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Foreclosure refugees head for O.C. apartments
April 28th, 2008, 12:05 am · 88 Comments · posted by Mary Ann Milbourn
The folks at Consumer Credit Counseling Services of Orange County may be seeing the first wave of refugees from foreclosures hitting the local apartment market.
Kelly Rogers, director of education at the credit counseling service, says there was a noticeable jump in people calling the office for credit counseling help early this year. Their problem: After losing their homes to foreclosure, their credit was shot and landlords were reluctant to rent to them.
And it’s not just people foreclosed in O.C. looking for apartments here.
“A lot of people from the Inland Empire, who work in Orange County, are coming back to Orange County to rent,” Rogers says.
Rogers says she understands both sides when it comes to creditworthiness of people who’ve been foreclosed. She’s in the process of renting out her one-bedroom, one-bath Fullerton condo so she and her husband can move into a bigger place they just bought.
“As landlords now, we’ve really started looking at credit history,” she says.
Despite reports that O.C.’s rental market is softening, Rogers says she’s been overwhelmed by the demand for her condo.
“We thought we might have to lower the (asking rent),” she says, “But in only two weeks, we’ve gotten more than 100 hits.”
CCCS of Orange County is a non-profit service to help people with financial problems. They provide credit, foreclosure and bankruptcy counseling as well as workshops on budgeting, homebuying and how to handle your finances. It can be reached at 800-213-2227.
For earlier stories on O.C.’s apartment market:
April 28th, 2008 at 6:05 am
I have been seeing this pattern for a while. Excessive demand for rental units. Rents may surge. Not suprising. Gas, food, utilities, everything is surging. INFLATION.
April 28th, 2008 at 6:22 am
When’s my salary gonna’ surge?
April 28th, 2008 at 6:49 am
“Excessive demand for rental units. Rents may surge.”
Do you have any evidence to support your theory, or is this just another hunch? All the evidence I see, is more concessions made by the landlords.
April 28th, 2008 at 6:57 am
Jimmy Says: “I have been seeing this pattern for a while”
Sure, and they are all moving to Corona del Mar and Newport Beach.
April 28th, 2008 at 7:07 am
Lots of talk about apartment rents, vacancies, trends. I’d love to see some of the same calculations on single family homes.
How many are being rented out? What are the average rents - what’s the trend? Any idea on vacancy rates? Obviously the number of homes rented out has grown tremendously..is anyone tracking this?
April 28th, 2008 at 7:08 am
How funny! The person doing the counseling just picked up a second property. Those potential walkers will find this isn’t the only part of their life they just ruined. Get ready to accept a status equal to a sex offender or illegal alien.
April 28th, 2008 at 7:19 am
Get ready to accept a status equal to a sex offender
Your comments are over the top … you really need to recheck yourself.
April 28th, 2008 at 7:20 am
Interesting that this “walk away” mentality is now coming back to haunt the irresponsible borrowers who — in many cases — walked away, only because their homes were worth less (not worthless) and NOT because they cannot make their payments. They simply CHOSE to not make their payments because their time horizon for equity gain needed to be adjusted. If I were a landlord, I would not rent to them out of fear they may simply choose to not make their rent payment.
There will be commentary here that it’s the lenders’ fault, and that these people should not have been loaned to in the first place. While that is true from a (lack of) risk management perspective of the banks, it was not true on the part of the borrowers who asked for and accepted their loans. Where’s the moral obligation here between lender and borrower?
I submit it does not rest with a landlord who chooses not to rent to foreclosure criminals or victims. Foreclosure criminals (those who walk away) need to reap what they sow. Being subjected to second class rental housing is the least they should suffer. Foreclosure victims (those with true hardship) deserve some sympathy. But if I am a landlord, they are not getting it from me.
April 28th, 2008 at 7:20 am
The interviewee has a 1/1 condo. The bottom tier of the bottom tier of the housing stock in this county. No doubt demand for that space is big.
But mid tier and above apartments 3/2 and bigger? IAC is lowering rents.
This is only good news if you’re a slumlord.
April 28th, 2008 at 7:32 am
“Foreclosure Criminals”, well done! Good post Anonymouse, except it’s not the lender’s fault if the loan COULD have been a good one, barring the crime.
April 28th, 2008 at 7:32 am
I have a friend who owns a small apt. complex and has a hard time getting tenants with good or even reasonable credit. Some of his apts. have been vacant for quite a while. He says he has plenty of interest. People are always looking at the vacant units, but whenever he runs a credit report on the applicant the information is negative and their credit score is not acceptable.
April 28th, 2008 at 7:33 am
This also hits the nail on the head:
“They simply CHOSE to not make their payments because their time horizon for equity gain needed to be adjusted.”
Perfection.
April 28th, 2008 at 7:41 am
come on girl….. make up your Option ARM excuses
http://money.cnn.com/2008/04/24/real_estate/good_credit_bad_loans/index.htm?postversion=2008042809
so i can be LMAO off this morning at your demise
a billion dollar right down here, a billion dollar right down there….. no big deal
April 28th, 2008 at 7:42 am
I’m sure they are all looking at top end apartments. Since they are so good at managing their money, I’m sure they can afford anything they want in O.C.
Lookout Santa Ana and Anaheim. You’ve got new neighbors.
April 28th, 2008 at 7:54 am
So many stupid comments this morning. Geeze … everything from “sex offenders” to “foreclosure criminals”. These PermaFools are just incredibly stupid. They still believe this ponzi scheme was supported by fundamentals, yet all the facts indicate the complete opposite.
April 28th, 2008 at 7:56 am
good news…. the demand for “inferior goods” like spagehetti and peanut butter has sky rocketed:
http://calculatedrisk.blogspot.com/2008/04/consumers-shifting-to-inferior-goods.html
I’m anxiously awaiting the quarterly results for ramen noodles
tighten your belts
April 28th, 2008 at 8:40 am
There is a thing in economics known as “efficient breach.” There shouldn’t be a penalty on breach of contract unless there is a good reason for having one, as an alternate use of the property subject to the contract may be more efficient.
In this case, it is arguably more “efficient” for those in over their head to walk away and for prices to fall to where 20 somethings can buy with a conventional fixed mortgage and 20% down even if that means a $300K median.
We need to reclaim society from the loan shark lenders who have too many folks over a barrel and return it to ordinary people trying to raise a family.
Just because you are losing your bubble equity doesn’t mean you have a right to demonize those who are efficiently breaching their contracts.
April 28th, 2008 at 8:43 am
“They simply CHOSE to not make their payments because their time horizon for equity gain needed to be adjusted.”
That choice may be quite rational if they project that their debt will increase faster than their equity gain over a long time horizon. Better to cut your losses now than dig yourself an ever-deepening debt hole for the rest of your life.
House prices are not perpetual motion machines, as you’d think people would have realized by now.
April 28th, 2008 at 8:49 am
Ponzi:
Don’t worry about my bubble equity. I don’t, because I am in this for the long haul, and enjoy my 92804 home.
But you DO need to worry about your moral compass. It’s attitudes such as this “efficient breach” concept that costs us all more, while mortgage insurers, lenders and even landlords have to pad what they charge all of us to offset losses from schlubs like you and those you defend.
The biggest problem in society today is not “loan shark lenders.” It’s the lack of responsibility you clearly promote here. Thanks for showing your true colors.
I challenge you to identify yourself and your position honestly to your next landlord. Somehow I do not think you will.
April 28th, 2008 at 9:03 am
“Efficient breach”, that’s a great euphemism! Most of these people are planning on either buying back as soon as possible, or as in many cases, bought the replacement property BEFORE they walked! If THAT is not a crime, I don’t know what is. They should be sent to prison for this type of fraud. I’d also like to know how “mortgage debt can increase faster than equity”.
April 28th, 2008 at 9:06 am
Ten days ago the OCR posts that vacancies are at a 13 year high:
http://lansner.freedomblogging.com/2008/04/17/oc-apartment-vacancies-hit-near-13-year-high/
Then today we get the message that the forclosure refugees are headed to apartments in droves.
How is it possible to reconcile these two articles assuming they are true? There’s only one solution.
Too much supply and not enough qualified buyers = prices are going down kids. Rents and asset values. Bank on it. Wages sure as hell aren’t going up.
If Truthiness would like to suggest an alternate reality view since her lithium has likely kicked in about now, I’d love to hear it.
April 28th, 2008 at 9:18 am
Someone on Padilla’s blog (Dina?) made a GREAT comment the other day about how hurling insults is the direct result of having no valid argument. How very appropriate here.
April 28th, 2008 at 9:20 am
You make a secured loan and agree to take the collateral in case of default. You have your security. I might suffer a minor impairment to my credit rating by defaulting, but if the cost of not defaulting is being underwater by $300,000, and paying an arm and a leg for a shack, my interests are served by defaulting. You have your collateral which you agreed under state law to take in satifaction of your loan.
I’m not sure what the problem is.
I don’t really have any personal familiarity with walking away, it just seems an efficient solution for people who took on way too much debt and need to simplify their lives at the present time. Bubbles pop, folks.
April 28th, 2008 at 9:24 am
“Minor impairment”? You are dangerous….and prone to exaggeration.
April 28th, 2008 at 9:28 am
The crumbling of the banking as it relates to credit will lead to a crumbling of the credit score market. Credit card usage is at an all time high. The more debt people have the worse their scores are.
That will be the next big economic fix that the government will tackle. After they pushed through the BK reform a couple of years ago. We will soon fine many people unable to pay their bills and continually in debt.
The government will end up picking up the tab for these people and bailing them out in one way or another.
There will have to be changes in how credit is handed out and reforms in debt worthiness.
Bottom line is the number of \”owners\” in the OC is going down, the number of \”renters\” is increasing. This will continue to be the case until it becomes more affordable to live here.
Now maybe some of you like having renters next door to you rather than the owners. Maybe a whole street of renters is better?
I highly doubt it.
April 28th, 2008 at 9:28 am
Reuters
Buffett says recession may be worse than feared
Monday April 28, 11:09 am ET
“…my general feeling is that the recession will be longer and deeper than most people think,” Buffett said. “This will not be short and shallow.”
Buffett sees no respite from the housing slump. “I think this is going to be fairly long and fairly deep, but who knows,” he said.
Add Buffett to the lengthy list of seasoned economists and investors who share this viewpoint. But, I know, I know, the wealthy enclaves of the OC are insulated from the woes of the rest of society. Good weather and all. That must be why Buffett sold his Laguna Beach pad in ‘04.
April 28th, 2008 at 9:29 am
Off Topic.
I know a realtor who transferred her home into her daughters name and bought a house 8 houses away. Her original house is now empty, weeds out front and up for auction but her new house down the street is still looking pretty. I’m not sure for how long. Fraud.
April 28th, 2008 at 9:31 am
On a small scale, US citizens are walking away from unaffordable debts (mortgages, car loans, consumer loans,… in billions).
On a medium scale, US banks — investment and commercial — are trying to unload toxic derivatives, bad bets onto unsuspected investors,… in billions).
On a large scale, US govt. is on course of inflating away years of deficit spending (in trillions).
Welcome to the great unraveling.
April 28th, 2008 at 9:33 am
I cannot beleive that some people actually believe that people are walking away from foreclosures because they are irresponsible borrowers? I’m not like many of you that just assume. I personally first hand know because my husband and I that do not have perfect credit almost lost our home last year in Oct. Our mortgage pymt jumped from $3750 to $5225. Is that fair that the lenders practice these kind of hikes?? We earn over $7500 a month and we tried to negotiate our loan with the lender so that we would not loose our home. We were one of the fortunate borrowers that had a solid account in the sense that in the 2 yrs. prior we had no late pymts we paid mthly on time all the time. Point being is that so many foreclosures would not be occuring if the lenders would practice more practical interest hikes, not bring a current loan from a 6% to a 13%. Had the lender not have adjusted my loan I to would have walked away, whats good for the goose is good for the gander!!
April 28th, 2008 at 9:45 am
I just heard on the radio this morning that they are picking foreclosures at bargain prices, and then walking away from their underwater units. You gotta live somewhere.
April 28th, 2008 at 9:45 am
Ponzi:
“You have your collateral which you agreed under state law to take in satifaction of your loan. I’m not sure what the problem is.”
As I understand it, the property is the ONLY collateral in a non-recourse foreclosure (i.e. purchase money) and only the FIRST collateral in a recourse foreclosure (i.e. refinanced 1st or 2nd mortgage) which requires a judicial foreclosure proceeding. That gives the lender the right to a deficiency judgment for the difference between the foreclosed value of the property and the defaulted mortgage amount.
Regardless of the collateral used for the loan, we all know the INTENT of the parties when the mortgage is made. Borrowers intend (in presumed good faith) to pay their lenders, but some intentions are dishonest from the beginning. Other intentions change due to pure economics (foreclosure criminals) or troubled financial circumstances (foreclosure victims.)
Let’s not make out foreclosure criminals to be foreclosure victims. Let’s not make out lenders to be the issue. The issue is PAST, PRESENT or FUTURE INTENT of borrowers. Lenders can’t simply walk away by calling a loan unless the terms dictate that ability. Buyers, then, should not have arbitrary rights to walk unless they can prove current hardship and well-meaning original intent. Otherwise, they should be forced to stay and perform on the loan.
Anything less costs me more in bailouts or increased interest rates.
April 28th, 2008 at 9:46 am
more signs the day of reckoning fast approaches….
http://www.latimes.com/business/la-me-generation27apr27,1,3327536.story
April 28th, 2008 at 9:53 am
Anonymouse said it as well: everyone knows the intent is the personal guaranty in addition to the collateral.
“Mortgage Crisis Leads to a 350% Jump in Instances of Lenders Pursuing Deficiency Judgments; Forces Homeowners to Protect Assets from Lenders”.
http://www.prweb.com/releases/2008/04/prweb806534.htm
Several states allow deficiency judgments. California is not one of them (on an OWNER OCCUPIED, PURCHASE LOAN), but that is only because California is extremely consumer-friendly. However, even California allows them for all but owner-occupied real estate and on ALL refinanced properties regardless of occupancy. Lenders make loans to borrowers with the full expectation that there is a personal moral obligation ON TOP of the collateral.
It’s really cheesy that the people so up in arms over fraud would cheer it when it suits them.
April 28th, 2008 at 9:53 am
for those who missed bloggers register article
on his 02 home price call… great article….
http://www.ocregister.com/articles/home-local-orange-2027510-county-homes?ref=patrick.net
April 28th, 2008 at 9:54 am
Vacant apartments are all around us in our area.
One has been vacant for at least 6 months and according the the leasing office it is the “most popular model”
April 28th, 2008 at 9:56 am
Thanks to those who posted the examples of the foreclosure criminals and their schemes.
April 28th, 2008 at 10:02 am
I’d also like to know how “mortgage debt can increase faster than equity”.
That you pretend not to have heard of negative amortization doesn’t surprise me.
Even a Jumbo 30-fixed for $600K right now requires you to pay back about $1.4M over the term of the loan. Will that property be worth $1.4M in 30 years? Are there better returns to be had for that investment over that time?
April 28th, 2008 at 10:03 am
Someone said Buffet sold 1 of 2 Laguna homes, and still has the other.
April 28th, 2008 at 10:07 am
Ah, figures! Speaking in broad generalizations about loans that represent somewhere between 5%-7% of all loans in Orange County (before any recent refis). And considering MOST of them put 30% down, it’s a stretch to say they would even be underwater, much less be underwater enough that it could never turn around.
April 28th, 2008 at 10:08 am
Well, it looks like the bursting of the housing bubble continues.
According to AP
WASHINGTON (AP) — The percentage of vacant homes for sale in the U.S. set a new record high in the first quarter of this year, the government said Monday.
The Census Bureau report shows that shows that 2.9 percent of U.S. homes — excluding rental properties — were vacant and up for sale, compared with 2.8 percent in the fourth quarter of 2007. It was the highest quarterly number in records going back to 1956.
The news keep getting worse by the day.
April 28th, 2008 at 10:08 am
“Even a Jumbo 30-fixed for $600K right now requires you to pay back about $1.4M over the term of the loan. Will that property be worth $1.4M in 30 years?”
HAHAHAHAHAHAHAHA!
April 28th, 2008 at 10:14 am
Um…Thoughts…you aren’t even making any sense now. I thought that no one was underwater in OC and that every homeowner could out last this down cycle. So if that’s that case then there would be no need for people to walk away, right?
BTW, you never did respond to my post about the profile of the residents of Lake Forest…did you know that the median household income in LF is about $67K/yr?
April 28th, 2008 at 10:14 am
Orange County inventory: approximately 15,000
Orange County homes: approximately 600,000
Percent of homes on market: 2.5%
Percent vacant: considerably less.
It’s VERY interesting that even on a national level that vacant inventory has grown by only 1/10th of one percent during the year that saw a massive credit displacement. Where’s the beef?
April 28th, 2008 at 10:18 am
Please show me where I said no one is under water. You can’t. Please show me where I said no one has walked away in Orange County. You can’t. I don’t know what you’re talking about in Lake Forest, but I bet I answered it.
April 28th, 2008 at 10:19 am
somewhere between 5%-7% of all loans in Orange County (before any recent refis). And considering MOST of them put 30% down, it’s a stretch to say they would even be underwater, much less be underwater enough that it could never turn around.
Your stats are disproven by the very sources that you claim they are referenced from. You also can’t decide if you want to condemn “foreclosure criminals” who tank the market in the renter thread, or deny that they exist in significant numbers, as in this thread. Please try to be a more believable t r o ll.
April 28th, 2008 at 10:22 am
why the worst isnt over,,, from el-erian of pimco
http://www.ft.com/cms/s/0/0ea6d2e8-120d-11dd-9b49-0000779fd2ac.html
April 28th, 2008 at 10:24 am
much less be underwater enough that it could never turn around.
And the Nasdaq will go over 5000 again real soon now.
April 28th, 2008 at 10:36 am
Thoughtful - yes, Buffett kept the home in Laguna that he bought for $150,000 in 1971. Sweet property tax deal on a home now worth $4mil+
In 2004/05, he sold the one he picked-up in 1996 for around $1mil, as he argued that prices had completely lost touch with fundamentals.
April 28th, 2008 at 10:49 am
moragn stanley- a wall street investment bank- comes
out today with this bit of news-
sell financials the credit crisis has just BEGUN-
but I dont think they confirmed this with “thoughtless”
yet so they may have to change their opinion LLOOLLL
http://www.cnbc.com/id/24352722
April 28th, 2008 at 10:52 am
thank goodness that credit crunch is over
now we can get back to buying over-priced
homes again lloolll @ribsplitter
http://www.cnbc.com/id/24352722
April 28th, 2008 at 10:57 am
in the words of karen carpenter
weve only just begun….
http://www.cnbc.com/id/24352722
April 28th, 2008 at 11:00 am
Thoughtful,
I don’t think every house in OC is on the market. So don’t lump the total # of homes in this, as well as other computations that you have posted. As calculated, they are misleading. The fact is 15,000 is historically high relative to previous cycles. 15,000 suggests that the supply of houses in the market is excessively, historically high. While on the demand side, the credit markets have had enough of mortgage-related securities and want no more of them, thus shutting down effective demand drastically. Now apply supply and demand curves and see for yourself the economic disconnect. Home price must drop to clear the excess supply and entice mortgage-backed security investors back into the housing market. It’s the only way.
April 28th, 2008 at 11:04 am
“Disproved by the very sources…”?
Nonsense! Quit making the same, tired mistake of bastarizing the negam numbers by adding in simple interest only loans. How many times do I need to shoot your bogus stats down? Didja notice YOU are the only one who doesn’t get it? Don’t you think someone, ANYONE would have jumped to your defense by now?
April 28th, 2008 at 11:09 am
Anon, I used total inventory because it was addressing this claim (which is about total US inventory):
“The Census Bureau report shows that shows that 2.9 percent of U.S. homes — excluding rental properties — were vacant and up for sale, compared with 2.8 percent in the fourth quarter of 2007.”
How on god’s green earth is THAT manipulative? It’s not.
April 28th, 2008 at 11:10 am
And the 15,000 is a helluva lot lower than what it was last year! Which reminds me: NO spring inventory jump!
April 28th, 2008 at 11:18 am
rants,
i can’t believe the Morgan Stanley analyst would know more than the Morgan Stanley CEO……….. LOL
if this is the 3rd inning of the credit cycle………. i hate to see what extra innings is going to look like……… where is the rally monkey when you need him LOL……… oh yeah laid off…….
April 28th, 2008 at 11:23 am
Thoughtful - Where are you getting the 15,000 inventory number?
The inventory now is about 6% higher than it was last year at this time - this site says it’s around 17,800 (SFR and condos). It’s also interesting that the inventory usually peaks in September or October for the year.
April 28th, 2008 at 11:29 am
caliguy….. let thoughtful have her cake…. even if she doesn’t need it LOL………. don’t give her YOY increases……. since we don’t have seasons in SoCal there is no seasonality…. LOL…. that’s for other places of the US to worry about……….. come July - October there will be a giant bear party…hells yeah… and thoughtful will change her name
April 28th, 2008 at 11:37 am
Thoughtful said “Someone on Padilla’s blog (Dina?) made a GREAT comment the other day about how hurling insults is the direct result of having no valid argument. How very appropriate here.”
How funny. Coming from a guy like you.