The 10-Year Big Mistake
It’s Friday desk clearing time for this blogger. “The California Association of Realtors has launched a program to provide a flat $1,500 monthly payment for as long as six months to cover mortgage payments for first-time homebuyers who get laid off from a job. The flip side of home-buying incentives is that they can result in some people buying homes when they don’t have a strong financial grounding, according to Bruce Norris, founder of The Norris Group, a Riverside-based real estate investment firm. Incentives, such as the association program and tax breaks, could end up weakening the financial caution a person should have when buying a home, he said.”
“‘You end up having people that look for solutions to their problem, other than just (looking to) themselves,’ he said. ‘I think it’s a big problem.’”
“Major builders offering job loss mortgage payment plans include Lennar Corp., Pulte Homes Inc., The Ryland Group Inc. and Toll Brothers Inc. J. Robert Hunter, director of insurance at the Consumer Federation of America, said that homebuyers might be better off passing on the mortgage payment insurance plans — which he generally called ‘a gimmick’ — and ask for a discount.”
“‘If we’re in for a two-year recession and I lose my job, I may not get it back for two years, and six months is still not going to save me,’ Hunter said. ‘I personally would want to find out how much money I could save buying the house without it.’”
“The foreclosure fallout, according to a University of Pacific economist, has taken median housing prices from roughly seven times the median income in Manteca three years ago to around 2.5 times today making homes much more affordable. The state housing plan mandate could end up being an exercise in futility until the foreclosure mess is cleaned up. ‘We’re in a declining market and we have to stabilize it,’ said Carol Ornellis of Visionary Home Builders.”
“She noted that the 10-year stretch of time where people viewed houses as a way to make quick money and turned everything upside down ‘was a big mistake.’ ‘We have to do a Wal-Mart and roll back prices.’”
“Phillip Muro was unexpectedly laid off this past Friday the 13th, along with most of the rest of his crew members from a Douglas-based company. Although he is considered to be ‘job-attached,’ meaning his boss wants him back when things pick up, he’s not sure he can wait. ‘My house payment doesn’t exactly come with hopes and dreams,’ he said. ‘It’s cash.’”
“There were more than 9,000 foreclosure filings in Pima County in 2008 and more than 4,500 in 2007, according to Realty Trac. Midvale Park is being targeted by Pima County officials in an effort to combat the negative effects of foreclosures in the neighborhood. The program involves buying foreclosed homes and turning them into low-cost rentals.”
“Abel Romero is moving his family into a home in Midvale Park this week. He said he was given 40 days to move out of his South Side home after it was foreclosed on earlier this year. He’s paying about $700 a month for a three-bedroom house. ‘I got laid off from my job and our payments were just too high,” Romero said. ‘You try to make your payments but when you’re already behind, all you’re paying on is late charges It was just a vicious cycle and we had no choice, pretty much. Hopefully down the line, once we get back on our feet, we’ll be able to buy another home.’”
“Jennifer Vaughn’s development in Homestead is one of many where prices seem to fall by the day. A 26-year-old first-time buyer, Ms. Vaughn closed on a three-bedroom, three-bathroom townhouse in November, paying $87,000 for the foreclosed property with an F.H.A. loan. The price was far below the $261,000 the house sold for in October 2006, but a few weeks ago, a townhouse with the same layout and fancier features sold for $75,000. And a third is about to close for $65,000, said Andy Lopez, a real estate agent who found Ms. Vaughn her townhouse.”
“So already, she appears to owe more than her home is worth. Not that she minds. ‘I’m going to stay for five or six years at least,’ Ms. Vaughn said, ‘and I’m sure prices will go up somewhat by then.’”
“She also has one of the recession’s safest job: she works for a collection agency.”
“The addition of a tax credit appears to be sweetening the pot for some of those buyers, while banks eager to unload foreclosed properties have also begun to offer incentives, like money for closing costs. ‘A lot of the banks have adjusted their thinking,’ said John Ahlbrand, a real estate agent in Las Vegas. ‘If they show they have the ability to repay — imagine that — then the bank helps.’”
“The number of pre-foreclosure notices filed in Deschutes County continues to rise. As the recession continues to take its toll, there are fewer families and individuals able to make their mortgage payments, said Kenny LaPoint, a housing specialist. And until the job market improves — Deschutes County’s unemployment rate hit 12.6 percent in February — LaPoint believes the federally announced loan modification and loan refinancing programs aimed at lowering mortgage payments aren’t going to amount to much.”
“‘Until our job market changes, it doesn’t matter what stimulus plans come out because if there’s no (household income), it doesn’t matter what your mortgage payment is,’ LaPoint said.”
“Cincinnati Realtor Kevin Hildebrand says now is the time to buy. Hildebrand is selling his own home and looking for a bigger house to buy right now. ‘I honestly think we’re at the bottom. And if we’re not at the bottom, we’re within a couple percent, so do you want to wait until we’re eight percent up before you buy?’”
“Hildebrand says, ‘we really need the first time buyer to take advantage of the low rate and the tax credit and start buying the house for $150,000. Then the $150,000 person can buy the $250,000 house, and the $250,000 home owner can buy one for $450,000. The housing market got us into this, and I think the housing market will get us out of this.’”
“Joseph Espinal says ever since he moved into his house in Banyan Isles two years ago with his wife and two small children, they’ve been getting sinus headaches and having trouble breathing. Also, the stainless steel shower head is turning black. He attributes the problems to Chinese drywall, and he’s had enough.”
“‘I am moving out,’ he said. ‘You are not going to find me there by the end of the month. But I don’t know where I am going to go. I don’t have the resources for two mortgages. But I cannot put a price tag on my family’s health.’”
“While sales have slowed, the local housing market is still said to be growing — albeit at a lower rate than one year ago. ‘In my opinion, Seguin and Guadalupe County seem to be doing better than some other areas,’ said Bill Seiler, a Realtor who works for Mickey Ferrell Realtors. ‘I know we’ve had some layoffs, and housing market-wise, it has slowed down, but it didn’t slow down like we’re hearing elsewhere around the nation.’”
“Across the country, Seiler said, is where you hear the bad stuff. ‘I talked to my dad in Phoenix, and it’s horrible,’ Seiler said of the market. ‘I talk to friends in Colorado, and it’s horrible.’”
“A friend in Colorado, Seiler said, wanted to sell his home and move to Phoenix to be closer to his children. He’ll probably end up keeping the house and renting, Seiler said, rather than taking a hit by selling in this market. ‘He doesn’t owe anything on his house, but he certainly can’t get the money he could have a couple months ago,’ Seiler said.”
“Abilene is one of the top 10 best markets in the nation for expected performance in home prices, according to an organization that forecasts the real estate market for investors. Jerry Mash, president of the Abilene Board of Realtors, pointed out that a home in 1990 in Abilene had an average value of $62,000, and now that average value is $126,000, which shows a steady increase. He said that the real problem in the housing market is on both coasts. The cities the Local Market Monitor named as Bottom 10 in expected real estate prices, with predicted declines of 25 percent or more, are in Las Vegas, Florida and California.”
“‘This is where housing prices went up fast. Then when the economy went down, demands for homes decreased,’ Mash stated.”
“The Local Market Monitor’s Carolyn Beggs says buying a house in a city such as Abilene is a good investment because owners will not see the decrease in value that other cities might. ‘You can buy a home and feel comfortable that it’s a solid investment,’ she said.”
“Although Richard Petree, Taylor County’s chief appraiser, says he believes Abilene is doing better as far as the housing market goes, he thinks the survey is a bit ‘too positive.’ ‘There are still lots of homes for sale, and that leads to a decrease in values,’ he said.”
“In Northeast Wisconsin 45 new housing permits were issued in January, down from 103 permits in January of 2008, a 56 percent decrease. The president of the Realtors Association of Northeast Wisconsin says things are turning around, and the last three months have consistently improved for new and existing home sales even though compared to last year sales are still down.”
“‘There’s no doubt about it, the market’s not where anyone in my profession would like it to be, but I can tell you it’s much better than where it was and we are taking baby steps, small strides at a time. It’s not like we can see the end of the tunnel, but we feel the end is coming,’ said K.C. Maurer, president of the Realtors Association of Northeast Wisconsin.”
“The chairmen of two key committees are at odds over the pace with which Congress should overhaul the nation’s financial regulatory system. Former AIG chief Maurice Greenberg, who left AIG in 2005, blasted the managers who came after him for the company’s near-failure, saying, ‘AIG’s business model did not fail. Its management did.’”
“But he also found himself defending his role at the company. ‘When you say management failed,’ demanded Rep. Elijah Cummings, ‘do you include yourself?’ ‘No. How could I?’ replied the 83-year-old executive. ‘When I left the company, it was a healthy company.’”
“People are trying to understand the similarities and/or differences between the Detroit car makers and the New York bankers in terms of; the amount of public money given their companies, the demands made in exchange for said money and the treatment of the executives of the respective companies.”
“The banks did know that many of the loans they were making were going to be a default and foreclosure problem. They knew this because they were making loans to people with incomes inadequate to repay them back; because they were making loans without even verifying income, because they were making loans that would jump up to three or four time the payment amount. In short the banks were making loans disregarding all the basic principles of good banking practices, so they knew the default rate would be sky high. That is why they sliced, diced and bundled the loans for resale to unsuspecting buyers. If they were good loans they could have sold without the complex derivative disguises they created.”
“The ‘anyone with a pulse’ could qualify for a loan process created the demand that resulted in the housing bubble. Since the demand was fraudulently high being based on people who could not afford to stay in the homes, the bursting of the bubble was inevitable. When the bubble burst, credit froze up because the banks were stuck with garbage loans of their own making all over their balance sheets. This lead the entire economy into a massive meltdown.”
“Some people say the car makers failed for years to provide the small inexpensive car that Americans wanted. The banks are guilty of a whole host of inappropriate business activities, none of which could be called honest mistakes. How come Washington treats the honest (albeit dim witted) mistakes of Detroit like they were crimes worthy of punishment and treats the dishonest mistakes of New York as if they were merely errors of judgment? Maybe because there is a revolving door between high government jobs in the economic field and high income jobs on Wall Street.”
“If the backbone and almost last vestige of what was once the great American manufacturing industry is going to be highly controlled by the government because of their honest mistakes, perhaps the banking industry, which actually didn’t create anything other than unconscionable bad debt due to dishonesty, should be subject at least similar control!”
