SONOMA COUNTY’S SUBPRIME CRISIS

The subprime loan crisis has hit Sonoma County harder than other parts of the Bay Area, California, or the rest of the United States. The number of subprime loans in parts of Santa Rosa are off the charts!

This has caused the median home price to drop over 12 percent across the board and as much as 35 percent in some distressed areas such as the Northpoint and Bellevue Ranch areas in Southwest Santa Rosa where they estimate that over 40% of the homes in this area were purchased with subprime loans. Other distressed areas include the Kawana Springs area in Southeast Santa Rosa and the Waltzer Lane area of Northwest Santa Rosa.

The median home price in Sonoma county has recently dropped to $473K, which is equivalent to 2003 levels and a far cry from $619K where the market peaked at in August 2005. Overall sales have dropped to a 16-year low. The inventory has spiked up to 2,597 homes for sale which is the highest level since October of 1992 which was the time of the last major decline in the area.

Sales are declining across the Bay Area, but Sonoma County has been one of the hardest hit places in the region.

“The housing downturn is worse in Sonoma County and other counties on the Bay Area’s edge largely because more homeowners relied on risky loans to purchase homes around the market’s peak and may be forced to sell. Soaring foreclosures have led to tightened lending requirements that push out some buyers. We’re still trying to work through the inventory and the bad loans.” said Rick Laws, Santa Rosa manager for Coldwell Banker.

Below is a map of the region which outlines the number of subprime loans taken out in different parts of Sonoma County:

Nearly one out of five homes sold in Sonoma County during the easy-money years of 2005 and 2006 was bought with a high-risk loan, which triggered a chain reaction of financial distress that has rippled through the county’s housing market. Most of those loans were made to middle and low-income families desperate to buy homes in newer more upscale neighborhoods of west Santa Rosa, Rohnert Park and Petaluma.

Rippling outward, hundreds of mortgage and real estate workers in Sonoma County are losing their jobs. One in five residents in Sonoma County work in some part of the housing industry, so this will have a devastating effect on the local job market. Dozens of lenders nationwide are bankrupt, or laying off thousands of people, and those that remain have stopped lending except to the most creditworthy borrowers. Meanwhile, pensions, 401(k) plans, mutual funds and banks are losing billions of dollars, as the mortgages they hold lose value.

Foreclosures in Sonoma County will reduce the area’s economic growth by $308 million in 2008, according to a report released Tuesday by the U.S. Conference of Mayors.

“Certainly, it’s going to have an economic impact and we’ve been seeing that. It’s probably going to get worse before it gets better.” said Vicki Vidak-Martinez, mayor of Rohnert Park.

HOW DID WE GET INTO THIS MESS?

The current turmoil in the Sonoma County housing market was caused by the speculative fever that gripped Sonoma County in 2005 and 2006, where prices jumped 69 percent in three years and multiple offers above the asking price were considered the norm. This caused many people, with good credit and bad, grabbed whatever loan terms they could get just to snag a house before prices and interest rates escalated beyond their reach.

Many took adjustable-rate loans, even though they were risky and interest rates were rising. Their plan was that home values would keep going up and they would refinance out of the high-rate loan in a couple of years.

They were helped by sales people who raked in six-figure incomes getting borrowers to accept high-rate loans, and by lenders who made a bundle selling the high-yield loans to Wall Street investors unaware of the risk. Interest rates on these loans have turned out to be 2 percent to 3 percent higher than a conventional loan.

Some buyers dearly wanted to own their own home. Others simply wanted to get rich quick. Some didn’t understand the terms of their loan or the risk they were taking. Others just hoped they could get in and get out before the bubble burst.

Many are living happily in houses they could never have afforded otherwise. But some are losing their life savings and everything else. The tools for this trade were loans that started out with low teaser rates, permitted 100 percent financing, didn’t require income or job verification and allowed negative amortization that defers a portion of the payment by increasing the size of the loan.

These loans were called “subprime,” because they were often, but not always, made to subprime borrowers who couldn’t get a conventional loan because they had bad credit or no credit history, unverifiable income or an unusual property.

Now these loans are hitting borrowers with sharply rising rates, balloon payments and punishing prepayment penalties.

The true cost of these high-rate loans is coming due just as home values have fallen 10 percent since their peak in 2005. The drop in home prices has wiped out the refinance option for borrowers who can’t refinance for enough money to pay off the problem loan. Thus, the same go-go financing that dangerously distended the housing bubble two years ago is now driving its deflation, and spooked lenders are slamming their doors on homeowners they embraced just months ago.

The unraveling of years of easy money, fueled by record low interest rates and promiscuous lending, has begun.

The end of the subprime bonanza began in June 2004, when the Federal Reserve, after 3½ years of easy money, started slowly raising short-term interest rates. By June 2006, the Fed had raised a key short term rate 17 times, from 1.25 percent to 5.25 percent. That drove adjustable rates for mortgages up 2 percent or more.

As the subprime market collapses, fingerpointing has begun. Borrowers are being accused of lying to lenders about their income. Mortgage brokers are being accused of lying to borrowers about the terms of the loan. Real estate agents are being accused of pressuring lenders to make the loan. Appraisers are being accused of inflating their estimates of home values. Lenders are being accused of predatory lending. State and federal legislators are threatening to crack down on them all. Lawsuits and prosecutions are likely. Wall Street investors want their money back.

In Sonoma County, real estate agents and mortgage brokers are fielding calls from borrowers fearful of losing their homes. While some lenders say they are trying to find ways to help their overextended borrowers, many homeowners cannot make their payments and will lose their homes.

LATINO HOMEOWNERS IN SONOMA COUNTY HIT HARDEST

The consequences have been especially severe for Latinos who bought into the promise that home ownership was within their grasp. A group of Latino real estate agents and lenders in Sonoma County (most notably Chris Nunez) made a killing selling homes to Latino buyers through risky subprime loans that were knowingly well above what they could afford. Almost half who purchased homes in 2005 and 2006 relied on these financially dangerous mortgages.

A LOCAL ANALYSIS ON SUBPRIME LOANS

To understand the forces that created the crisis, and the borrowers and neighborhoods that will be most affected, The Press Democrat analyzed three years of loans made in Sonoma County.

The analysis revealed the most prevalent use of high-risk loans — and likely the most damaging fallout — is concentrated in Santa Rosa’s Latino and lower-income neighborhoods. But many communities throughout the county, from Cloverdale to Petaluma, have large numbers of borrowers at all income levels who are stretched too thin.

Among the findings:

- Almost 20 percent of homes bought in 2005 and 2006 were funded with risky, high-rate loans, up sharply from 4 percent in 2004. In California, the rate was nearly 30 percent.

- In parts of west Santa Rosa, south Rohnert Park and east Petaluma, the rate was more than 40 percent.

- Latino home buyers were heavy users of the high-rate loans. In 2005 and 2006, more than 40 percent of Latino buyers relied on the risky loans, compared with 10 to 12 percent for non-Latino buyers. A decade ago, lenders were accused of denying loans to minorities, a practice called redlining. But as the housing market boomed and prices spiraled up, lenders were encouraged to make loans easier to get.

- Most high-rate borrowers in 2005 and 2006 said they had annual incomes between $100,000 and $200,000. However, many borrowers exaggerated their incomes to qualify for loans, sometimes at the direction of their brokers and lenders. During the housing boom, many lenders did not require borrowers to submit documents proving they earned enough to afford the monthly payments.

- Investors made 15 percent of the home purchases in Sonoma County in 2005 and 2006. They rarely used subprime loans; only 8 percent of the high-rate loans in the county were issued to investors who intended to become landlords.

- The average size of subprime second mortgages jumped almost 30 percent in two years, from $81,510 in 2004 to $103,881 in 2006. Most second-lien loans were the downpayment on a purchase made with a subprime first mortgage. Occasionally, homeowners used them to consolidate debt, take out cash or remodel.

- Subprime borrowers in Sonoma County extended themselves further than most Americans. In 2005, a Sonoma County loan was 3.4 times the income of the buyer, at the mid-point, or median. Nationwide, the median spread was 2.6.

- Most high-rate loans in 2005 and 2006 were used to buy mid- and lower-priced homes, but 14(cq) loans were for more than $1 million.

Almost $1.7 billion of debt issued to buy homes in Sonoma County is at risk, based on a Press Democrat analysis of 85,000 loans made in 2004 through 2006.

BANJO DRIVE

Let’s take a look at one small street in Southwest Santa Rosa where there are tons of distress properties in a relatively new upscale neighborhood that is predominantly Latino: Banjo Drive. The homes in this area are all 4-5 bedroom, 3 bath, 2-3 car garages, +2100 sq ft houses with nice yards.

Banjo Drive is in the distressed Bellevue Ranch neighborhood. It is believed that over 60 percent of the homes on Banjo drives were purchased through subprime loans taken out between 2004 and 2006.

The majority of the houses on this street are either currently for sale by owner, facing a short-sale, have been foreclosed on, or are temporarily off the market to be relisted at a lower price. Some of those families are just hanging onto their homes and others hope to sell and avoid foreclosure as mortgage payments rise and home prices fall.

“Once a symbol of Sonoma County’s housing boom, Bellevue Ranch is now emblematic of hard times in neighborhoods across the region.More than 20 of the 35 homes for sale in Bellevue Ranch are on the market either because banks took them back or owners must sell to avoid foreclosure.”

PROPERTIES

2021 Banjo Drive - purchased December 29, 2005 for $630,000.

The owners couldn’t sell after six months on the market this year at $599,900. The lender foreclosed on the house and it is set for public auction.

2077 Banjo Drive - purchased November 9, 2006 for $590,000.

On market as short sale for $440,000.

2081 Banjo Drive - purchased June 2, 2006 for $644,500.

Was for sale at $469,000. Taken off the market Oct. 30. Seller plans to relist the property at $425,000.

2085 Banjo Drive - purchased June 12, 2006 for $644,500.

Owner considering short sale to be listed at $499,000.

2089 Banjo Drive - purchased November 30, 2005 for $655,000.

Currently on market as short sale for $489,000.

IN CONCLUSION

Already, lenders have seized 630 Sonoma County homes this year, up from 129 in all of 2006, guaranteeing that 2007 will be the bitterest year for homeowners since the county began keeping computer records in 1964. Another 400 troubled properties are on the market, and lenders are threatening 300 homeowners a month with foreclosure if they can’t bring their loans current. Last year lenders averaged 93 foreclosure threats a month.

Prices will continue to fall and more homes will be on the market as more and more people run into financial trouble due to taking out risky loans and losing the leverage available to home owners in a rising market. People will be forced to sell their homes. And if they have to sell quickly, they are more likely to lower the price. Or even worse if the home goes into foreclosure and goes back to the bank, they will sell it at a discounted price.

Nor is there any hope that the shakeout will soon be over. Next year interest rates will adjust upward for the first time on over 1,148 Sonoma County properties bought with risky loans in 2006. One-fourth of these homeowners will most likely lose their homes according to the U.S. Department of Housing and Urban Development. Things are only going to get worse through out the year in 2008.

“We are going to have waves of foreclosures,” said economist Christopher Thornberg, who tracks the Sonoma County economy and predicted the current real estate crunch. “This thing has a long ways to go before it shakes out.”

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THE BUBBLE FORMS

As we approach the end of 2007, housing prices continue to fall and houses stay on the market longer and longer with no end in site.  Some properties have even been reduced in price well over 25% and still are unable to sell.  Properties that once wouldn’t last a week on the market are staying on the market over 100 days without any offers.  What happened?

The trouble began early in 2005, when the housing boom that was supposed to last forever turned into a housing bust.

Around this time the rate of house price appreciation didn’t just slow, as most economists predicted, nor did prices simply flatten into a plateau accordance with their revised predictions. House prices began to fall sharply.

In fact, these declining prices are even sharper than what is shown in the data, because sellers now are forced to make payments that are not captured in the selling price, such as picking up some of the buyer’s closing costs or making repairs to the house before the sale. These practices were unheard of a few years ago.

THE BUBBLE BURSTS

So what happened?  People acted truly amazed and shocked by the real estate crash, they thought that real estate was an invincible market.  They thought that prices would continue to soar at ridiculous rates and never decline, but they missed one of the prime principals of economics: what goes up, must come down.  If you look at the graph above you will notice that the Home Price Index increased at a ridiculous rate when compared with the Building-Cost Index (cost of materials and labor), the Population (prime drive of demand), and Bond Yield (value of money) which all increased at fairly reasonable rates.  Prices of homes became so disconnected with these fundamentals that they were destined to collapse.

So how could people afford these properties?  Sub-prime loans, Option ARMs, and NegAm Teaser loans.  The lending industry had to allow the average person to more easily borrow more-and-more money to keep up with the rising cost of purchasing the average loan.  Therefore they offered negative amortization teaser loans where for a limited time (usually 2-5 years) a borrower could pay less than interest due for that loan period and tack on the difference onto the end of their pricipal increasing the amount they owed.

Someone buying a home for $500K with a typical principal and interest payment  of $2,500 a month would only need to pay $1,200 during the intro period, however after this 2-5 year teaser period is over their payment would jump to over $3,200.  This works fine when there is a high demand for houses and prices are increasing because people could always either sell their homes or refinance their loans to reduce their payments once their loans adjust beyond their means, however when prices start falling it becomes much harder to sell a home or refinance the loan since the property is now worth less than the amount owed.

How does it effect an individual, lets see:

John makes $3,500 a month with only $1,200 going toward his mortgage payments leaving him $2,300 for other expenses.  He can live well off of $2,300 a month.  After two years his payments jump to $3,200 which leaves him only $300 additional not enough to live on.  He misses one payment of $3,200 and within a month it’s $3,500 with late fees.  His next payment is due with a banance of $6,700.  He can only afford $3,200 and just barely.  He is still $3,500 in the whole, another month slips and it’s up to $7,500 for two months payments with compounding late fees.  He can’t make a third month bringing him up to $10,700 behind on payments. 

He is forced to sell.  His house that he paid $500,000 for is only going for $410,000 and it will sit on the market for a long time at this price.  He could reduce it to $390,000 putting him an additional $110,000 in debt or try to pull off a short-sale which most likely will never happen. 

So he does what’s smart in this market and stops making payments and allows his home to foreclose rather than to go over a hundred thousand in debt. This was actually a smart move on his part.

You know that the system doesn’t work when it’s a more attractive option for people to allow their homes to be foreclosed on than try to do everything possible to make the payments.  This lending system was an iceburg waiting for the titanic.

Front page of the WSJ this morning:

“The subprime mortgage crisis is poised to get much worse.”

“Next year, interest rates are set to rise — or “reset” — on $362 billion worth of adjustable-rate subprime mortgages, according to data calculated by Bank of America Corp.

While many accounts portray resetting rates as the big factor behind the surge in home-loan defaults and foreclosures this year, that isn’t quite the case.  Many of the subprime mortgages that have driven up the default rate went bad in their first year or so, well before their interest rate had a chance to go higher.   Some of these mortgages went to speculators who planned to flip their houses, others to borrowers who had stretched too far to make their payments, and still others had some element of fraud.

Now the real crest of the reset wave is coming, and that promises more
pain for borrowers, lenders and Wall Street. Already, many subprime
lenders, who focused on people with poor credit, have gone bust. Big
banks and investors who made subprime loans or bought securities backed
by them are reporting billions of dollars in losses.”

Subprime mortgages account for more than half of all troubled loans. According to Fannie Mae, 76 percent of the borrowers who had subprime ARM resets in 2006 were unable to pay off their mortgage by selling or refinancing. Half of the borrowers who did not pay off their loan ended up delinquent or in foreclosure. With more resets expected in the coming years and banks reluctant to lend money (and many lenders simply gone), the delinquency ratio is likely to increase.

THE BAD NEWS

The projected supply of foreclosed homes is around 45% of existing home sales which adds four months to the supply of existing homes. According to Dale Westhoff of Bear Stearns, this is a “fundamental shift” in the housing supply and as such, home prices are likely to drop further as lenders dump many repossessed homes.

Foreclosed homes typically sell at a discount of 20% to 25% compared to the sale of an owner-occupied home, analysts say.  Lenders are eager to unload the properties, and the homes tend to be in poorer condition.

MORE WAVES TO COME

We are only at only seeing the first wave of defaults and foreclosures based on subprime mortgage adjustments.  Over between now and early-2009 the dollar amount of subprime mortgages that adjust will increase from $30B a month to around $38B and the number of option ARMs that adjust will continue to increase into 2011.

ARM Loan	Peak	First Reset in Billions (at Peak)
Option Adjustable Rate	2011	$39
Subprime	2009	$38
Alt-A	2011	$20
Prime	2010	$22
Agency	2011	$10

“Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide.” - Michael Bloomburg

“The subprime black hole is appearing deeper, darker and scarier than they thought.” - Hamilton James, Blackstone Group president and chief operating officer.

I predict that when this downturn ends sometime in mid-2011, the sales activity will correct back to 1998 levels.

This chart shows the resets peaking in early 2009. Guess what is going to happen to everyone wishing, hoping and praying for a quick turn around in the Spring?  It won’t happen.

THE LONG SLOW RECOVERY

Reasons why this last longer than expected and will NOT have a quick turnaround:

1) All the people who are being foreclosed on will not be able to re-enter the housing market in the near future because a) their credit will be destroyed and b) all the money they put into the house towards the downpayment, upgrades, or general expenses will be lost.  It will take years for these people to repair their credit and save enough money to re-enter the housing market as buyers.

2) Lenders have lost a record amount of money.  Therefore in the future they will be tighter with lending out money.  Thus people who once qualified for loans that were 7 times their annual income may now only qualify for loans 3 times their annual income.  They will also require that people have higher down payments to get loans and many no longer allow people to do 100% financing.  This will greatly restrict people to buying houses for a lower amount.

3) People will learn from past mistakes and only take out loans within their means.  Instead of buying a house for 7-8 times their annual income they will buy a house for 3-4 times their income.

4) People will no longer be able to falsify their income or cheat the system and lenders that help borrowers do this will now be subject to prosecution.

5) People who own more expensive house, say $700,000 - $800,000 homes will sell their more expensive homes and buy cheaper houses for $400,000 - $500,000 to cover their loses and overbearing debt.  These people may or may not take a heavy loss but will be entering the market with a lower priced home.  They will appear to be buyers which looks good for any market, when in fact they are trading down and further contributing to lower real estate prices and a weakening of the market.

This subprime mess is a national trend affecting some areas more than others.
According to an analysis by Comstock Partners, 70 percent of the borrowers who obtained a pay-option ARM last year owe more on their home now than when they took out a loan. Comstock also estimates that more than 15 percent of 2005 homebuyers (all loans) owe at least 10 percent more than their homes are worth.

The bottom line is that many of ARM holders will not be able to sell, refinance, or keep up with payments, leaving them with only one option: foreclosure (failing some form of mass-amnesty).

We are in for a long haul with currently no end in site.  Prices will continue to fall.  At what rate no one knows.  But they certainly will not increase in the near future. 

How is real estate doing in your area?  What trends have you noticed recently?

The subprime mortgages have plagued Sonoma County especially the Santa Rosa Area.  Santa Rosa is off the charts with the number of subprime loans issued.  Look at the map below:

Sonoma Count Subprime Mortgages

Percent of first liens that are subprime mortgages in each census tract:

RED:  more than 40%
ORANGE: 30-39%
YELLOW: 20-29%
GREEN:  10-19%
BLUE:  Less than 10%

More on Santa Rosa and the Sonoma County markets later…

I got a little too comfortable a few years ago.  It was during the spring of 2002, the dust from the collapse of the World Trade Center and the dot-com crash was beginning to settle.  Despite the economy I was able to find a good stable job and I had just entered a relatively serious relationship.  Like many  people who get into serious relationships, I started caring less and less about what I ate and lost my desire to workout or stay in shape.

Within a year I went from being 5′9″, 190 lbs, and ~10% bodyfat to around 235 lbs and ~35% bodyfat.

It was very tough to break this unhealthy trend. Prior to the dot-com crash I worked along the river in Petaluma not far from 24 Hour Fitness, Whole Foods, sushi bars, and Wraps & Rolls, where it was really easy to live a healthy lifestyle.  However after being laid off I found a new job in the Roseland Area of Santa Rosa, awash with a large endless variety of Mexican and Fried Chinese Cuisine.

I stayed around this weight until the fall of 2004.  One day I woke up and realized that I was really unhappy with myself and how out of shape I had become.  Over the course of two years I went from a pants size 30 to a pants size 36 and I even found a pair of size 36 jeans to be too tight for me and I had to sit at work with the top button of my jeans unbuttoned to be comfortable.  At this point I knew that I needed to make some serious changes in my life: I NEEDED TO GET BACK INTO SHAPE!

I had been heavily into fitness and bodybuilding towards the end of college and had been taught diet & nutrition, exercise, and other tricks to get into killer shape.  I had the knowledge, but I just needed to regain the determination and discipline. 

DIET AND NUTRITION

What is the ideal diet for weightloss?  Just cutting calories is definitely not the answer and will actually work against losing fat. The body will just adapt to the lower calorie amount within a few days.  Improving the composition of the food you eat and how the different macronutrients are combined will yield a much better body composition than just cutting calories and eating less.

Write down everything that you eat for an entire week and then look at ways that you can slowly adapt your diet to make it more healthy.  Don’t try to drastically go from eating nothing but junk food to eating nothing but health food.  The biggest source of failure with most diet plans are that are too difficult to follow.  Adapt your diet slowly week-by-week to make it better and better so that you slowly get use to eating more healthy.  This will make it much easier to follow.  The key is to develop a diet with the right balance of taste, nutrition and convenience.

You can easily improve your diet by eating more fruits, vegetables and lean protein sources. Switching from regular salad dressing to the low-fat version or from regular soda to diet soda can make a big difference.

EAT MORE FREQUENT SMALLER MEALS

Through out history people have been taught to eat three square meals a day, however ideally people should be eating smaller meals more freqently to stay lean.  I try to eat at least 6 meals a day and even eat as many as 8 meals some days.

Every time you eat, the metabolism is stimulated to break down the food in a process called the thermic effect of feeding. Eating frequent meals will speed up your metabolism and cause your body to store less fat.  Your body stores fat so that it can use them when needed at a later time.  If you eat more frequent meals there will be less demand for fat storage because your body is use to being fed more frequently and your body will use more energy to digest the food.

This will also maintain steady blood sugar levels, control hunger and provide a steady stream of nutrients to maintain lean mass and prevent catabolism.  It also prevents large surges of insulin that will occur when the body is deprived of food for longer then a four or five hour time span. 

If you don’t believe this theory then look at different animals.  Horses are very lean muscular animals that “graze” and frequently though out the day, their bodies don’t have a need for fat storage because they are always eating.  Bears on the other hand only eat once or twice a week and thus must have much greater fat storage to account for their eating patterns.  Would you rather have the body of the bear or the horse?

DRINK PLENTY OF ICE COLD WATER

Dehydration can slow down your metabolism by as much as 40% and can be extremely catabolic to muscle tissue.  Once thirst sets in, it is already too late because you are already well into a dehydrated state.

Water also has a thermogenic effect. By drinking ice-cold water, your metabolism is boosted by 40% to bring your body temperature up to its normal level.  Your body expends energy and burns fat inorder to make your warmer, this is known as the shivering response.

You should have at least 10-12 glass of COLD water a day.

ADD MORE FIBER TO YOUR DIET

A very low percentage of people really get the recommended minimum 30g of fiber a day. Research has shown that subjects who consumed an extra 15g of fiver a day had a 10% decrease in daily calorie intake and an average 4.2 lb weightloss in 6 weeks time. So remember to eat your veggies!

REDUCE SIMPLE SUGARS

Simple sugars increase the level of insulin in the body and increases the likelihood of food being stored as fat. Foods that ranked high on their glycemic index (index of how fast food appears in the blood as glucose) should be avoided, such as white bread, white rice, white pasta and low-fiber carbohydrates.

Sweets spike the insulin levels to extremely high levels and can drastically increase fat storage in some people.  However, sugar is essential for muscle growth in the morning and after working out.

EAT LEAN PROTEINS

The power of protein is unsurpassed. It is the most thermogenic of all the three major macronutrients (Carbohydrates, Fats, Proteins), requiring double the energy spent to digest than fats or carbohydrates.

Protein helps build lean mass that raises your resting metabolism, prevents muscle breakdown during calorie or carb restriction, and increases satiation at each meal.

Lean protein at every meal is a must for a fat loss goal to be achieved. The 1g per pound of bodyweight is the norm, but when calories and/or carbs are restricted, 1.5-2.0g per pound of bodyweight should be the goal of daily intake.

GOOD SOURCES OF LEAN PROTEIN

- white meat/skinless chicken
- turkey
- lean beef (93% lean ground, roast beef, lean cuts of steak)
- fish: salmon, tilapia, mahi mahi, ahi tuna
- shrimp
- tuna
- egg whites
- whey or caesin protein

EAT COMPLEX, FIBER RICH CARBOHYDRATES IN CYCLES

You will never win a marathon by cutting carbs, but you will lose fat. This is only true to a point since your body is a highly adaptive machine. So by cycling carbs, or a cyclical ketogenic diet (CKD), you prevent the body from adapting and allowing a long term fat loss state.

By cutting carbs, we put the body in a fat burning mode, but after a few days the hormone Leptin drops. Research shows Leptin is a key hormone in regulating hunger cravings and metabolic rate. It’s influenced by losing fat and insulin, so when fat loss occurs, Leptin drops, slowing your metabolism and increasing hunger.

By increasing carbs on a scheduled basis, the rise in insulin causes a rise in Leptin levels allowing more time in a ketogenic state after the scheduled carbohydrate increase.

For the average person, this can mean once a week or low-carb during the week, and eating carbs on the weekend. For people that are relatively lean, a carb-up day every 3-4 days seems to be the optimal schedule. Remember, once you have sugar cravings and/or increased hunger, Leptin has dropped too low. To counter this, try to target how many days before that occurs and schedule your carb-up the previous day.

However, you should try to avoid carbohydrates at night since they can contribute to fat storage while you sleep.  Slow digesting lean proteins like Casein protein (slow digesting 7-10 hr) should be taken at night.

GOOD SOURCES OF COMPLEX CARBS

- brown rice
- sweet potatos or yams
- oatmeal
- whole wheat or multi grain bread
- whole wheat or multi grain pasta
- barley, oats, flax

GOOD SOURCES OF ESSENTIAL FATS

- peanuts or peanut butter
- almonds
- olive oil
- fish
- avacodoes

VEGETABLES

Most vegetables are low in calories but high in volume - salad greens, asparagus, green beans, broccoli, zucchini, just to name a few. Each vegetable serving is about 25 calories, and typical serving sizes are 1 cup raw, a half cup cooked or 2 cups leafy vegetables.

Some vegetables are starchy - such as corn, potatoes, sweet potatoes and winter squash - and contain more calories per serving.

FRUITS

Practically all types of fruit fit into a healthy diet. Some fruits are better choices than others. Whole fresh, frozen and canned fruit, without added sugar, have about 60 calories a serving. Unlike fruit juices and dried fruits, these types of fruit are higher in bulk because of water and fiber and are your best choices. A typical serving is a small or medium-sized piece of fresh fruit or a half cup of sliced fruit.

Keep the serving size of fruits small since they tend to be higher in sugar than other types of food.

 
EXAMPLE MEAL PLANS

Non-Workout Days:
1950cals, 50f, 200c, 225 protein

      Meal 1:
      1 cup oats/oatmeal or 2 Multigrain/Wheat Pancakes*
      1 banana or 1 grapefruit
      1.5 scoop Whey or 6 Egg Whites

      * 0 calorie butter spray can be added to pancakes.

      Meal 2:
      1/2 cup brown rice
      1 tbs. peanut Butter or almonds
      Chicken breast / Fish / Turkey

      Meal 3:
      1/2 cup brown rice
      2 tbs. Peanut Butter or almonds
      Chicken breast / Fish / Turkey

      Meal 4:
      2 cups veggies
      1 apple
      Chicken breast / Fish / Turkey

      Meal 5:
      1 apple
      1/2 tbs Flax
      1/2 lb sliced Turkey

      Meal 6:
      1 scoop Casein Whey
      1/2 tbs Flax

Workout Days:
2600cals, 70f, 300c, 225 protein

      Meal 1: Pre-Workout
      1 cup oats/oatmeal or 2 Multigrain/Wheat Pancakes*
      1 banana
      16 Almonds
      1.5 scoop Whey or 6 Egg Whites

      Meal 2: Post-Workout
      1 workout recover drink containing 3-to-1 carb-to-protein ration

      Meal 3: 30 min Later Post-Post-Workout
      1 cup brown rice or baked yam
      2 chicken breasts
      1/2 tbs Flax

      Meal 4:
      1 cup brown rice or baked yam
      2 cups veggies
      20 Almonds
      Chicken breast / Fish / Turkey

      Meal 4:
      1 cup brown rice or baked yam
      2 cups veggies
      20 Almonds
      Chicken breast / Fish / Turkey

      Meal 5:
      2 cup veggies
      1/2 tbs Flax
      Chicken breast / Fish / Turkey

      Meal 6:
      1 scoop Casein Whey
      1/2 tbs Flax

To make my meals not seem so redundant and plain, I add “combo” seasonings like Mrs. Dash to the veggies and calorie free syrups to the oats. If I didn’t feel like eating chicken or fish I would go pick up some buffalo or some smoked salmon. I’m not sure I will ever get tired of eating these types of meals, as long as I always choose different types of lean protein sources

FEELING FULL ON LESS CALORIES

It is possible to feel full on fewer calories and at the same time lose weight and keep it off long-term. To achieve and maintain a healthy weight, you have to follow an eating plan you can live with for a lifetime. That means no severe restrictions, no extreme hunger and no fads or crash diets.

Choosing foods that are less concentrated with calories means that you get a larger portion size with a fewer number of calories which can help you lose weight and still control your hunger.

All foods have a certain number of calories within a given amount of volume. Some foods, such as desserts, have many calories in just a small portion. So in order to feel full, you’ll need to eat larger quantities of these types of foods, which also means a larger number of calories.

For example, a half cup of mixed nuts has 438 calories which is the calorie amount of an entire meal but a half cup of nuts alone is not likely to leave you feeling full.

Some foods such as fruits, vegetables and whole grains - have more volume but less calories. Contrast to the 438 calories in a half cup of mixed nuts, a half cup of cooked green beans has just 19 calories, a half cup of cubed cantaloupe has 28 calories and a half cup of cooked whole-wheat spaghetti has 87 calories. So eating one of these lower calorie alternatives, will give you more food and cause you to consume fewer calories as well as make you feel more full than the cup of nuts which has around 20 times the number of calories.

Two major “Factors” play an important role in making foods less calorie packed and more filling:

   1. Water - Many fruits and vegetables contain water, which provides volume but not calories. A grapefruit, for example, is about 90 percent water and has just 39 calories in a half-fruit serving. Carrots are about 88 percent water and have only 52 calories in 1 cup.

   2. Fiber - High-fiber foods, such as vegetables, fruits and whole grains - not only provide volume, but also take longer to digest, making you seem more full for longer.

 

MAKING THIS DIET WORK FOR YOU

Starting a healthy diet that emphasizes fresh fruits and vegetables and whole grains makes room in your diet for some of your favorite foods in small quantities: some fat free/calorie free ice cream, small whole wheat cookies, or sugar free candy for example.
* Increase the ratio of fruits and vegetables in your meals. For example, add blueberries to your oatmeal or cereal in the morning and in the evening top your pasta with sauté, grilled, or steamed vegetables.

* Experiment with new foods in different combinations. Try banana or apple slices on whole-wheat toast with a little peanut butter. Toss some mandarin orange and peach slices into a salad. You may find some new tastes you love that fit within your eating plan.

* Start lunch or dinner with a broth-based, vegetable-filled soup or a large salad with a small amount of fat-free dressing (Walden farms calorie free dressings). These foods take longer to eat and will curb your hunger. Also, serve whole grains, an extra serving of vegetables and a serving of lean protein for your main course. By the time you get to dessert, you may not even have room for that cup of mixed berries topped with a spoonful of fat free vanilla pudding!

By eating larger portions of foods less packed with calories, you will eliminate hunger pains and feel much better about your meal, which will contribute to how satisfied you feel and look overall.

SUGGESTED FOOD SUBSTITUTIONS TO EAT BETTER

Ingredient - Substitute

* 1 oz Baking Chocolate - 3 Tablespoon of cocoa

* 1 Egg - 2 egg whites

* Butter/Shortening - Calorie Free Butter Spray or Reduced Fat Yogurt Butter

* Cream Cheese - Reduced fat cream cheese

* Fudge Sauce - Walden Farms Calorie Free Chocolate syrup

* Whipping Cream - Equal portions of half-&-half and evaporated skimmed milk (not for whipping)

* Light Cream - Equal portion of 1% milk and evaporated skim milk

* Mayo - Reduced fat mayonnaise or reduced fat sour cream

* Oil (in baking) - use extra virgin olive oil.

* Shortening - Replace up to 3/4 of shortening with apple butter or fruit puree. Reduce sugar when using apple butter.

* Sour Cream - Low fat sour cream low far yogurt, or blend 1 cup low fat cottage cheese with 1 Tablespoon skim milk with 2 Tablespoons lemon juice.

* Whipped Cream - Chilled evaporated milk, whipped.

IN CONCLUSION

By following the diet above I was able to lose over 40 lbs within a two month period.  I rapidly went from 235 lbs to 178 lbs and from a size 36+ waist back to a size 30.  I went from ~35% bodyfat down to ~14% bodyfat within 60 days. 

I did also followed a specific weightlifting and guerilla cardio regieme that I will cover at a later time.  This entry focused on the proper diet which is the most important aspect of any health or fitness plan.  I would say that a proper diet is around 70% of whats behind staying shape.

The most important thing with any diet or execise program is to be consistent and disciplined.  Get into a scheduled diet and exercise routine and stick with it!  Outline your goals and follow them through!

Another important thing is experimentation, what works for one person may not work the same way for another.  Try different things. Ask lots of questions and watch others and see what works for them.  Through trial and error you can learn your own body and what works for you.   

Lastly you need to have confidence in yourself. If you doubt you can accomplish something, then you won’t accomplish it. You have to have confidence in your ability, and then be tough enough to follow through.

Tell me about your Goals?
- Lose Fat?
- Build Muscle?
- Improve Energy?
- Other?

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