Ok, for the real comment. I guess this throws the theory of San Fran being immune out the window. Thank god we don't have to hear that anymore. I am just filled with glee over all this horrible news. Nothing makes me feel better than seeing rich ass speculators losing their ASS.
Yeah, it's different in the Bay Area. We're a destination. People want to live here, and there'll always be a market for homes at high prices. Mmmmmm hmmmmm.
The median Bay Area household income is something in the range of $65,000 and trending downward. Even if you toss in a bit of a premium because the Bay Area is a desirable place to live housing prices still need to fall by 50% in order to reach affordability.
Eventually it will sink into everybody's think skull that a house is a mildly depreciating asset that requires regular maintenance. It is not an investment vehicle.
But that's going to take awhile. I have a bunch of relatives and co-workers who think the boom times will return before the end of this year.
Feb. 14 (Bloomberg) -- UBS AG won't buy auction-rate securities that fail to attract enough bidders, joining a growing number of dealers stepping back from the $300 billion market, said a person with direct knowledge of the situation...
Probably decided to focus on the Quality of the sales and not the volume. These are better sales. Anybody could sell cheap houses and just pump them out. We're looking at quality sales, you know, like 'hotel quality art
Perhaps not completely off-topic: the idea of assessing how much something has dropped by looking at distance from last peak has bothered me. I would think that comparing current number with some kind of average value would be better.
The change in lending standards is having a huge impact in the San Diego area.
A reality-based Realtor in San Diego posted his analysis of sales that closed in January in 3 of the nicer areas in the metro area - I'd guesstimate that median values are around $700k in the 3 areas.
Of the 75 sales:
0 used 100% financing.
Only 1 used a 5% down loan.
15 were 10-15% down
An amazing 59 of 75 were 20+% down.
Prices are still pretty sticky here in "The Fortress".
What happens in the East Bay and further environs will take time percolate to the peninsula and SF proper.
There are 10,000+ AAPL/GOOG employees with dotcom 2.0 money to burn looking for a quality SFH near work, and combine this with the fact that (thanks to Prop 13) everyone who bought from 1850-2000 can easily rent out their place for a juicy profit.
What is going to affect prices the most is the kneecapping of the marginal buyer. Right now 10% down is required for $400-500K mortgages and 20% down is required for Jumbos above that.
It remains to be seen what the "temporary" (haha, tell me another) conforming adjustment is going to change the static status quo.
"It remains to be seen what the "temporary" (haha, tell me another) conforming adjustment is going to change the static status quo"
I addressed this yesterday and didn't get much response so I'll try again. The theory is that the GSE conforming limit increase is a red herring to allow FNM/FRE to build giant loss reserves to (hopefully) stave off collapse, and that the limit increases were purposely hard to qualify for as they didn't want anyone to actually try to take them up on it. All bubble zones (CA, etc.) are pretty much out with 80% LTV requirements, along with several other important restrictions.
Along these lines, what is the true price of a house when the GSE's fail and the securitization model fails? How about the price of the actual down payment? At that point we'll get to see how much of the dotcon 2.0 bubble money is real and how much is fantasy.
I'm routinely seeing pricing/sales that are off about 40%+ from peak. In fact, it's a baseline I use to approach some semblence of fair value.
It has been my contention, and a saw I throw around quite often, that if you want a starting point for fair value on a property go back to it's 2000 or 2001 price. Based on a number of fundamentals, I feel this is a good starting place for what to pay. Those numbers are about 40-60% from peak. There's a wide swing with condos and undesirable areas taking much bigger haircuts for example.
It doesn't seem too imprudent that if one finds a house that really "fits" lifestyle (community, proximity to job/amenities/rec, type of dwelling, etc), has a signif discount, is "home" for a longer time frame, and with affordable, appropriate prudent financing (esp being able to lock in long money at < 6.5%) then moving forward can make sense.
On the other hand, some well located/desirable properties are still selling quickly and over (still very inflated IMHO) asking price.
The problem is that people who join GOOG/AAPL late are the majority of those employees. Given the recent turn of events in the stock market, it wouldn't be a surprise that a lot their stock options are under water, and even if not, they're not vested yet. Typically, a company succeeds in the Silicon Valley and the stock goes up, it starts hiring and grows rapidly, but the newer employees (now the majority) don't benefit from the company stock because they joined the party too late
CR, I still take exception with your apparent decision not to report on the extent jumbo loans affect the percentage drop in median prices.
In response to your SoCal post a couple days ago I said:
On the report CR cited and linked, the more important language to me is buried:
"The median price paid for a home financed with a conforming loan was $380,000 in January, down 5.0 percent from $400,000 a year ago, and down 7.3 percent from the $410,000 peak reached in March and April of 2007."
I understand "a 17.8% drop" makes a much better news story, but that number only makes sense if one assumes absolutely no change in the market for jumbo loans which of course has changed dramatically since last summer.
Apples to apples.
The same theory applies to the Bay Area. From the DQ report:
Last month the percentage of Bay Area homes purchased with jumbo mortgages, or loans over $417,000, fell to 34.5 percent, down from 39.6 percent in December and down from about 63 percent before the credit crunch hit six months ago.
Although the current DQ report does not contain a similar statement, I suspect that the price decline in houses financed with conforming loans is around 5% to 7%.
I understand 17% makes a better headline, but your analysis usually goes far beyond the headline.
It may be bad form to repost a link from the last thread, but it's even more relevant here.
Housing Wire noted that NAHB's PAC has just publicly turned off the cash spigot to Capitol Hill, ending all political donations until further notice in retaliation for the fact that Congress left numerous NAHB priorities out of the recently-passed stimulus bill.
That just doesn't happen in Washington. It's virtually unprecedented to see announcements like that. As the Bay Area numbers show, desperate times call for desperate measures.
Feb. 14 (Bloomberg) -- GMAC LLC, the auto and mortgage lender controlled by Cerberus Capital Management LP, may run into ``substantial difficulty'' if credit markets don't improve, said Stephen Feinberg, founder of the private-equity firm.
"We have detailed contingency plans in a continuing worsening environment,'' Feinberg wrote in a Jan. 22 letter to investors, a copy of which was obtained by Bloomberg News.However, if the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty.''
..."
"Eventually it will sink into everybody's think skull that a house is a mildly depreciating asset that requires regular maintenance. It is not an investment vehicle."
I could not disagree with you more. My partner and I have owned 7 different homes going back to 1976. None were bought for investment purposes. We lived in them all. We put down at least 10% on all of them and in most cases much more. We sold when one of us needed to move to take another job. Not counting the current home we live in, the six homes we bought and sold have netted us a seven figure total. The current house could go to zero in price and we would still have a solid gain. And none of that includes the very generous tax benefits we have gotten from the property taxes and mortgage interest.
I don't think we are exceptional in the kinds of returns we have had. Residential real estate has been an exceptional investment.
AMBAC's CEO on CNBC 2 mins ago :
"bailout is a word we don't use in our organization" before going to give his testimony to a Senate (or Congress?) committee.
He says they are super liquid, no probs, it's those pesky 06 and 07 vintage mortgages that some wackos are worried about but if they aren't AAA i.e. 99.9% assured to pay at worst they are 99.7% solvent.
oh and Buffett's offer earlier this week is like offering somebody 50 bucks for their house ,of course they're not taking it seriously.
Misean writes:
Those numbers [SoCal by zip code] were terrifying.
I don't understand how Realtors® are going to survive. I look at specific markets like 92397 that had 3 sales where I also know has at least 6 RE offices and three times that in sales agents. No soup for them.
GMAC and Cerberus on the edge:
(just jump and get it over with)
GMAC LLC, the auto and mortgage lender controlled by Cerberus Capital Management LP, may run into ``substantial difficulty'' if credit markets don't improve, said Stephen Feinberg, founder of the private-equity firm.
We have detailed contingency plans in a continuing worsening environment,'' Feinberg wrote in a Jan. 22 letter to investors, a copy of which was obtained by Bloomberg News.However, if the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty.''
Picosec makes an important point: The bifurcation in the Bay Area market is dramatic. Good neighborhoods on the peninsula and San Francisco are still seeing pretty robust buying interest. In the less desirable inner locations and in the out perimeters, the market is collapsing. My guess is that as fewer and fewer borrowers qualify for jumbo loans, that the downward trend in pricing will seep into the marquee neighborhoods as well. I don't believe the credit crunch is a passing phenomena.
You've been riding the boomer tailwind. Look out for the boomer retirement headwinds dead ahead."
Hear that. Several war baby couples I know (born '40-45) have unloaded their big homes over the past few years to buy condos or smaller homes, or homes in lower-priced areas.
Look at it another way: there are tons of people out there with excess capacity in their houses now: an older couple of two in a house that could handle a family of four or five.
So barring massive immigration or massive price cuts (or both together), there's too much house and (soon) not enough buyer out there in most high-priced markets.
If you want a harbinger, take a look around at the churches in your community. There are too many, and most of them (except for the marketing mega-churches) are too big. They built 'em in the '60s, when they thought the baby boom would go on forever. Now a lot of congregations are dropping away as the families shrink and the old-timers move away ir due, and a lot of churches are becoming community centers, yoga/martial arts businesses, homes, private schools, you name it.
I look at specific markets like 92397 that had 3 sales where I also know has at least 6 RE offices and three times that in sales agents. No soup for them.
C'mon, Rob Dawg, Wrightwood was snowed in last month, wasn't it?
I was talking to my boss about this yesterday. Turns out he is a member of this group, because we do a lot of business with home builders. He told me that they just didn't want to give to democrats, so they weren't going to give to anyone.
The thing is guys, they don't have money to give whether they want to or not. If you cannot sell homes, you cannot build homes. If your job is building homes and you cannot, you do not make money. Call it a protest or whatever you want, but it just a lack of funds.
seriously, you guys, these doom and gloom numbers are getting ridiculous.
i have a friend with perfect credit and hundreds of thousands in the bank who's been looking to buy in the Bay Area for the last year. If you can show me a nice 2-3 bedroom single family house that is down 40% from the peak you'd have a buyer immediately. It ain't there.
The bias here has always been bearish. But people are now glibly predicting declines of 40, 50, 60 percent. Heck, why not 70 or 80? You're pulling these numbers out of your butts anyway.
I was no cheerleader during the bubble. I thought it was insane too. But egging on panic now is no more productive. There are real people in real homes involved here. We have to remember that over the last 10 years, the housing market and mortgage business have consistently punished and taken advantage of people who were conservative and rational. But those people still needed a place to live -- and they will be punished on the downside too -- probably more so because they still hold on to the "quaint" belief that they should honor their obligations.
So why all the glee? Why can't this blog be a voice of reason and temperance during the downswing, just as it was during the bubble?
If it just becomes a cesspool of Schadenfreude it will be a real shame.
"i have a friend with perfect credit and hundreds of thousands in the bank who's been looking to buy in the Bay Area for the last year. If you can show me a nice 2-3 bedroom single family house that is down 40% from the peak you'd have a buyer immediately. It ain't there."
It'll be there eventually. He wants to go to Antioch or Solano, he could be there now, or shortly. San Francisco or Palo Alto or Berkeley or Southern Marin: that'll take a lot more time, and they may never drop as much.
If you wonder why we're so skeptical, it's because of all the things that weren't the way they were supposed to be in this mess; who knows what further skeletons are ready to fall out of the closet?
the idea of assessing how much something has dropped by looking at distance from last peak has bothered me
Well that's the definition that just about anyone would use for "how much something has dropped", be it a stock, housing, or Bush's popularity, so just what is bothering you about it?
Didn't you get the memo? This is Gleeclub.com now. The Calculated Risk site was suddenly removed by the government "due to budgetary constraints." If you don't want glee, I suggest you watch CNBC.
"But egging on panic now is no more productive." - jmay
Please. You actually think this blog has any effect on the market? 30% of homedebtors think their houses when up in value last year. The market is so biased to the optimistic side that possible over pessimistic comments on this blog are rain drops in a hurricane.
In a way, they are similar to complaints that we are talking ourselves into a recession. PLease. The fact that we have hundreds of billions to trillions of dollars in malinvestment (now bad/non-performing debt) has a litte more to do with what is going to happen than how we all 'feel' about things. Quit singing koombaya and wake up. Positive thinking does not help you when there is a bullet entering your skull.
sportsfan writes:
I look at specific markets like 92397 that had 3 sales where I also know has at least 6 RE offices and three times that in sales agents. No soup for them.
C'mon, Rob Dawg, Wrightwood was snowed in last month, wasn't it?
Wrightwood is a ski resort village. Prices and sales traditionally go up when it snows. Back when I owned some up there I used to joke that it was worth another $1000 to me every time it snowed.
what's doom and gloom about reporting a median price decline? hard numbers friend. by most income/price metrics it has long been clear that bubble areas would have to drop close to 60%. it's coming true. it just is, man. be the ball danny.
Re: the NAHB PAC, they're sitting on $1.37M, according to FEC records. The NAHB's lobbyist even holds the PAC out as one of the top six in the nation.
The builders may be getting pounded in the market, but all their executives made those PAC donations over the last year or so.
And I don't get the idea of withhold cash from Democrats, as Tom in AZ mentioned.
Whether you like it or not, there's a strong consensus that there are going to be a lot more Democrats to give to after November. So will NAHB stop giving until the Republicans take control again? That may be quite a dry spell.
The glee is because i might finally be able to buy a house without sacrificing my retirement funds. One man's food is another's poison. This was true during the bubble and it is true during downturn.
It was just about time for someone to show up with another troll-like comment accusing posters of reveling in bad news -- they appear with a certain regularity. That's been happening over at HBB for nearly 3 years now, despite the fact that the most bearish forecasts have tended to be the right ones.
You want cheerleading, watch CNBC. The bubble ran condos here up 400%, so a drop of 80% wouldn't be out of the question.
Darth Toll writes:
So much for the "it's different here in the Bay Area" myth. $100K off! Wow, that's a nice haircut, and much more where that came from.
Bay Area folks: how bout a nice big cup of shut the f*!# up?!?!
=============================
Hey,
Many people living here can't wait for the house prices to crash.
Some people have a lot invested in the insanity. Funny how it always expresses itself in the same way. Reminds me of would-be sellers and the oft-heard refrain "I'm not just gonna give it away!".
Boy am I torn. While human decency has me feeling bad for those about to lose their homes (in the Bay Area), I'm pleased as punch the realtors are suffering. In the Bay Area especially, they are the biggest bunch of snake oil salesmen/women and without the slightest degree of ethics.
They spend their commission before the deal is even done so when issues arise before the close of escrow, you better believe they grease whatever wheels to make sure all ends well.
I'm rooting for the crash, yes indeed. AND I own one of those greatly overpriced Bay Area Homes!
Why, you might ask? Well, I'd like to trade up. If home prices drop 50%, then: my property tax on the new place would be half; the amount I pay a realtor would be half; the loan fees are half; my capital gains drop to zero - (yes, the gain on my place exceeds the $500k giveaway)
And the new mortgage would certainly not have to be JUMBO.
And, Big Plus: my risk of the new place dropping in value would be less.
Yahoo, let them prices drop!
A friend of my Mom's just had a sale fall out of escrow in Aptos..and the sale price was $200,000 below last year's appraisal... and the people who were going to buy supposedly had to buy NOW for tax reasons..go figure
Anyone else remember the episode where South Park was about to be enveloped in a cloud of Smug emanating from California. The San Fran people were smelling their own farts to avoid greenhouse gas emmissions and talking about how progressive they were.
Seems fitting that San Fran would be the last to recognize that they are not in fact special and not everyone in the world wants to live there.
BayArea, sorry for the rant. It was getting pretty damned tiring listening to all of the Bay Area pukes..er..I mean people saying how special and magical the Bay Area is and that it was impossible for any price declines to happen there, etc. etc.
Like tj said, we've been listening to that crap for years over at HBB.
Since you haven't noticed in the linked article, San Francisco's property values haven't really declined yet, unless you want to count a 0.8% decline in the median price...... so it maybe it makes sense that they would be the "last to recognize".
If you can show me a nice 2-3 bedroom single family house that is down 40% from the peak you'd have a buyer immediately. It ain't there.
Where's your friend looking to buy?
Up in the hills south? There's 40% declines up there, with a number of houses going for under $400k.
In Santa Clara? 20% declines there. Houses that were going for $700k in '05 now selling for $550k.
In San Jose? 30% declines there.
if your friend is really hung up on 40%, heck, wait a couple months.
Really, the utter inability of folks to understand what's happening is... suprising.
The "low end" 3br/2ba market in South SF Bay is sinking like a rock. That's houses that went for 700k or less in '05.
For mid-value, it's drifting slowly down, but I'd expect that it'll pick up speed once the new comps get set at the low end. High end is still going up, slightly, since rich people are apparently more stupid than I've been lead to beleive.
If you think prices can't drop by 50% here, you haven't been paying attention to income or rents. It was cheaper to own than rent in '99. Now it's twice as expensive, or more usually, more. It will again be cheaper to own than rent before this is over, and it won't be because rents go up - they've already started sliding back down.
I am in Sonoma county,and the declines are affecting marginal areas first,and more.I spoke to a friend today,and asked about his daughter who got a "deal" from the builder she worked for in early '06.she and her husband paid $680k for a mcmansion with a mother in law unit,5% down and a negam loan.They owe substantially more now,and the Identical model next door has been for sale at $450k for 2 months with no offers.This was an 80 home infill subdivision in sw santa rosa,bad schools,and gangs outside the immediate area.more than half of the homes in the subdivision are now REO.She and hubby are holding on in hopes things will turn around.....
"The median price paid for a home financed with a conforming loan was $380,000 in January, down 5.0 percent from $400,000 a year ago, and down 7.3 percent from the $410,000 peak reached in March and April of 2007."
sportsfan said:
I understand "a 17.8% drop" makes a much better news story, but that number only makes sense if one assumes absolutely no change in the market for jumbo loans which of course has changed dramatically since last summer.
I understand 17% makes a better headline, but your analysis usually goes far beyond the headline.
sportsfan,
The median price for homes financed with a conforming loan will drop less than the actual price drop for the following 2 reasons:
The down payments are larger now so more expensive homes that would not have been counted before are now in the average.
As the price drops, more homes from the expensive side qualify for conforming loans. This will skew the median upwards.
For example you have 5 homes. Peak price (800K, 600K, 400K, 300K, 200K). The median for conforming loans will be 300K (the 800K and 600K are excluded).
Now supposed the price dropped 50%. Now the price of the houses are (400K, 300K, 200K, 150K, 100K). The median for conforming loans is 200K. That's a drop of only 30% even though the real price drop is 50%.
This is the reason the real price drop is understated by conforming loan median.
Thanks for the courtesy of a reply. It's the only one I saw to posts on two threads.
Yes, I understand that some increase in the median conforming loan amount will occur due to loan amounts falling either because of large down payments or because of lower housing prices. Perhaps that will cause the median of conforming loans to drop less than it otherwise would.
But that calculation is far less meaningful than what is being posted on this blog without any critical analysis, namely that the overall median prices in SoCal and Bay Area are down 17% and 17.8% from the peak.
Those median prices are down primarily due to the relative absence of jumbo loans being written since last August. Taking the majority of sales with loans over $417K out of the equation will skew the median sale price far more than any other input into the equation. It's a very simple point that is not being made, but which explains why the headline numbers are not as significant as they may first appear.
I've come to expect more from our hosts, but I don't mind being critical of them if I believe it's warranted . . . and naturally I do hope the criticism is constructive.
sportsfan said: Taking the majority of sales with loans over $417K out of the equation will skew the median sale price far more than any other input into the equation.
Longer article:
Publication: Los Angeles Business Journal
Publication Date: 28-JAN-02
Format: Online - approximately 412 words
Delivery: Immediate Online Access
Author: Bronstad, Amanda
Company: Executive Life Insurance Co.
Full Article:
In a $10 billion bankruptcy, $56 million doesn't seem like much.
But a group of attorneys representing the 300,000-plus policyholders of Executive Life Insurance Co. at the time of its 1991 collapse and sale are prepared to take on the state Department of Insurance over the dollars owed to policy holders.
"By reason of nothing other than bureaucracy, it's taken four years to distribute $50 million from the Department of Insurance," said Robert Wallan, an attorney with Pillsbury Winthrop LLP in Los angeles, who represents policy holders. "Maybe $50 million isn't $2 billion, but it's $50 million that's just sitting there."
Wallan says the department is focused on a civil suit it filed in 1999 against several European entities it claims fraudulently hid the true purchaser of Executive Life in 1991. The U.S. Department of Justice is also involved in the matter.
The $56 million settlement in question includes $42 million from a settlement between Drexel Burnham Lambert Inc. and First Executive Corp., the parent company of Executive Life, Wallan said. Drexel Burnham was an investment bank in the 1980s that provided many of the junk bonds in Executive Life's portfolio.
The remaining $14 million is based on the Department's accounting for interest accrued since the settlement in 1995.
Wallan said the Department is unnecessarily concerned about liability in distributing the First Executive, or FEC, funds. He points to an Oct. 24, 2001 U.S. Bankruptcy ruling that gave the green light for the Department to begin distributing funds. He also said the recent ruling backed an earlier Los Angeles Superior Court decision to dole out the funds.
But Lucia Coyoca, an attorney for the Insurance Commissioner's proceedings in the FEC litigation trust, said the Department is not hedging on the distribution. She said the multiple court rulings were necessary to ensure the funds were distributed using a method that was fair to all policyholders, which range from bondholders to individuals with long-term disabilities.
However, the Department still has not distributed the FEC funds, even with approval from both courts. Coyoca said there are two issues creating the delay. First, the Department is still in pending litigation with First Lincoln Holdings Inc., the successor to First Executive, which claims a share of the FEC trust between $2 million to $10 million. The Department is also putting in place a record keeping system designed to distribute the funds on an individual policyholder basis, she said.
first?
Ok, for the real comment. I guess this throws the theory of San Fran being immune out the window. Thank god we don't have to hear that anymore. I am just filled with glee over all this horrible news. Nothing makes me feel better than seeing rich ass speculators losing their ASS.
What's under the basement?
Meanwhile, BB says the economy is getting worse, and the market went down. Is something broken?
F. Frederson,
Try the following link:
http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0705/document/ec053007.pdf
Paul Kasriel of Northern Trust does a good job of accounting for U.S. investment in education and R&D. Not as rosy a picture as many suggest.
Yeah, it's different in the Bay Area. We're a destination. People want to live here, and there'll always be a market for homes at high prices. Mmmmmm hmmmmm.
The median Bay Area household income is something in the range of $65,000 and trending downward. Even if you toss in a bit of a premium because the Bay Area is a desirable place to live housing prices still need to fall by 50% in order to reach affordability.
Eventually it will sink into everybody's think skull that a house is a mildly depreciating asset that requires regular maintenance. It is not an investment vehicle.
But that's going to take awhile. I have a bunch of relatives and co-workers who think the boom times will return before the end of this year.
Debt Spiral - a self fulfilling prophesy...
Feb. 14 (Bloomberg) -- UBS AG won't buy auction-rate securities that fail to attract enough bidders, joining a growing number of dealers stepping back from the $300 billion market, said a person with direct knowledge of the situation...
UBS Won't Support Failing Auction-Rate Securities (Update4) - Bloomberg.com
So much for the "it's different here in the Bay Area" myth. $100K off! Wow, that's a nice haircut, and much more where that came from.
Bay Area folks: how bout a nice big cup of shut the f*!# up?!?!
Probably decided to focus on the Quality of the sales and not the volume. These are better sales. Anybody could sell cheap houses and just pump them out. We're looking at quality sales, you know, like 'hotel quality art
The Bay Area is just trying to keep up with their neighbors to the south. DQNews for SoCal by zip code.
Perhaps not completely off-topic: the idea of assessing how much something has dropped by looking at distance from last peak has bothered me. I would think that comparing current number with some kind of average value would be better.
Angry Saver | 02.14.08 - 2:17 pm
This was apropos to something in another thread, I take it?
But all housing is hyper-local. For an article and a map showing home value appreciation/depreciation see SF Bay Area Housing Microclimates.
Click on the map icon for map.
Tremendous variability, even within ZIP codes.
The change in lending standards is having a huge impact in the San Diego area.
A reality-based Realtor in San Diego posted his analysis of sales that closed in January in 3 of the nicer areas in the metro area - I'd guesstimate that median values are around $700k in the 3 areas.
Of the 75 sales:
0 used 100% financing.
Only 1 used a 5% down loan.
15 were 10-15% down
An amazing 59 of 75 were 20+% down.
Prices are still pretty sticky here in "The Fortress".
What happens in the East Bay and further environs will take time percolate to the peninsula and SF proper.
There are 10,000+ AAPL/GOOG employees with dotcom 2.0 money to burn looking for a quality SFH near work, and combine this with the fact that (thanks to Prop 13) everyone who bought from 1850-2000 can easily rent out their place for a juicy profit.
What is going to affect prices the most is the kneecapping of the marginal buyer. Right now 10% down is required for $400-500K mortgages and 20% down is required for Jumbos above that.
It remains to be seen what the "temporary" (haha, tell me another) conforming adjustment is going to change the static status quo.
Billy Hill,
Forget the position, consider the vector.
The Spook: FDIC Offers Chihuahua Giveaway and Free Trips to Disneyland and Las Vegas:
The Spoof : FDIC Offers Chihuahua Giveaway and Free Trips to Disneyland and Las Vegas funny satire story
FDIC Financial Institution Letters
Fourth Quarter 2007 Edition of FDIC's Letter to Stakeholders (reports on FDIC's activities and year-end financial statistics for 2007)
FDIC: FIL-8-2008: Fourth Quarter 2007 Edition of FDIC's Letter to Stakeholders
F. Frederson,
Yes, related to your earlier posts.
I think Kasriel is a straight shooter. Not a bull, but not a bear either. Also, he makes much of his research available to the public.
Unfotunately, he's not a cheerleader, so I suspect that is why he is not a regular on the media circuit.
"It remains to be seen what the "temporary" (haha, tell me another) conforming adjustment is going to change the static status quo"
I addressed this yesterday and didn't get much response so I'll try again. The theory is that the GSE conforming limit increase is a red herring to allow FNM/FRE to build giant loss reserves to (hopefully) stave off collapse, and that the limit increases were purposely hard to qualify for as they didn't want anyone to actually try to take them up on it. All bubble zones (CA, etc.) are pretty much out with 80% LTV requirements, along with several other important restrictions.
Along these lines, what is the true price of a house when the GSE's fail and the securitization model fails? How about the price of the actual down payment? At that point we'll get to see how much of the dotcon 2.0 bubble money is real and how much is fantasy.
I'm routinely seeing pricing/sales that are off about 40%+ from peak. In fact, it's a baseline I use to approach some semblence of fair value.
It has been my contention, and a saw I throw around quite often, that if you want a starting point for fair value on a property go back to it's 2000 or 2001 price. Based on a number of fundamentals, I feel this is a good starting place for what to pay. Those numbers are about 40-60% from peak. There's a wide swing with condos and undesirable areas taking much bigger haircuts for example.
It doesn't seem too imprudent that if one finds a house that really "fits" lifestyle (community, proximity to job/amenities/rec, type of dwelling, etc), has a signif discount, is "home" for a longer time frame, and with affordable, appropriate prudent financing (esp being able to lock in long money at < 6.5%) then moving forward can make sense.
On the other hand, some well located/desirable properties are still selling quickly and over (still very inflated IMHO) asking price.
Just what I'm seeing round these parts...
The problem is that people who join GOOG/AAPL late are the majority of those employees. Given the recent turn of events in the stock market, it wouldn't be a surprise that a lot their stock options are under water, and even if not, they're not vested yet. Typically, a company succeeds in the Silicon Valley and the stock goes up, it starts hiring and grows rapidly, but the newer employees (now the majority) don't benefit from the company stock because they joined the party too late
Rob Dawg,
Thanks for the link to the DQ sales. Looking at the SB numbers, I guess it's not so different here after all.
Now I get to start watching the wealth effect evaporate. Bwahahaha!
Oh yeah... still about 100 properties/week going back to lenders at the foreclosure sales in just Alameda County.
In regards to previous posts/threads about inventory:
East bay MLS currently showing about 840 active properties tagged as REO or short pay.
However we've been at a pace of 100/week REO in just 1 county since October. So REOs are underweighted by at least a factor of 4.
There are thousands of "phantom" REOs waiting in the wings. Invetory numbers should continue to explode.
more about bonds:
The markets sudden slump has pushed interest rates as high as 20 per cent for entities from the Port Authority of New York & New Jersey to a hospital
FT.com / Capital Markets - Debt crisis spreads to US municipalities
O/T - Securities Backed by Auto Loans Falter
Securities backed by auto loans weaken - Feb. 14, 2008
CR, I still take exception with your apparent decision not to report on the extent jumbo loans affect the percentage drop in median prices.
In response to your SoCal post a couple days ago I said:
On the report CR cited and linked, the more important language to me is buried:
"The median price paid for a home financed with a conforming loan was $380,000 in January, down 5.0 percent from $400,000 a year ago, and down 7.3 percent from the $410,000 peak reached in March and April of 2007."
I understand "a 17.8% drop" makes a much better news story, but that number only makes sense if one assumes absolutely no change in the market for jumbo loans which of course has changed dramatically since last summer.
Apples to apples.
The same theory applies to the Bay Area. From the DQ report:
Last month the percentage of Bay Area homes purchased with jumbo mortgages, or loans over $417,000, fell to 34.5 percent, down from 39.6 percent in December and down from about 63 percent before the credit crunch hit six months ago.
Although the current DQ report does not contain a similar statement, I suspect that the price decline in houses financed with conforming loans is around 5% to 7%.
I understand 17% makes a better headline, but your analysis usually goes far beyond the headline.
It may be bad form to repost a link from the last thread, but it's even more relevant here.
Housing Wire noted that NAHB's PAC has just publicly turned off the cash spigot to Capitol Hill, ending all political donations until further notice in retaliation for the fact that Congress left numerous NAHB priorities out of the recently-passed stimulus bill.
Page not found : HousingWire || financial news for the mortgage market
That just doesn't happen in Washington. It's virtually unprecedented to see announcements like that. As the Bay Area numbers show, desperate times call for desperate measures.
Rob Dawg,
Those numbers were terrifying. Thanks, lunch just around the corner.
Cheers,
When do we get the new Jumbos? March...gee whiz...maybe that and the rebates will help us.
OT - Cerberus founder states GMAC may face substantial difficulty if credit markets don't improve. Mentions Chrysler also.
GMAC May Face `Substantial Difficulty,' Cerberus Says (Update1) - Bloomberg.com
Feb. 14 (Bloomberg) -- GMAC LLC, the auto and mortgage lender controlled by Cerberus Capital Management LP, may run into ``substantial difficulty'' if credit markets don't improve, said Stephen Feinberg, founder of the private-equity firm.
"We have detailed contingency plans in a continuing worsening environment,'' Feinberg wrote in a Jan. 22 letter to investors, a copy of which was obtained by Bloomberg News.However, if the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty.''
..."
Binko wrote:
"Eventually it will sink into everybody's think skull that a house is a mildly depreciating asset that requires regular maintenance. It is not an investment vehicle."
I could not disagree with you more. My partner and I have owned 7 different homes going back to 1976. None were bought for investment purposes. We lived in them all. We put down at least 10% on all of them and in most cases much more. We sold when one of us needed to move to take another job. Not counting the current home we live in, the six homes we bought and sold have netted us a seven figure total. The current house could go to zero in price and we would still have a solid gain. And none of that includes the very generous tax benefits we have gotten from the property taxes and mortgage interest.
I don't think we are exceptional in the kinds of returns we have had. Residential real estate has been an exceptional investment.
Moody's cuts FGIC rating to A3 from Aaa
daisycolorado,
You've been riding the boomer tailwind. Look out for the boomer retirement headwinds dead ahead.
AMBAC's CEO on CNBC 2 mins ago :
"bailout is a word we don't use in our organization" before going to give his testimony to a Senate (or Congress?) committee.
He says they are super liquid, no probs, it's those pesky 06 and 07 vintage mortgages that some wackos are worried about but if they aren't AAA i.e. 99.9% assured to pay at worst they are 99.7% solvent.
oh and Buffett's offer earlier this week is like offering somebody 50 bucks for their house ,of course they're not taking it seriously.
Misean writes:
Those numbers [SoCal by zip code] were terrifying.
I don't understand how Realtors® are going to survive. I look at specific markets like 92397 that had 3 sales where I also know has at least 6 RE offices and three times that in sales agents. No soup for them.
Those Germans will never EVER be able to cross this deep Trench Monsieur Maginot, Trenches like this have always stopped invading armies in the past.
GMAC and Cerberus on the edge:
(just jump and get it over with)
GMAC LLC, the auto and mortgage lender controlled by Cerberus Capital Management LP, may run into ``substantial difficulty'' if credit markets don't improve, said Stephen Feinberg, founder of the private-equity firm.
We have detailed contingency plans in a continuing worsening environment,'' Feinberg wrote in a Jan. 22 letter to investors, a copy of which was obtained by Bloomberg News.However, if the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty.''
GMAC May Face `Substantial Difficulty,' Cerberus Says (Update1) - Bloomberg.com
Picosec makes an important point: The bifurcation in the Bay Area market is dramatic. Good neighborhoods on the peninsula and San Francisco are still seeing pretty robust buying interest. In the less desirable inner locations and in the out perimeters, the market is collapsing. My guess is that as fewer and fewer borrowers qualify for jumbo loans, that the downward trend in pricing will seep into the marquee neighborhoods as well. I don't believe the credit crunch is a passing phenomena.
"daisycolorado,
You've been riding the boomer tailwind. Look out for the boomer retirement headwinds dead ahead."
Hear that. Several war baby couples I know (born '40-45) have unloaded their big homes over the past few years to buy condos or smaller homes, or homes in lower-priced areas.
Look at it another way: there are tons of people out there with excess capacity in their houses now: an older couple of two in a house that could handle a family of four or five.
So barring massive immigration or massive price cuts (or both together), there's too much house and (soon) not enough buyer out there in most high-priced markets.
If you want a harbinger, take a look around at the churches in your community. There are too many, and most of them (except for the marketing mega-churches) are too big. They built 'em in the '60s, when they thought the baby boom would go on forever. Now a lot of congregations are dropping away as the families shrink and the old-timers move away ir due, and a lot of churches are becoming community centers, yoga/martial arts businesses, homes, private schools, you name it.
Rob Dawg,
There's a Realty office on every corner in SF Valley. Man!
Cheers,
I look at specific markets like 92397 that had 3 sales where I also know has at least 6 RE offices and three times that in sales agents. No soup for them.
C'mon, Rob Dawg, Wrightwood was snowed in last month, wasn't it?
RE: NAHB's PAC's decision to stop donations to legislators.
I call that LEADERSHIP! Wouldn't it be nice if all PACs made the same decision. Sway legislators with reasoned arguments, not bribes.
I'm not holding my breath.
"move away ir due"
"move away or die;" I've been in LA for several days, and it affected my nervous system.
FatalException | 02.14.08 - 2:56 pm | #
I was talking to my boss about this yesterday. Turns out he is a member of this group, because we do a lot of business with home builders. He told me that they just didn't want to give to democrats, so they weren't going to give to anyone.
The thing is guys, they don't have money to give whether they want to or not. If you cannot sell homes, you cannot build homes. If your job is building homes and you cannot, you do not make money. Call it a protest or whatever you want, but it just a lack of funds.
seriously, you guys, these doom and gloom numbers are getting ridiculous.
i have a friend with perfect credit and hundreds of thousands in the bank who's been looking to buy in the Bay Area for the last year. If you can show me a nice 2-3 bedroom single family house that is down 40% from the peak you'd have a buyer immediately. It ain't there.
The bias here has always been bearish. But people are now glibly predicting declines of 40, 50, 60 percent. Heck, why not 70 or 80? You're pulling these numbers out of your butts anyway.
I was no cheerleader during the bubble. I thought it was insane too. But egging on panic now is no more productive. There are real people in real homes involved here. We have to remember that over the last 10 years, the housing market and mortgage business have consistently punished and taken advantage of people who were conservative and rational. But those people still needed a place to live -- and they will be punished on the downside too -- probably more so because they still hold on to the "quaint" belief that they should honor their obligations.
So why all the glee? Why can't this blog be a voice of reason and temperance during the downswing, just as it was during the bubble?
If it just becomes a cesspool of Schadenfreude it will be a real shame.
"i have a friend with perfect credit and hundreds of thousands in the bank who's been looking to buy in the Bay Area for the last year."
jmay,
You hit the nail on the head. With that one friend of yours, we'll turn this bust right around.
Tell him I say hi.
"i have a friend with perfect credit and hundreds of thousands in the bank who's been looking to buy in the Bay Area for the last year. If you can show me a nice 2-3 bedroom single family house that is down 40% from the peak you'd have a buyer immediately. It ain't there."
It'll be there eventually. He wants to go to Antioch or Solano, he could be there now, or shortly. San Francisco or Palo Alto or Berkeley or Southern Marin: that'll take a lot more time, and they may never drop as much.
If you wonder why we're so skeptical, it's because of all the things that weren't the way they were supposed to be in this mess; who knows what further skeletons are ready to fall out of the closet?
the idea of assessing how much something has dropped by looking at distance from last peak has bothered me
Well that's the definition that just about anyone would use for "how much something has dropped", be it a stock, housing, or Bush's popularity, so just what is bothering you about it?
So why all the glee?
Didn't you get the memo? This is Gleeclub.com now. The Calculated Risk site was suddenly removed by the government "due to budgetary constraints." If you don't want glee, I suggest you watch CNBC.
"But egging on panic now is no more productive." - jmay
Please. You actually think this blog has any effect on the market? 30% of homedebtors think their houses when up in value last year. The market is so biased to the optimistic side that possible over pessimistic comments on this blog are rain drops in a hurricane.
In a way, they are similar to complaints that we are talking ourselves into a recession. PLease. The fact that we have hundreds of billions to trillions of dollars in malinvestment (now bad/non-performing debt) has a litte more to do with what is going to happen than how we all 'feel' about things. Quit singing koombaya and wake up. Positive thinking does not help you when there is a bullet entering your skull.
sportsfan writes:
I look at specific markets like 92397 that had 3 sales where I also know has at least 6 RE offices and three times that in sales agents. No soup for them.
C'mon, Rob Dawg, Wrightwood was snowed in last month, wasn't it?
Wrightwood is a ski resort village. Prices and sales traditionally go up when it snows. Back when I owned some up there I used to joke that it was worth another $1000 to me every time it snowed.
Quit singing koombaya and wake up.
I'm not familiar with this song "koombaya," although, apparently, it makes you sleepy.
jmay
what's doom and gloom about reporting a median price decline? hard numbers friend. by most income/price metrics it has long been clear that bubble areas would have to drop close to 60%. it's coming true. it just is, man. be the ball danny.
Elvis,
Re: the NAHB PAC, they're sitting on $1.37M, according to FEC records. The NAHB's lobbyist even holds the PAC out as one of the top six in the nation.
The builders may be getting pounded in the market, but all their executives made those PAC donations over the last year or so.
And I don't get the idea of withhold cash from Democrats, as Tom in AZ mentioned.
Whether you like it or not, there's a strong consensus that there are going to be a lot more Democrats to give to after November. So will NAHB stop giving until the Republicans take control again? That may be quite a dry spell.
So why all the glee?
The glee is because i might finally be able to buy a house without sacrificing my retirement funds. One man's food is another's poison. This was true during the bubble and it is true during downturn.
FatalException,
The builders will ask for their $1.37M back, so they can fuel their yatchs for last ride.
Elvis - LOL. I'm sure they wish they could!
It was just about time for someone to show up with another troll-like comment accusing posters of reveling in bad news -- they appear with a certain regularity. That's been happening over at HBB for nearly 3 years now, despite the fact that the most bearish forecasts have tended to be the right ones.
You want cheerleading, watch CNBC. The bubble ran condos here up 400%, so a drop of 80% wouldn't be out of the question.
BTW, 442 visitors online.
tj,
Big day for TWM. Glad I jumped in.
BTW, have you noticed how some posters here seem to revel in the bad news that comes out every once in a great while?
Bob Dobbs writes:
"daisycolorado,
You've been riding the boomer tailwind. Look out for the boomer retirement headwinds dead ahead."
As baby boomers retire, home markets will hurt
The housing market has a new problem: ageing Americans
So why all the glee? Why can't this blog be a voice of reason and temperance during the downswing, just as it was during the bubble?...
jmay
You forgot:
WhyoWhy do you hate America ?
WhyoWhy do you hate freedom ?
WhyoWhy do you hate democracy ?
Sheesh... Whyowhy do you care about the expression of emotion ? Are the facts being distorted ? No, they aren't.
Unlike the way the boosters distorted them; want examples - check the press releases of the NAR
Real Estate Data, Statistics, Demographics, & Trends: NAR Current News
-K
Anybody ever read salon? This article titled "Help! I'm a prisoner in a big suburban house!" is a bit of a zeitgeist.
Since You Asked - Salon.com
Darth Toll writes:
So much for the "it's different here in the Bay Area" myth. $100K off! Wow, that's a nice haircut, and much more where that came from.
Bay Area folks: how bout a nice big cup of shut the f*!# up?!?!
=============================
Hey,
Many people living here can't wait for the house prices to crash.
sportsfan,
Some people have a lot invested in the insanity. Funny how it always expresses itself in the same way. Reminds me of would-be sellers and the oft-heard refrain "I'm not just gonna give it away!".
Boy am I torn. While human decency has me feeling bad for those about to lose their homes (in the Bay Area), I'm pleased as punch the realtors are suffering. In the Bay Area especially, they are the biggest bunch of snake oil salesmen/women and without the slightest degree of ethics.
They spend their commission before the deal is even done so when issues arise before the close of escrow, you better believe they grease whatever wheels to make sure all ends well.
To hell with them....
I'm rooting for the crash, yes indeed. AND I own one of those greatly overpriced Bay Area Homes!
Why, you might ask? Well, I'd like to trade up. If home prices drop 50%, then: my property tax on the new place would be half; the amount I pay a realtor would be half; the loan fees are half; my capital gains drop to zero - (yes, the gain on my place exceeds the $500k giveaway)
And the new mortgage would certainly not have to be JUMBO.
And, Big Plus: my risk of the new place dropping in value would be less.
Yahoo, let them prices drop!
A friend of my Mom's just had a sale fall out of escrow in Aptos..and the sale price was $200,000 below last year's appraisal... and the people who were going to buy supposedly had to buy NOW for tax reasons..go figure
Anyone else remember the episode where South Park was about to be enveloped in a cloud of Smug emanating from California. The San Fran people were smelling their own farts to avoid greenhouse gas emmissions and talking about how progressive they were.
Seems fitting that San Fran would be the last to recognize that they are not in fact special and not everyone in the world wants to live there.
BayArea, sorry for the rant. It was getting pretty damned tiring listening to all of the Bay Area pukes..er..I mean people saying how special and magical the Bay Area is and that it was impossible for any price declines to happen there, etc. etc.
Like tj said, we've been listening to that crap for years over at HBB.
Hey Worker --
Since you haven't noticed in the linked article, San Francisco's property values haven't really declined yet, unless you want to count a 0.8% decline in the median price...... so it maybe it makes sense that they would be the "last to recognize".
If you can show me a nice 2-3 bedroom single family house that is down 40% from the peak you'd have a buyer immediately. It ain't there.
Where's your friend looking to buy?
Up in the hills south? There's 40% declines up there, with a number of houses going for under $400k.
In Santa Clara? 20% declines there. Houses that were going for $700k in '05 now selling for $550k.
In San Jose? 30% declines there.
if your friend is really hung up on 40%, heck, wait a couple months.
Really, the utter inability of folks to understand what's happening is... suprising.
The "low end" 3br/2ba market in South SF Bay is sinking like a rock. That's houses that went for 700k or less in '05.
For mid-value, it's drifting slowly down, but I'd expect that it'll pick up speed once the new comps get set at the low end. High end is still going up, slightly, since rich people are apparently more stupid than I've been lead to beleive.
If you think prices can't drop by 50% here, you haven't been paying attention to income or rents. It was cheaper to own than rent in '99. Now it's twice as expensive, or more usually, more. It will again be cheaper to own than rent before this is over, and it won't be because rents go up - they've already started sliding back down.
So why all the glee?
Exercise your mind to increase understanding:
If the price of gas dropped by 50% - would you be happy? Why?
Would you instead feel bad for the oil companies?
In every price change, there's a winner and a loser.
Guess which side the happy people are on?
I am in Sonoma county,and the declines are affecting marginal areas first,and more.I spoke to a friend today,and asked about his daughter who got a "deal" from the builder she worked for in early '06.she and her husband paid $680k for a mcmansion with a mother in law unit,5% down and a negam loan.They owe substantially more now,and the Identical model next door has been for sale at $450k for 2 months with no offers.This was an 80 home infill subdivision in sw santa rosa,bad schools,and gangs outside the immediate area.more than half of the homes in the subdivision are now REO.She and hubby are holding on in hopes things will turn around.....
Bay Area folks: how bout a nice big cup of shut the f*!# up?!?!
Sounds like someone has peninsula envy.
"The median price paid for a home financed with a conforming loan was $380,000 in January, down 5.0 percent from $400,000 a year ago, and down 7.3 percent from the $410,000 peak reached in March and April of 2007."
sportsfan said:
I understand "a 17.8% drop" makes a much better news story, but that number only makes sense if one assumes absolutely no change in the market for jumbo loans which of course has changed dramatically since last summer.
I understand 17% makes a better headline, but your analysis usually goes far beyond the headline.
sportsfan,
The median price for homes financed with a conforming loan will drop less than the actual price drop for the following 2 reasons:
For example you have 5 homes. Peak price (800K, 600K, 400K, 300K, 200K). The median for conforming loans will be 300K (the 800K and 600K are excluded).
Now supposed the price dropped 50%. Now the price of the houses are (400K, 300K, 200K, 150K, 100K). The median for conforming loans is 200K. That's a drop of only 30% even though the real price drop is 50%.
This is the reason the real price drop is understated by conforming loan median.
"But egging on panic now is no more productive. There are real people in real homes involved here."
Now on video.
That's a joke, right? San Jose? Santa Clara? We're talking Silicon Valley. That would be Palo Alto. Cupertino. Menlo Park.
Sorry, but prices are as high as they've ever been in Silicon Valley.
mb,
Thanks for the courtesy of a reply. It's the only one I saw to posts on two threads.
Yes, I understand that some increase in the median conforming loan amount will occur due to loan amounts falling either because of large down payments or because of lower housing prices. Perhaps that will cause the median of conforming loans to drop less than it otherwise would.
But that calculation is far less meaningful than what is being posted on this blog without any critical analysis, namely that the overall median prices in SoCal and Bay Area are down 17% and 17.8% from the peak.
Those median prices are down primarily due to the relative absence of jumbo loans being written since last August. Taking the majority of sales with loans over $417K out of the equation will skew the median sale price far more than any other input into the equation. It's a very simple point that is not being made, but which explains why the headline numbers are not as significant as they may first appear.
I've come to expect more from our hosts, but I don't mind being critical of them if I believe it's warranted . . . and naturally I do hope the criticism is constructive.
Thanks again,
sportsfa
sportsfan said:
Taking the majority of sales with loans over $417K out of the equation will skew the median sale price far more than any other input into the equation.
That makes sense.
thank you, picosec.
SF Gate link suggests that my tool shed with running water, I mean house, is not totally collapsing in value.
Here is an article on First Executive Life Insurance that was seized by the California Insurance Commissioner in the early 1990s.
I believe that they were part of the Drexel Burnham/Milken masters of the universe junk bond crowd.
404 File Not Found | Find Articles at Bnet
Conservation and Liquidation Office
Longer article:
Publication: Los Angeles Business Journal
Publication Date: 28-JAN-02
Format: Online - approximately 412 words
Delivery: Immediate Online Access
Author: Bronstad, Amanda
Company: Executive Life Insurance Co.
Full Article:
In a $10 billion bankruptcy, $56 million doesn't seem like much.
But a group of attorneys representing the 300,000-plus policyholders of Executive Life Insurance Co. at the time of its 1991 collapse and sale are prepared to take on the state Department of Insurance over the dollars owed to policy holders.
"By reason of nothing other than bureaucracy, it's taken four years to distribute $50 million from the Department of Insurance," said Robert Wallan, an attorney with Pillsbury Winthrop LLP in Los angeles, who represents policy holders. "Maybe $50 million isn't $2 billion, but it's $50 million that's just sitting there."
Wallan says the department is focused on a civil suit it filed in 1999 against several European entities it claims fraudulently hid the true purchaser of Executive Life in 1991. The U.S. Department of Justice is also involved in the matter.
The $56 million settlement in question includes $42 million from a settlement between Drexel Burnham Lambert Inc. and First Executive Corp., the parent company of Executive Life, Wallan said. Drexel Burnham was an investment bank in the 1980s that provided many of the junk bonds in Executive Life's portfolio.
The remaining $14 million is based on the Department's accounting for interest accrued since the settlement in 1995.
Wallan said the Department is unnecessarily concerned about liability in distributing the First Executive, or FEC, funds. He points to an Oct. 24, 2001 U.S. Bankruptcy ruling that gave the green light for the Department to begin distributing funds. He also said the recent ruling backed an earlier Los Angeles Superior Court decision to dole out the funds.
But Lucia Coyoca, an attorney for the Insurance Commissioner's proceedings in the FEC litigation trust, said the Department is not hedging on the distribution. She said the multiple court rulings were necessary to ensure the funds were distributed using a method that was fair to all policyholders, which range from bondholders to individuals with long-term disabilities.
However, the Department still has not distributed the FEC funds, even with approval from both courts. Coyoca said there are two issues creating the delay. First, the Department is still in pending litigation with First Lincoln Holdings Inc., the successor to First Executive, which claims a share of the FEC trust between $2 million to $10 million. The Department is also putting in place a record keeping system designed to distribute the funds on an individual policyholder basis, she said.
Exercise your mind to increase understanding:
Classic direct command statement! LMAO. On par with "Recoginize!" or "Don't believe the hype" or "Do or do not, there is no try"
It was just about time for someone to show up with another troll-like comment accusing posters of reveling in bad news.
rc helicopter
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