Leslie believes that the “trade up” market has diminished in California.  31% of homes in California are “underwater”. The “Net to Seller” was a median of $205K in 2005 and down to $35K in 2010.  Sellers planning to re-purchase is down to 33% from 70% in 2010.  Investors have helped to move the market forward; 23% of sales in 2010 were CASH.  That number is higher in luxury markets.  The California median price is at $300K compared to nation at $150K. 

The $8,000 home buyer tax credits of 2010 was very effective at igniting buyers, and the data proves this motivation with higher sales in early 2010 compared to the 2^nd half of 2010.  However, 2011 will be left to its own devices on positive stimulus.  There is an urgency in 2011 to purchase before the $729K loan limit ends on Oct 1^st,  and going down to $625K.  Financing will be more expensive in the future and the direction to eliminate Fannie Mae/Freddie Mac and FHA changes will also change the landscape.  She also can’t imagine lower rates, monthly payments, and down payments. 

 Bruce and Leslie discussed that many people can’t buy now and are in “pause mode” until their credit can be repaired. Migration is also on “Pause” and construction is LOW.  Many families have also moved into together.  When these factors change, the demand for housing will be increased!

 Financing will be more expensive for down payments and rates.  However, the goal of households is to purchase their own home.  People do need a place to live.  We will see a world where financing will be a bigger consideration and burden than in the boom.  30 year mortgage could be an endangered species.  This will result in FEWER home owners.  Bruce talked of having a loan playbook that worked:  nothing down VA and FHA loans had VERY FEW foreclosures, we need to go back to that criteria!  FANNIE & FREDDIE worked prior to 2005; if they would have stayed with the loan criteria that they had, things would be different.

Great information is on this two- 30 minute radio broadcast.  Take time and listen to two great California real estate experts.  Here is the link to the broadcast.  (NOTE: To listen in order, the 1st broadcast is BELOW the 2nd) Check out this link for this and other real estate/investor information.  Tne Norris Group does hard money lending and investor training  in California.

This is my third year attending this breast cancer benefit.  I enjoyed the honest opinions of the panel on how they are dealing with this challenging market.  This is the first year that speakers from Fannie & Freddie attended talking about bulk REO purchases.

Please click on this link to hear this worthwhile program.  It is in five (5) segments which will allow you to digest all the meat of the discussions.  (Allow 4 hours to hear the total event.)  IT IS WELL WORTH IT!!!!

Please take 8 minutes and listen to this interview as Bruce mentions the problem of negative equity that cannot be solved by jobs, lenders taking back properties that sell for less than the neighbor owes on his house and strategic defaults.   It will give you something to think about and make you realize that this market will be around for awhile.

Christopher discussed the proposal allowing bankruptcy judges to determine what should be owed on homes.  Most people in financial trouble today are in trouble, not because they bought homes at the peak, but because they refinanced at the peak!  In this interview, he also discusses Japan’s  tight monetary policy, and if wanted to get rid of deflation, all they need to do is start printing money.

In 2009, banks changed the way they deal with distressed debt.  Banks do not need to be aggressive about how they value loans.  As long as the bank can keep the loan current, they don’t have to acknowledge the potential loss in that loan. If we forced forced banks to comply with their actual Tier 1 capital needs; there would be at least 6000 banks out of business!

The Federal Reserve has made the stance that they are anti-inflation. Christopher believes that Bernanke needs to think more realistically, because a little inflation would be a huge relief for our financial system.  When we have inflation, we usually have an increase in wages. However, wage increases do not usually occur quickly.

Thornberg feels confident about a GDP over 1%, and if  the government backs off the stimulus and allows the economy to re-grow with less consumer spending, and more exports, then we will have a great opportunity to grow as a country. The U.S. GDP growth was supported by a lot of equity extraction/cash out refinancing.  If we did not have the big equity bubble, and if we hadn’t seen an extreme increase in consumer spending, then our ability to supply would have shifted to exporting and business spending.

As for California, it has a $1.9 trillion economy & a a $20 billion deficit; its problems are political and not economic! Christopher thinks California spends its money in the wrong places and put high taxes on small tax bases. He also thinks that Prop 13 is a fiscal injustice, and we need to get people to vote against this proposition.  Finally, Christopher believes that we own China, and not the other way around!!!   Please take time to listen to this fascinating perspective from a different perspective than CNN and FOX! 

 For a link to this interview click here.