vote Jan. 27 on changes that would go effect July 1, according to a tentative schedule.

The toll authority collects tolls on the Bay Bridge plus six others, Benicia, Zampa, Richmond-San Rafael, San Mateo, Dumbarton and Antioch.

Under the first option for a toll increase, the basic toll on the seven bridges would increase from $4 to $5 per vehicle. Carpoolers would pay $3 during rush hour. The toll for a three-axle truck would climb from $6 to $11.

Under the second option, carpoolers would continue to get a free ride in peak hours, while the basic toll would increase from $4 to $5 for all other automobiles. The charge for a three-axle truck would increase from $6 to $15.

A third option calls for a $3 toll for carpoolers during peak hours. On all but the Bay Bridge, the basic toll would increase from $4 to $5 for other cars. On the Bay Bridge, the toll would be $6 per car from 5 to 10 a.m. and 3 to 7 p.m. weekdays, while the toll at other weekday times would remain at $4. On weekends, the toll would be $5 per car.

Jake Mackenzie, a Rohnert Park council member on the toll authority, said the Bay Bridge toll should be raised to as much as $10 in the busiest 30 minutes of the commute hours to reduce congestion and the production of greenhouse gases.

This post originally appeared on HousingStorm.com

Bay Area homeowners' continue to benefit from banks' not finishing the foreclosure process. Warning notices are up, but banks are still not following through.

From the Contra Costa Times Bay Area homes still taking a hit

More homeowners in the Bay Area received a notice of foreclosure — the first step in the foreclosure process — in September compared with a year ago while at the same time the number of foreclosed homes that became bank-owned properties declined.

Last month, 3,916 homeowners received notices of default, a 116.4 percent increase from a year ago, but 2,484 foreclosed homes became bank-owned properties, a 41.6 percent decrease from a year ago.

The slowdown in banks taking back homes after homeowners fail to bring payments up to date is likely the result of loan modification programs that are in place, said Daren Blomquist, marketing and communications manager for www.realtytrac.com, which released to the report today. "All of that did have the effect of somewhat bringing down the (bank-owned properties) as lenders tried to figure out if (borrowers) qualified for any foreclosure prevention programs," he said.

...

"There is still pent-up foreclosure activity that needs to work through. So we would expect (bank-owned) numbers to continue to ramp up as lenders work through more of the loans and figure out if they qualify for a loan modification or not,'' he said.

California's Budget is only 10 weeks old and revenue is already more than $1 Billion short.

This should come as a surprise to no one.

California's Budget was passed with smoke-and-mirrors financing and overly optimistic projections. Without huge federal aid, expect much more pain to come for state employees and those that depend on Government programs.

From The Office of California State Controller John Chaing

SACRAMENTO – State Controller John Chiang today released his monthly report covering California’s cash balance, receipts and disbursements in September. For the first three months of the fiscal year, total General Fund revenue was nearly $1.1 billion below the recently amended 2009-10 Budget Act estimates.

“Revenues more than $1 billion under estimates and recent adverse court rulings are dealing a major blow to a budget that is barely 10-weeks old,” said Controller Chiang. “While there are encouraging signs that California’s economy is preparing for a comeback, the recession continues to drag State revenues down. I urge lawmakers and the Governor to prepare for more difficult decisions ahead.”

The State’s three largest sources of revenue fell below estimates for the month of September. When adjusted to account for payments made in September that were previously delayed or issued as Registered Warrants in July and August, personal income tax revenues for the month were $934 million below estimates (-17.3%), corporate taxes were down $183 million (-10.5%), and sales taxes came in $99.8 million lower than expected (-4.5%).

The State started the fiscal year with an $11.9 billion cash deficit in the General Fund, which grew to $16.2 billion by September 30. Those deficits are being covered with a combination of $7.3 billion of internal borrowing from special funds and $8.8 billion in short-term revenue anticipation notes.

We've already had to borrow $16.2 Billion? This is not going to end well.

This article originally appeared on HousingStorm.com

Did the FHA knowingly make bad loans with taxpayer money to prop up the housing prices?

Was it because of political pressure?

Barney Frank says in The New York Times

“I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast. That’s a policy.”

So now it's official policy of the Government to prop up home prices. Ponder that for a few minutes...

Even though it's been a hot story over the last couple of days, FHA solvency problems are nothing new.

Back in the beginning of September, we discussed FHA: The Next Bailout

…Rising defaults have eaten through the FHA’s cushion. Some 7.8% of FHA loans at the end of the second quarter were 90 days late or more, or in foreclosure, according to the Mortgage Bankers Association, a figure roughly equal to the national average for all loans. That is up from 5.4% a year ago.

Resulting FHA losses are offset by premiums paid by borrowers. Federal law says the FHA must maintain, after expected losses, reserves equal to at least 2% of the loans insured by the agency. The ratio last year was around 3%, down from 6.4% in 2007.

If its reserves fall short, the agency is obliged to notify Congress, which could spark a commotion over the extent to which the government is funding losses in the housing market. Some housing analysts have said losses might lead the FHA to pull back lending, which has helped boost flagging housing demand.

A senior official at HUD, which oversees the FHA, said there is “no risk” that the FHA would require money from Congress if the ratio falls below 2%. Asked about the agency’s capital ratio, the official said a report detailing that number won’t be completed until the FHA’s fiscal year ends Sept. 30.

HUD Secretary Shaun Donovan said in June, “there’s a better than even chance that we will stay above the two percent reserve threshold. That suggests, not just for the 2010 business, but overall for the portfolio, that we’ll more than likely to stay out of a broader need for any taxpayer funding.”

Hmmm…you believe them? Isn’t this what they say over and over again before getting bailed out? It’s no secret the FHA has been making some of the riskiest loans over the last few years. This will be a bloodbath.

Yesterday, Bloomberg reported FHA Shortfall Seen at $54 Billion May Lead to Bailout

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” consultant Edward Pinto said in testimony prepared for a House committee hearing in Washington today. Pinto was the chief credit officer from 1987 to 1989 for Fannie Mae, the mortgage-finance company that is now government-run.

The FHA program’s volumes have quadrupled since 2006 as private lenders and insurers pulled back amid the U.S. housing slump, Pinto said. The jump has left the agency backing risky loans and exposed to fraud in a “market where prices have yet to stabilize,” he said.

...

About 14.4 percent of FHA loans were delinquent as of June 30 and 2.98 percent were already being foreclosed upon, according to the Mortgage Bankers Association. The combined percentage for all mortgages was a record 13.16 percent, according to data from the Washington-based trade group, which said the share of FHA loans past due is being suppressed by the large amount of new debt.

Not surprisingly, The National Association of Realtors gave a statement that made so sense:

Boyd Campbell, testifying on behalf of the National Association of Realtors, said the FHA has helped avoid a worse collapse.

“Due to solid underwriting requirements and responsible lending practices, FHA has avoided the brunt of defaults and foreclosures facing the rest of the real estate finance industry,” Campbell said in his prepared testimony.

Yves Smith had made an interesting point over at Naked Capitalism

The FHA has ALWAYS been in the low down payment business! It has long offered loans requiring only 3% down, long before “subprime” was part of the lexicon. Historically, FHA loans did not show default rates materially worse than prime loans. That experience has been replicated by not for profit lenders in low income neighborhoods.

In fact, when subprime became a big business (the post 2000 incarnation; there were subprime mortgages in the 1990s, but those were mainly for manufactured housing), it first took share from FHA and then expanded the market. And the big difference from how the FHA once did business versus its subprime competitors was…..the FHA screened loans on an individual basis. The process was time consuming and somewhat intrusive. Private lenders were faster, easier, and (lo and behold) less stringent.

My objection is that the (New York Times) article implies that low down payment loans are a bad idea. They aren’t necessarily. Low down payment loans can be a viable business, but lenders need to screen borrowers much more carefully than when they have a much bigger loss cushion.

And using low down payment loans as a way to prop up the housing market IS a bad idea. The fact that the FHA is cranking so many loans through more or less the same administrative platform is strong evidence that its lending standards have gone out the window.

This FHA train-wreck has been happening slowly over the last few years now. That they need money should be a surprise to no one (excluding most Realtors).

Clearly, lending standards should have been tightened years ago, but they weren't. Why? Because Government "policy" is to help keep home prices from falling; and they are willing to spend billions of taxpayer dollars to prop them up.

Got that? Our elected leaders are spending billions of our dollars to make our own homes more expensive...higher mortgage payments, higher property taxes...

Thank you, Barney Frank.

This article also appears on HousingStorm.com