Real Estate Crash thread

[JimmyCarter]

Just when you thought this couldn't be handled any worse...
http://www.ibtimes.com/articles/2009...policy_all.htm

I've become numb a long time ago ... but seeing these programs and "solutions" one after the other is simply.... I don't have words. Just enjoy - last week we mentioned how some states had created a work around to use the tax REBATE (i.e. AFTER you buy the home you get the handout) as a substitute for a down payment and closing costs [ May 8: Minyanville - Subprime Lending is Back with a Vengeance ]

In an effort to boost home buying -- even for marginally qualified borrowers -- a number of states are finding creative ways to advance the tax credit to buyers on the day they get their new keys , r ather than having to wait for next year's refund check. This allows buyers to pay for things like closing costs, mortgage points - or even the down payment.

Well folks - it did not take long... the early results of letting people who cannot even find enough money to put 3.5% down into the housing market must of been spectacular. Because in just the blink of an eye this "adjustment" to what Congress originally approved, has now become the federal standard .

(May 12, 2009) Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment .

Secretary Donovan said that important changes, which the National Association of Realtors(R) has been calling for , will help consumers purchase a home. "We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment ," Donovan said. According to Donovan, the FHA's approved lenders will be permitted to "monetize" the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

This is the same FHA we posted last week would cause the next housing bust [ May 6: WSJ - FHA Loans, the Next Housing Bust ]

Last year banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100% taxpayer guarantee . Many of these have the same characteristics as subprime loans: low downpayment requirements, high-risk borrowers, and in many cases shady mortgage originators. FHA now insures nearly one of every three new mortgages, up from 2% in 2006 .

... taxpayer losses are mounting on its $562 billion portfolio . According to Mortgage Bankers Association data, more than one in eight FHA loans is now delinquent -- nearly triple the rate on conventional, nonsubprime loan portfolios . Another 7.5% of recent FHA loans are in "serious delinquency, " which means at least three months overdue.

Because FHA also allows borrowers to finance closing costs and other fees as part of the mortgage, the purchaser's equity can be very close to zero .

So let's wrap this up and put a bow on it. Effectively the US government is going to allow people with "3.5% down" (now covered by the tax payers gift of $8000) to enter into agreements of sub 5% mortgage rates, to FICO scores as low as 620. As long as its your first home. Closing costs? Remembers the FHA allows people to finance that... you don't need to have it on you.

To put that in perspective this means, based on the median home price in America - about 70% of homes are now available to home buyers for less upfront than a rental. In a rental you at least need to save enough to put down a security deposit. Under this innovative program (that was not the original intent of the legislation) $8000 can finance 3.5% down on up to a $228,000 home. Anyone who can make the monthly payments from there now is welcome to join the home ownership class. Or if you really don't care about your 620, 630 FICO score you can basically get into one of these homes, not make a single payment and live rent free from 12-18 months before they get around to foreclosing on you (which many banks are dragging their feet on).

And if the home value goes down even 1% and you find yourself immediately underwater? You walk away and send the keys to the US taxpayer - we're going to pay for it on the back end as well as the front end.

This is what was done in the auto industry - it's called pulling forward demand with greater and greater incentives (0% interest rates for multiple years, $4K, $5K, $6K rebates). Now we pulled almost all natural demand for home buyers that should of been arriving in 2008-2009 into 2006-2007. So you have to create an even stronger drug when you can rustle up enough home buyers. And here we are.... and when home data "drops at a slower rate than the previous period" we can rally on "2 nd derivative improvement"... failing to mention whom is bearing the costs for that improvement .

Am I surprised? No. It's all Groundhog Day at this point - each program begins to sound like the other. Common theme is taxpayer handouts and taxpayers bearing risk - Kick the Can policies. In my predictions piece for 2009 I wrote things would get so desperate... err, correction - I wrote green shoots would be so plentiful that:

But larger than that - my prediction is Fannie/Freddie and then above and beyond that, for people who do not have 20% down and won't pay for insurance, the FHA - will wage a war against current mortgages. We'll see interest rate buydowns , we'll see principal reductions, we'll see anything and everything that basically gives a big (bleep) you to people who have been honoring the system. In return we will tell those people, well if your neighbor's house goes into foreclosure we will all suffer, so it's a necessary evil.

By the back half of 2009, refinancing will reach levels (and above) seen in the bubble years of 2005-2006. Obama & Co will also come up with myriad plans for buyers to suck up excess inventory - the government will be our partner . Nothing should surprise you - this will be an all out assault - we are already seeing the first inane ideas such as no appraisal refinances. The "private" mortgage industry will be almost completely crowded out as no one can compete with what the government will offer.

Mission Accomplished

[Blurred]

It doesn't matter what he told you or what you thought you saw, FHA requires 3.5% down on a purchase in 2009, period. I have been doing those loans since 1984, so ya, I am the fucking expert on this.
It looks like he put 2% down because he did put 3.5% down, but 1.5% for MIP was added back on to his base loan amt, resulting in a 98% amount financed.
What you called PMI, FHA calls MIP and what was 1.5%, is now 1.75% of the loan amt added to the loan upfront with .55% paid on the loan balance monthly.
Sorry dood, you talking bullshit and those that speculated that he got out of that because the property appraised with 20% equity is crap, as FHA charges MIP regardless of LTV on a purchase.

In CA he could have done a Calpers or Calsters loan with 3% down and no mortgage insurance, as the loans are split into an 80% 1st and 17% 2nd. Because this is a conventional loan with a 80% ltv 1st TD, there is no PMI required. I am sure other states have similar products, but FHA is the same nationally.

Acronyms really make me horny.

[skier666]

So let's wrap this up and put a bow on it. Effectively the US government is going to allow people with "3.5% down" (now covered by the tax payers gift of $8000) to enter into agreements of sub 5% mortgage rates, to FICO scores as low as 620. As long as its your first home. Closing costs? Remembers the FHA allows people to finance that... you don't need to have it on you.

Bingo! Home Ownership and the speculative appreciation is gone except in only the most highly desirable and unique locations. People just don't get it...our country is borrowing to get us back....back to what? Back to where? Refinancing and buying shit we don't need? So we get back to the point of dumb lending practices, and then it all crashes down again? Its an endless loop.

Currently, I live in a 1000 sqft apartment in a nice part of San Francisco. Our little guy is on the move and should be walking soon....we need a at least another bedroom. I'm starting the process of getting pre-approved for loans, and getting ready to place our place on the market. We're lucky in that the past year of comps show that sales of units in and around our apartment have sold at or just below list. We'll lose some equity on the sale, but make it up on the other side. I'll keep you posted....if its rough in SF, its going to be worse almost everywhere else.

[bean]

What's the deal with investment property loans? % down, rates, so on and so forth? Are there any provisions for deciding to make an investment property into a primary residence?

[H0G]

What's the deal with investment property loans? % down, rates, so on and so forth? Are there any provisions for deciding to make an investment property into a primary residence?

Rates are generally 3/4% higher than what you would get for your primary home. 20-25% down, 6 month reserve - if you own any real estate, you must qualify for all mortgage debt payments regardless of rental income.

there are no ramifications to moving into your rental.

I am in Denver, so pm me for more info.

[Skidog]

All this and Obama picked the low hanging fruit of credit card reform instead of one of the MAIN platforms he was elected on which was the housing crisis.

Boy when the lobbyists have control they have control....

[liv2ski]

Jimmy Carter and Hog,

Just to clear up a few issues. First, JC, just because FHA is nuts enough to allow the tax credit for a down payment, doesn't mean that the investors that do FHA loans will accept that form of down payment today. So don't worry, no one is doing that yet. Also, FHA does not allow you to finance closing costs on a purchase. I don't care what you read. Everyone misinterprets the outdated verbage used in the old guidelines.
Hog, I don't know where your sending your loans to be underwritten, but you always use the net rental income or loss on the tax return to to determine cash flow. Yes, I have a positive cash flow on my rentals. When buying a new N/O/O property the lender will use 75% of the rental income projected to off set the new PITI. that may result in a loss which is hit against you like a debt for qualifying or as income if your that lucky.

[liv2ski]

What's the deal with investment property loans? % down, rates, so on and so forth? Are there any provisions for deciding to make an investment property into a primary residence?

In the old days, you could move into your rental property, that you had owned forever, with a shitload of equity in it, stay there 2+ years and treat the equity at sale like a home you lived in forever. That means no taxes paid up to a $500k gain for a married couple rather than normal capital gains taxes on a rental properties equity which in CA runs about 18% Fed and 10% state last time I got hosed selling a rental.
Sadly Congress changed the rules in 2008 and that sweetheart lope hole is drastically reduced/gone.

[mcsquared]

In the old days, you could move into your rental property, that you had owned forever, with a shitload of equity in it, stay there 2+ years and treat the equity at sale like a home you lived in forever. That means no taxes paid up to a $500k gain for a married couple rather than normal capital gains taxes on a rental properties equity which in CA runs about 18% Fed and 10% state last time I got hosed selling a rental.
Sadly Congress changed the rules in 2008 and that sweetheart lope hole is drastically reduced/gone.

I am not sure what you are smoking but the primary residence exemption still exists. There are some ownership and use tests but it hasn't gone anywhere. I have never moved into a rental and then sold before so I am sure there are some depreciation/basis issues there but I have moved out of a house, rented it for a couple years and then sold it, excluding the gain each time.

[liv2ski]

I am not sure what you are smoking but the primary residence exemption still exists. There are some ownership and use tests but it hasn't gone anywhere. I have never moved into a rental and then sold before so I am sure there are some depreciation/basis issues there but I have moved out of a house, rented it for a couple years and then sold it, excluding the gain each time.

I don't smoke, that is Mrs liv2ski your thinking about
But while having my 08 return done my CPA pointed out to me there was a change in the tax code that would limit/eliminate the ability of the owner of a long term rental property to move into it for two years and be able to treat the gain like a normal always owner occupied sale.
You may want to talk to your tax guy about this, as I hope I am wrong. It was my intent to move into the rentals, one by one over the years to get out of the normal Capital Gain hit you have on the sale on N/O properties. I was told sorry dude, that won't work for you anymore on these properties you have had as rentals for 15+ years. So to Congress and Mr Bush

[mcsquared]

Actually, I should probably start smoking. Because it turns out you are right. or at least kind of right. Sounds like you would have to live there for 5 years. But if you live there for 2 years you still get a break, 2/5ths is exempt
http://www.investmentnews.com/articl.../REG/517913864

[smitchell333]

Actually, I should probably start smoking. Because it turns out you are right. or at least kind of right. Sounds like you would have to live there for 5 years. But if you live there for 2 years you still get a break, 2/5ths is exempt
http://www.investmentnews.com/articl.../REG/517913864

Note that any property that you are currently living in (or were living in prior to 1/1/09) is exempt.

The rule takes effect Jan. 1. Anyone who purchases a home and is living in it as a principal residence by that date won't be subject to its provisions and can enjoy the full tax-free capital gain, provided that that homeowner has lived in the house for two of the previous five years.

[JimmyCarter]

Jimmy Carter and Hog,

Just to clear up a few issues. First, JC, just because FHA is nuts enough to allow the tax credit for a down payment, doesn't mean that the investors that do FHA loans will accept that form of down payment today. So don't worry, no one is doing that yet. Also, FHA does not allow you to finance closing costs on a purchase. I don't care what you read. Everyone misinterprets the outdated verbage used in the old guidelines.

Good to know. I just cut and paste the guy's whole rant because the whole mentality of "we need to get people into houses (they probably can't afford) as soon as possible!" bugs me.

[khakis]

along the lines of that rant, this article is a good read, if you can get through it without vomiting
http://www.nytimes.com/2009/05/17/ma...closure-t.html

[H0G]

Jimmy Carter and Hog,

Hog, I don't know where your sending your loans to be underwritten, but you always use the net rental income or loss on the tax return to to determine cash flow. Yes, I have a positive cash flow on my rentals. When buying a new N/O/O property the lender will use 75% of the rental income projected to off set the new PITI. that may result in a loss which is hit against you like a debt for qualifying or as income if your that lucky.

This is true, but your rental income must be qualified and verified for 12-24 months. So if you are trying to rent your primary residence, showing them a lease is not going to cut it.

[ass-to-mouth]

along the lines of that rant, this article is a good read, if you can get through it without vomiting
http://www.nytimes.com/2009/05/17/ma...closure-t.html

It appears as though Mr Andrews neglected to mention a few important pieces of information.
http://meganmcardle.theatlantic.com/...bankruptcy.php

The Road to Bankruptcy

21 May 2009 01:02 pm
At the end of his book's harrowing account of mortgage mistakes and credit card crises, Edmund Andrews writes: "While our misadventure had certainly been more extreme than those of many other Americans, our situation was not all that unusual." And indeed the book reads like the story of an American Everyman, easily sucked in to the alluring world of easy credit as he struggled to blend a new family. The terrifying implication is that it could happen to you--to anyone who leads with their heart and not their head.

But en route to that moral, it turns out the story has been tidied up a little. Patty Barreiro, Andrews' wife, has declared bankruptcy twice. The second time was while they were married, a detail that didn't make it into either the book or the excerpt that ran in last Sunday's New York Times Magazine.

Andrews' desire to shield his wife is understandable--hell, laudable. No decent person wants to parade their spouse's financial trouble in front of the world. But this is material information that changes the tenor of his story. Serial bankruptcy is not a creation of the current credit crisis, and it doesn't just happen to anyone, particularly anyone with a six figure salary.

In September 1998, California bankruptcy court records indicate that Patty and her first husband declared bankruptcy. The financial statement they filed with the court indicated family income of $174,000 in 1996, $87,000 in 1997, and $126,000 in the first nine months of 1998. The income fluctuations are not surprising, given that her husband was in the film production industry. By the time of the filing, the couple owed about $30,000 on 8 credit cards, over $200,000 in back taxes, and almost $15,000 in private school tuition, as well as substantial car and mortgage payments.

In 2007, nearly as soon as she was eligible, Patty Barreiro filed again in Montgomery Country. When called for comment yesterday, Andrews was unavailable, but there is no question that it is his wife: his income and occupation are prominently featured in the docket.

This is really highly unusual. For starters, the overwhelming majority of people who file bankruptcy do not make anything close to $100,000 a year--the standard estimate when the 2005 bankruptcy reform was passed was that about 80% of filers had household incomes below the median income in their state. The number of affluent people who file twice is even smaller, and has presumably gone down since the 2005 filing largely eliminated abusive serial Chapter 13 filings, which used to be used, often by quite wealthy people, to forestall evictions or foreclosure.

The bankruptcy code requires filers to wait 8 years after a previous Chapter 7 discharge. Barely four months after she became eligible, Patty Barreiro filed again. And the filing shows some suggestion of strategic debt management.

Ms. Barreiro filed separately from Andrews, and had to amend the filing to include Andrews' income after a complaint from a creditor who wanted to force her into a Chapter 13 repayment plan. She filed when her income was at rock bottom, consisting only of unemployment; the timing may have just excluded having to declare $5,000 in freelance editing income Andrews mentions in the book. And she shed what appear to be jointly incurred debts, such as a Comcast account. Comcast does not service the address listed on the 1998 filing, but as I can attest (to my sorrow), it is the main cable provider in Silver Spring, where she moved to live with Andrews in 2004.

Serial bankruptcies can, of course, happen to anyone with enough bad luck. But they usually don't. And when they do, they usually hit people with marginal incomes that leave no margin for error in the budget. Most people, even in LA, are able to build a sustainable budget out of an income in the low six figures.

Moreover, pesky bad luck isn't really the picture painted by either filing. Rather, Ms. Barreiro seems to have spent most of the last two decades living right up to the edge of her income, and beyond, and then massively defaulting. If you structure your finances so that absolutely everything has to go right, it's hard to blame the mortgage company when you don't quite make it.

Andrews has been admirably open about many of the poor decisions and the wishful thinking that led him deep into debt. Nonetheless, he has laid much of the blame onto irresponsible bankers and mortgage brokers. The missing bankruptcies substantially undermine this basic narrative arc of Andrews' story. Particularly in his book, the bankers are the villains, America's current troubles are the inevitable denouement of their maniacal greed, and the Andrews household stands in for an American public led, by their own greed and longing and hopeful trust, into the money pit.

It's hard to argue that Ms. Barreiro was forced into bankruptcy by crazed subprime mortgage lenders in 1998. Greedy bankers certainly didn't keep her and her first husband from paying their taxes.

Of course, her first husband was involved too--there's no way of knowing who was at fault in the first case. If indeed anyone was: there may have been a business failure or some other mitigating factor. As I mentioned, I tried to reach Andrews for comment several times, leaving messages on both his office and cell phone that made it clear I was reporting for The Atlantic, and that I wanted to speak to him about Patty's bankruptcies. For whatever reason, he has not called me back, and so I don't have his (her) side of the story to tell you.

Of course, no matter what he told me, it wouldn't let the bankers off the hook. Whatever Patty Barreiro's spending history, it's still true that she and Andrews were able to dig themselves in a lot deeper because of fantastically easy credit from a variety of fantastically stupid bankers, most of whom now seem to have gone fantastically bankrupt. But while the willing lenders amplified the problem, given Ms. Barreiro's history, it seems unlikely they were at the root of it. It's hard to see them as victims either of those bankers, or a mass mania.

Andrews married a woman with a lengthy history of debt and spending problems. Serial bankrupts were getting into trouble long before there was a credit bubble, indeed long before there were credit cards or 30-year self-amortizing mortgages. In fact, the literary history of America is littered with them; we owe much of Mark Twain's later work to his catastrophic financial mismanagement.

Credit encourages people to spend more by separating the pain of payment from the pleasure of consumption. For many, maybe most, people, this means at least one brush with unpleasantly large overdrafts or credit card balances. And for a small subset of folks, that easy accumulation leads to real, often repeated, trouble. Those kinds of problems can't be fixed with tighter mortgage lending standards or a 500 basis point uptick in the Fed Funds rate. And they aren't the main problems facing most Americans today.

[liv2ski]

This is true, but your rental income must be qualified and verified for 12-24 months. So if you are trying to rent your primary residence, showing them a lease is not going to cut it.

Hog, you need to quit putting stuff like this out there, as it isn't 100% correct. If you are getting a FNMA loan, the present home you live in needs 30% equity to count the rental income to offset the PITI. A new FHA loan, the present home needs 25% equity in it to count the rental income. VA or Jumbo loan, no problem counting the rental income as long as present home loan/value isn't upside down.
For those with less than the required equity, that are wanting a FNMA or FHA loan, I suggest they move out of the present home and rent it out for 6+ months prior to applying for a new loan, so the rental income can be counted even though they don't have the 25%-30% equity position.
This is a clearer explanation on the rules you tossed out there.

EDIT: I find it interesting that FNMA and FHA came up with the equity required in the present home rule, so as to make it tougher for people to qualify. I mean, if you don't have the equity in the present home, they are making you qualify for the present and new mortgage payments, unless you rent the present home out for 6+ months, as I suggested as a work around. I guess prior to the rule change, people that were upside down on their equity would buy a new home saying they were going to rent out the present home, when in fact they just let the first home go back to the lender at the close of escrow on the new place.

No matter what rules the lenders come up with to try and slow down foreclosures, this shit is just going to happen more and more as unemployment goes up and values continue to fall. People getting squeezed will say fuck it and mail in the keys. To slow that down, lenders could do at least 2 things IMO. Send the person a 1099 on the deficiency balance once the home is resold, without exception and tell them they can't apply for a new home mortgage with less than 20% down for 7 years. Knowing those two issues were there to deal with would make many people pause from just mailing the keys in.

[Benny Profane]

No matter what rules the lenders come up with to try and slow down foreclosures, this shit is just going to happen more and more as unemployment goes up and values continue to fall. People getting squeezed will say fuck it and mail in the keys. To slow that down, lenders could do at least 2 things IMO. Send the person a 1099 on the deficiency balance once the home is resold, without exception and tell them they can't apply for a new home mortgage with less than 20% down for 7 years. Knowing those two issues were there to deal with would make many people pause from just mailing the keys in.

Sorry, but if i was dealing with some stupid mortgage on a house that is so underwater the fishes have built a home to stay (and Luca Brasi floats down to spend eternity), the smartest thing to do is take a deep breath, make sure you have an exit strategy, which is key, and walk. The penalties really aren't that bad, which is the problem. The fact that just seven short years from now you could be in a home again is kinda absurd to a non homeowner, but I've heard a lot of really absurd stories the past few years about some warm bodies getting big loans. From what I've seen over the last year and a half, and from the way that the whole auto bankruptcies are progressing, is that when the shit really flies in the coming year during the accelerating foreclosure bubble (give me a break about it slowing down), The Obama led Congress will focus on adjusting loans by lowering principal values without tax penalties. The banks will be pressured, and they'll do it, and, it will probably be necessary, considering how fucked up the economy will be. But talk about moral hazard. And the first people who foreclosed will be back in at the rock bottom wheeling and dealing and inflating prices with stupid credit. It's will be stupid because they, of all people, can get it.

[cramer]

Sorry, but if i was dealing with some stupid mortgage on a house that is so underwater the fishes have built a home to stay (and Luca Brasi floats down to spend eternity), the smartest thing to do is take a deep breath, make sure you have an exit strategy, which is key, and walk. The penalties really aren't that bad, which is the problem. The fact that just seven short years from now you could be in a home again is kinda absurd to a non homeowner, but I've heard a lot of really absurd stories the past few years about some warm bodies getting big loans. From what I've seen over the last year and a half, and from the way that the whole auto bankruptcies are progressing, is that when the shit really flies in the coming year during the accelerating foreclosure bubble (give me a break about it slowing down), The Obama led Congress will focus on adjusting loans by lowering principal values without tax penalties. The banks will be pressured, and they'll do it, and, it will probably be necessary, considering how fucked up the economy will be. But talk about moral hazard. And the first people who foreclosed will be back in at the rock bottom wheeling and dealing and inflating prices with stupid credit. It's will be stupid because they, of all people, can get it.

Actually its 3 years you can be in a home again is what's absurd. You are a first time buyer again and a 620 credit score is more than attainable. FHA will give you another shot as long as you had stellar credit since your foreclosure. 7 years if you file bankrupt.

Really pisses me off that i sat on the sidelines all this time and waited for the houses to get affordable. Meanwhile friend upon friend, family member upon family member had these big houses, brand new cars, boat, jet ski's, etc and where are they now? No worse off then i have been the last 10 years. Renting a nice house or condo, and essentially got free toys from the loans they foreclosed on. Such bullshit.

[Egon]

Really pisses me off that i sat on the sidelines all this time and waited for the houses to get affordable. Meanwhile friend upon friend, family member upon family member had these big houses, brand new cars, boat, jet ski's, etc and where are they now? No worse off then i have been the last 10 years. Renting a nice house or condo, and essentially got free toys from the loans they foreclosed on. Such bullshit.

I need a car. What they got?

[H0G]

This is a clearer explanation on the rules you tossed out there.

Knowing those two issues were there to deal with would make many people pause from just mailing the keys in.

agreed. i should be more clear.

Giving them a 1099 and barring them from buying is harsh, but that may be what it takes. This has been a wild ride, but things are getting better in Denver.

[cramer]

I need a car. What they got?

2007 maxima and 2006 7 series bmw, 4000+ surround sound w/ tv.

motor home, 2005, jet ski's 2007, boat 2007, scooters 2007, quads, 2007

shall i go on?

PAID OFF ill add....let me take a 2nd on the house and pay these off in full...
Oh, i have no more money, some im going to WALK. Understand, these toys were paid off when they took a 2nd on their house. The bank, well tell me what they are going to do. I dont know. They still all holding their shit.

Comprende?

[liv2ski]

Really pisses me off that i sat on the sidelines all this time and waited for the houses to get affordable. Meanwhile friend upon friend, family member upon family member had these big houses, brand new cars, boat, jet ski's, etc and where are they now? No worse off then i have been the last 10 years. Renting a nice house or condo, and essentially got free toys from the loans they foreclosed on. Such bullshit.

You know this whole bail out / mail the keys back in mentality is a slap in the face of every person that ever managed their money in a sound manner. I can't begin to tell you how bitter this shit has made me. I am like fuck the US guberment. I will sell all my real estate and move back to Canada and fuck them out of about $300k in capital gains because they are such douches.

[Benny Profane]

Now it's like "Dog, the House Bounty Hunter". But this one won't make it to cable.


May 24, 2009
Amid Housing Bust, Phoenix Begins a New Frenzy

By DAVID STREITFELD
PHOENIX — Every weekday morning, Lou Jarvis drives the sun-baked suburban streets looking for investment gold: a family that will lose its house in a foreclosure auction within a few hours.

If the property looks promising, Mr. Jarvis puts in a bid on behalf of any of his dozens of clients eager to become landlords. When he wins, he offers to let the family stay in the house and rent for much less than their mortgage payment.

With this sweltering desert city enduring one of the largest tumbles in housing prices for any urban area since the Depression, there is an unrelenting stream of foreclosures to choose from. On some days, hundreds are offered for sale at the auctions that take place on the plaza in front of the county courthouse.

There is also a large supply of foreclosed families who can no longer qualify for a loan. And that is prompting a flood of investors like Mr. Jarvis, who wants to turn as many of these people as possible into rent-paying tenants in the houses they used to own.

Real estate got just about everyone into trouble in Phoenix, and the thinking seems to be that real estate is going to get everyone out.

The low end of the real estate market here — and in some equally hard-hit places like inland California and coastal Florida — is becoming as wild as anything during the boom.

One real estate agent was showing a foreclosed house to a prospective client when a passer-by saw the open door, came in and snapped up the property. Another agent says she was having the lock changed on a bank-owned home when a man happened by, found out from the locksmith that it was available, and immediately bought it. Bidding wars are routine.

Absentee buyers, who can be either investors or individuals purchasing a vacation property, bought nearly 4 of every 10 homes sold in the Phoenix metropolitan area in April, according to the research firm MDA DataQuick. That is up 50 percent since late 2007, and is nearly the same ratio as at the 2005 peak.

Once again, just about everybody seems to be buying as many houses as they can, positive it will make them rich — or at least allow them to recoup some of their losses.

“I bought too high a few years ago,” said Jason Fischbeck, an entrepreneur who lives across the street from Mr. Jarvis and is one of his clients. “It cost $225,000. Now it’s worth $110,000. So I just paid $80,000 cash for another. ”

Mr. Jarvis, 47, the former co-owner of a wood moulding company that thrived in the boom and faltered in the crunch, also made some mistakes. Last spring, he contracted for three new homes in the distant suburb of Copper Basin, convinced that real estate was bottoming.

He was wrong. He managed to get out of two of the contracts but had to buy one of the houses, which is now substantially under water.

“You need to buy when there’s blood in the streets,” he said with a shrug. “Even if it’s your own blood.”

In January, Mr. Jarvis began working as director of investor relations for Brewer Caldwell, a property management firm that had been approached by the CBI Group, a real estate fund based in Calgary, Alberta. In its first foray into the American market, CBI is buying 175 rental houses in Phoenix.

One of them belonged to Mary Lou and Jorge Aguilar, who purchased it new for $111,000 in 1999. Three years ago, after a series of financial difficulties, they refinanced for $185,000 for reasons they no longer understand. “Our lender talked a pretty picture,” Mrs. Aguilar said bitterly.

When the couple’s mortgage payment adjusted to $1,242 a month, they fell behind and ended up in foreclosure. They now pay $1,014 in rent, which they say is bearable.

Still, their feelings are mixed. “It’s not our house anymore; it’s someone else’s,” said Mrs. Aguilar, who works for the state welfare department.

For CBI, the deal is sweet. At that rent, it would recoup the $52,000 it paid for the house in about five years. “This type of deal is absolutely not available in Canada,” said Jarrett Zielinski, a CBI executive. “No city here has fallen by 50 percent, the way Phoenix has.”

The investment group is opening a new fund this week to buy another 160 Phoenix homes.

As CBI continues to buy, it is planning investing seminars for its tenants. “Our goal is to be able to sell them their house back,” Mr. Zielinski said. “Wouldn’t that complete the circle?”

First up for Mr. Jarvis’s inspection on a recent morning is a three-bedroom on a cul-de-sac in the suburb of Gilbert. A rival investment crew is already there. “You don’t want this one,” one fellow says. “It’s no good.” Mr. Jarvis just laughs.

Once they are inside, the reason he is trying to send Mr. Jarvis away becomes clear. The house, built in 1991, is clean and well proportioned, with an opening bid of $76,000 — $200,000 less than what it sold for three years ago.

Not every property gets his nod. He considers an older condominium but deems it unlikely to appreciate. A three-bedroom seems promising until he sees the power lines looming just feet from the back fence.

In the end, he makes just one bid this day, for the three-bedroom he saw first. He offers $110,000, which is not enough. At the courthouse, it goes for $114,000. Every week, the foreclosure market is more competitive.

As the day’s auctions wind down, Mr. Jarvis goes back to the office to meet with a group that wants to put $5 million into the Phoenix housing market. A few miles away, the owner of that house with the monstrous power lines, Robert Corr, is being told his house was sold and he has five days to vacate.

Mr. Corr smiled when he heard the news, happy to be the latest of the 78,738 foreclosures in Phoenix since January 2005. He had already rented a van to take him and his family back to Alabama, where they would buy a mobile home and live on 10 acres of land.

Brewer Caldwell has bought about 125 houses this year for its clients. Only a quarter had owners who were living there already and willing to stay on as tenants. Filling up the rest, and all the other houses the company intends to buy, will depend on a steady supply of people who cannot afford to buy for themselves.

“If Phoenix loses population,” Mr. Jarvis says, “then buying houses here is a bad bet.”

As Mr. Jarvis scouts for houses, he sometimes finds a familiar one. In February, he saw a home that one of his brothers bought from a builder in 2005, camping out overnight for the opportunity. With its value now shrunk, the brother was letting it go to foreclosure.

Mr. Jarvis’s daughter Jade also bought a house at the market’s peak — in her case to live in. The other day she asked for advice: should she keep paying the mortgage on something that had declined in value by 60 percent? His conclusion: “probably not.”

“Am I teaching my kids right by letting them walk away from something they made a commitment to?” Mr. Jarvis wonders.

[Egon]

2007 maxima and 2006 7 series bmw, 4000+ surround sound w/ tv.
motor home, 2005, jet ski's 2007, boat 2007, scooters 2007, quads, 2007
shall i go on? They still all holding their shit.
Comprende?

Wow, maybe not the cars, but there must be a couple sleds hidden in there somewhere...