Comments on: California subprime mortgages by county

By: Morgan Brown

Morgan Brown — Mon, 07 May 2007 19:09:24 +0000

Markus, I agree. The one part that I think we need to take a close look at though is all of those prime loans that are option ARMs and those homes on the coast w/1st & 2nd mortgages.

I think a lot of prime borrowers could be in for some serious pain too when those figures are portrayed.

I do think you’re right though – I don’t see a 30% decrease any time soon; I think there is some intrinsic values to Orange County that will keep the property within 15-20% of where it is at now at the worst.

There are some good posts out there comparing income to housing costs that I’ll try to get up tonight/tomorrow that talk about how these people afford these homes.

By: MarkusArelius

MarkusArelius — Mon, 07 May 2007 18:30:50 +0000

This was a great article and I’m glad you posted it on your blog. You spotlighted some important takeaways for residents of Orange County:

1.)In Orange County, 21 percent of home-purchase loan volume was subprime.

2.) In wealthy cities like Newport Beach and Laguna Beach, subprime accounted for less than 5 percent of the home-purchase market.

3.) Subprime lenders grabbed just 11 percent of the business in the over-$500,000 loan market.

There are no doubt a lot of people in trouble right now in Orange County. I believe things will begin to get worse. But I seriously question the notion of some R.E. pundits who suggest that things are so bad that home values could decline by 30 to 40% in Orange County – as much as I would relish witnessing such an outcome! You’ll never convince me that 3 bed, 2.5 bath homes in OC, built as they were, are ACTUALLY worth $650K or more.

If service sector employment starts to teeter here in OC, then OK maybe there’s more than meets the eye to the crash. But the moderate strength of the OC economy just might prevent all out disaster.

I’m curious about the availability of 2 deed of trust home loan configs for a family earning $80K to $90K a year here in OC. How in the world can they afford a $650,000 single family home?

By: Chuck

Chuck — Mon, 07 May 2007 11:37:52 +0000

“Great post again and love the map. You can clearly see the California foreclosure issue is an inland and not coastal problem.”

The bulk of the 6-times-income option-ARM loans extended to Prime borrowers don’t start to reset until until 2008. The Coastal areas will get the same treatment as the Inland areas are now.

By: Morgan Brown

Morgan Brown — Mon, 07 May 2007 06:18:06 +0000

Schahrzad – A very true depiction of what is happening to a lot of the boom-time loan officers.

I hear the next stopping point for some of these locusts is insurance – senior citizens beware of life insurance salesmen – they might be former loan officers!!

By: Morgan Brown

Morgan Brown — Mon, 07 May 2007 06:16:49 +0000

Tony – I agree, the coastal, higher-income areas have fewer subprime loans. It would be interesting to see the same map with the pay-option loan density! We might see more red along the coast then!

By: Tony Gallegos

Tony Gallegos — Sun, 06 May 2007 22:31:16 +0000

Morgan, – Great post again and love the map. You can clearly see the California foreclosure issue is an inland and not coastal problem.

By: Schahrzad Berkland

Schahrzad Berkland — Sun, 06 May 2007 21:23:42 +0000

Hey Morgan, I thought of you when I was at the car wash today. The guy at the register struck me as being much too smart for running a register. A little conversation resulted in these facts.
The cashier just got laid off from a 6-month-long stint in the mortgage industry. He had a $35K base salary plus commission. Prior to that he was a retail manager selling barbeques. Now, he cannot find anything in retail management or mortgage lending, and is stuck making $8.50 per hour at the car wash. He knows the economy is weaker, and is pleased for his friends who have recession proof jobs, like courier or cleaning apartment and retirement home pools.