June 16, 2017

What Was Happening Before The Recession

It’s Friday desk clearing time for this blogger. “A new report from RealtyAustin shows for the first time ever, the average price for single family homes in the Austin area is nearly $400,000, up 9.6 percent from May 2016. After a long search first time home buyer Caitlin Intrator remains optimistic. ‘I do think the growth will continue, so when I hear that number I think, Yes! Can I just get in today? So tomorrow I can start reaping the benefits.’”

“David Arbit, director of research and economics for the Minneapolis Association of Realtors, said we’re not in a housing bubble. ‘Typically in bubbles, you have easy money, where if basically if you fog a mirror, you can get a mortgage,’ Arbit said. ‘And we don’t really have that anymore.’”

“They were all the rage — then the scourge — of the housing boom and bust. Now they’re back, big time: home mortgages that require tiny or zero down payments from buyers. Several major lenders are offering loans with 1 percent down, and now a large national mortgage company has gone all the way, requiring absolutely nothing down.”

“Movement Mortgage, a top-10 retail home lender, has just introduced a financing option that provides eligible first-time buyers with a nonrepayable grant of up to 3 percent. This allows applicants to qualify for a 97 percent loan-to-value-ratio conventional mortgage — essentially zero from the buyers, 3 percent from Movement. Duke Walker, branch manager for Movement for the Washington area, told me that although the program is brand-new, it’s already ‘going great guns.’ Movement is hardly the only player in this arena.”

“Many San Diegans would like to own a home in the region they work in, but they often struggle with the large down payment. Gearing up for a new generation of buyers, San Diego-based Guild Mortgage has launched a 1 percent down payment mortgage that has some of the easiest debt requirements on the market. Other lenders — Quicken Loans, Guaranteed Rate, United Wholesale Mortgage — have 1 percent down programs, but Guild Mortgage allows the borrower to have the most debt and allows for more sources of income, said an analysis by HousingWire.”

“Norm Miller, real estate finance lecturer at the University of San Diego, said 1 percent down payment programs ignore a lesson from the housing crash: Not having a high amount of equity in a home can be asking for trouble. He said a buyer who overpays for a property by 5 percent, but only pays 1 percent down, could quickly find themselves with negative equity. ‘That’s not an unrealistic scenario,’ he said, noting data from 2005 to 2008 that showed it happening frequently. ‘It’s déjà vu all over again.’”

“Miller said that adjustable rate mortgages weren’t the only factor in the crash, but also dropping home values. Defaults don’t typically happen if a borrower’s home has positive equity, he said. When the value of a home drops, that’s a big factor in defaulting — no matter what type of loan. ‘The system is not set up to stop people from overpaying,’ Miller said.”

“San Francisco, which had the greatest uptick in home values in recent years, now has the weakest market out of the nation’s top 100 metropolitan areas, with annual prices falling for the first time since 2011. ‘We are seeing an increasing number of engineers who don’t want to live in this state of uncertainty. They are opting to go back home to India or China, or they are looking to work in Canada,’ said Mike Grandinetti, chief marketing and corporate strategy officer at Reduxio, an IT firm based in Silicon Valley.”

“For more than 20 years, Mark Eilers, managing director of land services for Colliers International in Tampa, has been helping clients buy and sell land. Q: With prices for residential real estate rising so much, there’s concern that we might be headed for another housing bust. Do you see signs that commercial real estate in general is slowing down or even facing a bust like that in 2007-08? A: (Lenders) are much more methodical in underwriting than they were back then, and they are underwriting more intelligently. Now things have slowed done and people on all sides are being more careful, the lenders, the developers, everybody.”

“Q: Are any types of development cooling? A: Multi- family (apartments). The lending market is tightening up so it’s putting pressure on getting deals done even if they find land. Right now lenders are a bit wary. Are we going to be oversaturated in West Shore, for example, with all the top-dollar rents? How deep is the renting pool? Downtown Tampa is the same way. It’s all predicated on the fact that because land is so expensive, rents have to be really high and (lenders) are concerned, do we have enough business to rent at $2 a square foot? Historically in Tampa, an apartment complex built in 1985 in Carrollwood is getting $1, maybe $1.30.”

“CoreLogic’s latest report places Connecticut’s negative equity share, or percentage of mortgaged homes in which the loan amount is higher than what the home is currently worth, at 9.9 percent — the fifth-highest total nationally. Nevada has the highest negative equity share, at 12.4 percent. Florida, Illinois and New Jersey rounded out the top five. ‘I’m not surprised if that were the case,’ said Michael Barbaro, president of the Connecticut Association of Realtors. ‘I can tell you that what I’ve witnessed is a lot of sellers or would-be sellers that just don’t have the equity to sell.’”

“Barbaro said the fact that millions of people are still underwater shouldn’t be surprising considering what was happening in the lending world before the recession. ‘Prior to the crash, there was a prevalence of high-ratio loans, such as 100 percent financing,’ he said. ‘In addition to the fact that they purchased at the height of the market, (homeowners) didn’t have a lot of equity to begin with.’”

“Searches for ‘overgrown,’ ‘debris’ and ‘dilapidated’ in the Public Eye email inbox yield countless reports of rundown homes in South Jersey. Despite a four-year turnaround in the housing market and an optimistic outlook from officials, Atlantic County still has one of the nation’s highest foreclosure rates. Homes remain vacant years after the recession. While auctions and investors have helped remedy the problem in many towns, residents still notice homes falling into disrepair, with no one seeming to handle the problem.”

“One Egg Harbor Township resident who contacted Public Eye said he’s taken the first step in getting a neglected foreclosed home addressed. The concerned resident said the committee helped him get as far as identifying who currently owns the property, Ditech Home Loans, to which notice has been given. But there has been no response from the Florida-based company.”

“A last-ditch effort may be to look into home and garden show casting calls. A quick scan of the TV seems to suggest the newest reality-show trend is home renovations, and Atlantic County could provide a handful of house-flipper series a season’s-worth of shows.”




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109 Comments »

Comment by Ben Jones
2017-06-16 08:00:41

‘the average price for single family homes in the Austin area is nearly $400,000, up 9.6 percent from May 2016. After a long search first time home buyer Caitlin Intrator remains optimistic. ‘I do think the growth will continue, so when I hear that number I think, Yes! Can I just get in today? So tomorrow I can start reaping the benefits.’

Motivation tells us more about a mania than statistics. Do we even bat an eye at 9% anymore, when those kind of increases didn’t happen for hundreds of years? How hard would it be to wind up underwater in these circumstances? And Miller is dead on: being underwater is the biggest incentive to default.

Comment by Sacks of Dong
2017-06-16 15:16:18

Well she is sort of right.
There will be a reaping.

 
 
Comment by Raymond K Hessel
Comment by In Colorado
2017-06-16 08:40:42

I don’t get it. My understanding was that Whole Paycheck was in a death spiral, why did Amazon buy them? For the distribution network?

Comment by scdave
2017-06-16 08:42:41

For the distribution network ??

Sure…What better way to disrupt the industry quickly…

Comment by Ben Jones
2017-06-16 08:45:11

The lead-filled life preserver business was already taken.

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Comment by Jingle Male
2017-06-17 04:15:21

LOL….cute.

 
 
Comment by scdave
2017-06-16 09:16:58

If Amazon has there way they will be the only one left standing…Safeway was rumored to be interested in Whole foods…Are we going to see the faceless check out register soon ??

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Comment by Ben Jones
2017-06-16 09:31:23

They have self scan places at hardware stores now.

‘After this deal’s announcement, almost any company that sells groceries is getting pummeled as investors brace for the competition brought on by Amazon’s entry into the space. The most notable loser is Kroger, the nation’s second-largest seller of groceries behind Walmart, down 13% in early trading on Friday.’

‘Other losers included Target, down 10%, and wholesale retailer Costco down 7% in early trade on Friday. Also lower were shares of dollar stores Dollar General, down 6%, and Dollar Tree, down 4%. Shares of UK grocer Tesco were down 5% in afternoon trading in London on Friday.’

 
 
Comment by In Colorado
2017-06-16 09:21:27

Unless Whole Paycheck changes dramatically I don’t see a whole lot of disruption, unless Amazon starts buying out other grocers as well.

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Comment by MightyMike
2017-06-16 09:28:52

They may want get into home delivery of groceries. I think that there were some bankruptcies in that business in the original dot com bubble 20 years ago.

 
Comment by scdave
2017-06-16 09:30:54

Unless Whole Paycheck changes dramatically ??

What if they eliminate 75% of the payroll and drive the savings to the bottom line ?? How does Safeway respond ?? Amazon already has robots stocking shelves in the fulfillment centers…Why can’t the stock the shelves in a supermarket the same way ??

 
Comment by In Colorado
2017-06-16 10:12:05

Sure, Amazon could introduce ultra cheap stores with a mean, lean distribution channel. But in that case, wouldn’t it have made more sense to buy out Aldi or Lidl as opposed to Whole Paycheck? Whole Paycheck is about pricey, boutique food and customer service. You don’t go there to buy Twinkies or a $1 pack of hamburger buns. It seems to me that Amazon would be throwing away what Whole Paycheck is all about.

 
Comment by MightyMike
2017-06-16 10:17:09

What if they eliminate 75% of the payroll and drive the savings to the bottom line ?? How does Safeway respond ??

Whole Foods would probably still be more expensive than Safeway.

Amazon already has robots stocking shelves in the fulfillment centers…Why can’t the stock the shelves in a supermarket the same way ??

If robots work, Walmart can probably afford to buy robots.

Some of these chains, like Kroger and Safeway, have been around for 100 years. The endeavor could blow up in Amazon’s face.

 
Comment by butters
2017-06-16 10:34:58

The endeavor could blow up in Amazon’s face.

I think it will. Kinda reminds me of Teresa May.
B!tch got greddy.

 
Comment by scdave
2017-06-16 10:54:25

Whole Paycheck is about pricey, boutique food ??

But thats where the biggest margin is so the savings delivered to the customer would also be large…It also may be about the demographics of the area where the whole foods stores are located…

Walmart can probably afford to buy robots ??

Different customer profile and hardly convenient if you want a couple of steaks and a head of lettuce…

The endeavor could blow up in Amazon’s face ??

Maybe but with their money I guess they can take chances…

 
Comment by In Colorado
2017-06-16 11:11:48

It also may be about the demographics of the area where the whole foods stores are located…

In that case Kroger, Walmart, Safeway, etc. have nothing to worry about, as those people already shop at Whole Paycheck.

WalMart took a huge bite out of Kroger, Safeway, etc. when they jumped into groceries, and yet they’re still around.

As for pushing suppliers to lower prices to the bone, WalMart’s being doing that for decades.

 
Comment by scdave
2017-06-16 11:30:55

As for pushing suppliers to lower prices to the bone ??

Its likely not about supply pricing…It may be all about automation…robots…Cut the human element out just like their Fulfillment warehouses…

 
Comment by MightyMike
2017-06-16 12:10:38

Kinda reminds me of Teresa May.
B!tch got greddy.

Commie blames Trump for that, too.

…U.K. Prime Minister Theresa May has a warmer relationship with Trump. She was the first foreign leader to visit Trump in January after his inauguration, when she congratulated him on his “stunning electoral victory.” But she was criticized for not pushing back on Trump as much as her European colleagues or her rivals from other parties after Trump withdrew the U.S. from the Paris climate accords on June 1 and then instigated a fight with the mayor of London after the terrorist attack in London two days later. Her Conservatives suffered a humiliating result, blowing a 17 percentage point polling lead and losing their majority in Parliament; it’s now not clear how much longer she’ll continue as prime minister. Trump was not May’s only problem, but he certainly didn’t help.

https://fivethirtyeight.com/features/donald-trump-is-making-europe-liberal-again

 
Comment by In Colorado
2017-06-16 12:12:33

Just how much will they save by having droids stock the shelves? Especially when suppliers often do that job anyway. And who says WalMart can’t do that too?

Also, given that Whole Paycheck stores are small, will shelf stocking droids be even practical?

For all the talk of Amazon using droids, they still employ an army of meat bags in their warehouses.

 
Comment by scdave
2017-06-16 13:00:15

how much will they save by having droids stock the shelves ??

Not sure…If you look at what Amazon has done so far with everything they touch its been very disruptive…Look at retail sales for example and that is still playing out…So, with the acquisition of Whole Foods I would have to make the assumption that they are going to attempt to disrupt that business model the way things are done…

 
Comment by butters
2017-06-16 13:30:15

Current WF locations can’t serve as distribution centers because they are all within city/town limits and logistics can’t support that. Move them to far-flong areas, then the retail suffers.
Not sure what the plan is….but I would say again the b!tch got greedy. The only difference is APPL or GOOG are awash in cash (foreign) but not AMZN.

 
Comment by junior_kai
2017-06-16 14:48:41

Thought we would more likely see Uber implode in the future and someone pick up its IP on the cheap - tesla or apple, with apple buying tesla as it implodes.

 
Comment by PitchforkPurveyor
2017-06-16 18:49:12

I got rid of Amazon Prime. It wasn’t worth it for the $99, and they were playing games with prices. I’d buy something, then it would mysteriously go up before I bought it again, but I could get the previous price if I agreed to “automatically” get it every month. Shenanigans and overpriced crap.

 
 
Comment by megamie
2017-06-16 17:50:10
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Comment by In Colorado
2017-06-16 21:26:26

Amazon didn’t acquire an iconic grocery store brand just for the quinoa: Whole Foods operates hundreds of retail data mines, and Amazon just married a world-class artificial intelligence team with one of the best sources of in-store consumer shopping data in the U.S.

Maybe for the demographic that shops at Whole Paycheck. It would have made more sense to buy a chain like the Piggly Wiggly to learn what “average” Americans buy.

 
Comment by Carl Morris
2017-06-17 13:28:17

It would have made more sense to buy a chain like the Piggly Wiggly to learn what “average” Americans buy.

Not much blood left to squeeze out of that turnip.

 
 
 
Comment by 2banana
2017-06-16 08:42:47

That is one over-hyped and expensive deal…

Comment by new attitude
2017-06-16 09:05:39

Amazon has more money then they know what to do with. I am glad they are spending it. Next up, Apple needs to unload some cash.

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Comment by Ben Jones
2017-06-16 09:13:26
 
Comment by 2banana
2017-06-16 09:18:04

But, but… a P/E of 186

 
Comment by scdave
2017-06-16 09:58:58

But, but… a P/E of 186 ??

I don’t own any stock but I got to believe its not all speculative bets on Amazon…Some must believe that Amazon will gain enough market share that it will destroy other competitors in whatever it touches…Seeing the fall in stock prices of some of the other grocers today lends to that idea….

 
Comment by Blue Skye
2017-06-16 10:17:49

Maybe, but Amazon’s market share could double several times and the stock would still be grossly overpriced. There’s nothing “special” about delivering groceries to the house. We have a local store here that has been doing that for a very long time.

 
Comment by scdave
2017-06-16 10:57:32

There’s nothing “special” about delivering groceries to the house ??

The acquisition may have little to do with delivery…

 
Comment by palmetto
2017-06-16 11:06:55

“The Washington Post has been one of the two main establishment papers in the U.S. for a while.

But it’s gotten ridiculously pro-intelligence community in the last couple of years, fawning over the intelligence agencies and quoting “anonymous sources” from the IC every single day.

The Post is owned by Jeff Bezos, who runs Amazon. And Bezos has been molding the Post’s direction since he bought it.

Amazon, in turn, has been working with the CIA since 2014 to provide the agency’s cloud computing needs.

The company just launched a cloud-based service for many American intelligence agencies.”

http://www.zerohedge.com/news/2017-06-16/no-wonder-washington-post-fawning-over-intelligence-community

Gee, I wonder where WaPo gets its “anonymous intelligence sources” information from? Just reach for the cloud!

How convenient!

 
 
Comment by Sean
2017-06-16 11:06:45

It WAS an expensive deal this morning. Then the market opened and both Whole Foods and Amazons stock shot up, so much so by this time next week Bezos will basically have gotten WF for free.

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Comment by oxide
2017-06-16 17:54:29

Good point, Sean. For all we know, the deal could be exactly about only this. Buy the company for the immediate pump and dump, and then hands off. As long as WF doesn’t lose money, Amazon will just let WF do its thing.

 
 
Comment by Auntie Fed
2017-06-16 12:30:33

I concur. Who gives a fork about the owner-in-name of Whole Puke? No one shops there.

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Comment by Carl Morris
2017-06-16 15:45:41

No one shops there.

It’s too crowded?

 
Comment by MacBeth
2017-06-16 16:23:12

AMAZON IS A CATALOG COMPANY.

Going into the grocery business doesn’t change this fact. In reality, it only deepens its commitment to the catalog idea.

The only reason for Amazon to get into groceries is to broaden its retail / home delivery business to include food.

The snobs that shop at Whole Paycheck (lol!) are sitting ducks for Amazon’s desire to cater to fancy pants princess-type customers. They’ll lap that sh*t up because it makes them feel special.

It is a good fit for Amazon. As a specialty business.

 
Comment by palmetto
2017-06-16 17:07:31

“AMAZON IS A CATALOG COMPANY.”

Awesome. WaPo can just go into the cloud and pick out which bit of intel they want to leak. Russian spies? Drug cartels? Thong purchases by prominent socialites? Leo DiCrapio’s art collection? How long before the intel starts being brokered out? That’d be a heckuva thing.

 
Comment by MacBeth
2017-06-16 20:00:07

Good to see someone catching on.

 
 
 
Comment by sleepless_near_seattle
2017-06-16 21:31:47

“why did Amazon buy them?”

Amazon wants to become Wal-Mart faster than Wal-Mart can become Amazon.

 
 
 
Comment by 2banana
2017-06-16 08:14:15

One of the many lessons I have learned here on the HBB.

Never buy a mass produced “high end” crap shack with stucco.

++++

Buckingham homeowners’ battle with Toll shines light on widespread water damage problem.
Crissa Shoemaker DeBree - 6/16/2017 - The Bucks County Courier Times

When Kim Shaffer and Dave Wolk moved into their Buckingham home in August 2002, they felt they had achieved a lifelong dream.

They said the estate home, built by Toll Brothers, signified their years of hard work had paid off.

“It meant something,” said Shaffer. “I was excited when we learned we were going to move into a Toll home.”

Now, however, the couple and some neighbors in their Buckingham Forest development are battling Toll Brothers over what they say is water damage beneath the stucco and brick facades of their homes — damage they and the housing inspectors they hired attribute to improper building practices. Some homeowners say they face repair bills of $100,000 or more to homes that are rotting from the inside out.

Housing inspectors and construction attorneys say the problem extends beyond one builder and one development to involve homes across the country. Southeastern Pennsylvania, they say, has been hit especially hard by building failures — so much so that building scientists refer to the region as the “stucco failure capitol of the U.S.” Stucco has been used on the exterior of many homes in Buckingham Forest, where the current asking price for homes is in the mid $600,000s.

“We’re seeing these failures because builders universally failed to build and construct these houses in accordance with the building codes that were in place at the time,” said attorney Jennifer Horn. Her firm, Horn & Williamson, represents 250 families in the region in construction default cases, including some Buckingham Forest homeowners.

“In a rush to build as fast as possible to make as much money as possible, these builders were doing three things wrong,” she added. “They were not having appropriate oversight in the field. They’re putting money before product and quality. And thirdly, most importantly, they’re not paying attention to the details.”

“You sort of feel like you’re living in a home with cancer,” said Wolk. “You can’t really see it. You’re told it’s there. You’re not sure how to respond to it. Do I pay out of pocket to fix it and have the cancer go away?”

When Toll ended its fiscal year last October, it estimated its liability had grown to approximately $324.4 million. Approximately $115.5 million of that would go to fix water intrusion at non-stucco homes, Toll Brothers aid.

As of April 30, Toll said it has spent $171.8 million on water intrusion claims this year. Earlier this month, the company disclosed in a footnote in its quarterly earnings report, that the Securities and Exchange Commission is investigating its repair estimates. Toll said it would comply with the agency’s request for more information, adding, “Management cannot at this time predict the eventual scope or outcome of this matter.”

Danielle and Joe Steffe said they felt the same as Wolk and his wife did about their new home when they moved in, in 2003. “I bought a Toll Brothers home thinking I was buying a cut above,” said Joe Steffe, a dentist.

Comment by Raymond K Hessel
2017-06-16 08:19:52

You mean, the illegal immigrant cowboy contractors who built your stucco shack were less than concerned about having it outlast the mortgage? I am shocked, shocked!

Comment by 2banana
2017-06-16 08:34:30

But, but…

“I bought a Toll Brothers home thinking I was buying a cut above”

Comment by Raymond K Hessel
2017-06-16 10:06:42

“The first cut is the deepest.” — Rod Stewart

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Comment by phony scandals
2017-06-16 08:40:57

“Some homeowners say they face repair bills of $100,000 or more to homes that are rotting from the inside out.”

Thank you sir may I have another?

https://www.youtube.com/watch?v=qdFLPn30dvQ

 
Comment by oxide
2017-06-16 18:03:26

FINALLY!! I’ve asking whether it was true about those Tool Bros POS — allegedly “after 5 years it falls apart.” I guess its 15 years, and finally they are falling apart. And this was 2002 vintage. The 2006-2007 stuff must be even worse.

Hey rich people, if you want “a cut above,” buy a luxury home that was built in the 1960’s or 1970’s or even 1930’s. Many of those mansions were individually designed and lovingly built one at a time. And most of those older mansions do *not* look out of style, like bell-bottoms. There are amazing luxury Craftsman and Tudor and Colonial and Cape Cods built in every decade. Brick, stone, slate roofs, larger lot, mature trees, beautiful landscaping, the whole bit. If I had the money, that’s the kind of house I’d buy.

 
 
Comment by 2banana
2017-06-16 08:16:51

This “new generation of buyers” will walk away from their “investment” in a heart beat if the housing market declines even slightly…

++++

Gearing up for a new generation of buyers, San Diego-based Guild Mortgage has launched a 1 percent down payment mortgage that has some of the easiest debt requirements on the market.

Comment by Ben Jones
2017-06-16 08:22:23

The zero down article mentions the paper is being sold off through the GSE’s. For the supply/demanders: what would the appetite for these loans be if the government wasn’t backing it?

‘Now things have slowed done and people on all sides are being more careful, the lenders, the developers, everybody’

Not everybody, it would appear.

Comment by 2banana
2017-06-16 08:27:29

Government guarantees have totally distorted the housing market.

And have DESTROYED affordable housing.

But bigger and bigger government can solve this…

Comment by scdave
2017-06-16 08:59:40

Government guarantees have totally distorted the housing market ?

What about farm subsidies ?? Has it distorted land values & food cost ??

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Comment by Blue Skye
2017-06-16 10:38:35

What about farm subsidies ??

OK, but hard to line those up timing wise with the recent farmland bubble.

 
Comment by scdave
2017-06-16 10:59:56

long term Interest rates have just compounded the effects on the already subsidized AG land…

 
Comment by Blue Skye
2017-06-16 16:08:00

Probably so, but farmland was selling for way more than it’s productive value. It was being bought for appreciation value. Paying $10,000 for something that you can make a couple hundred on with hard work does not pencil out regardless the low interest rate.

 
 
 
 
 
Comment by 2banana
2017-06-16 08:23:16

It is just like 2006.

Lots of negative equity
People using their houses as an ATM
1% or no down payment mortgages
Sellers bringing money to the table to close
5-6x income levels to buy a house
You must buy and get on the property ladder or be left behind
It is different this time
Renting much less expensive than buying

The greater fool theory…

+++++

“CoreLogic’s latest report places Connecticut’s negative equity share, or percentage of mortgaged homes in which the loan amount is higher than what the home is currently worth, at 9.9 percent

Comment by oxide
2017-06-16 18:09:16

They were all the rage — then the scourge — of the housing boom and bust. Now they’re back, big time: home mortgages that require tiny or zero down payments from buyers.

Total BS. The scourge of the housing boom was interest-only and neg-am mortgage — both for new purchases and for cash-out refi.

 
 
Comment by Ben Jones
2017-06-16 08:42:54

‘provides eligible first-time buyers with a nonrepayable grant of up to 3 percent. This allows applicants to qualify for a 97 percent loan-to-value-ratio conventional mortgage — essentially zero from the buyers, 3 percent from Movement…it’s already ‘going great guns.’

I’m touched by the philanthropy here. These guys dug into their own pockets to give away 3% of a shack price. And it’s nonrepayable! I suppose that means they wouldn’t take the money if you wanted to pay them back. Look at how pleased this guy is that it’s been received so well. Oh joy! Joy to the World.

Comment by Auntie Fed
2017-06-16 13:11:56

Does it mean the mortgage company owns 3% of your house forever?

 
Comment by CHE
2017-06-16 13:59:52

I don’t get what this obsession with the down payment being the thing holding people back… For me, it’s not the down payment - it’s the monthly nut.

If I can put 20% down on a $500,000 crapshack and still can’t be comfortable with the monthly nut, how can these 3%ers do it?

Comment by Ben Jones
2017-06-16 15:25:39

‘I do think the growth will continue, so when I hear that number I think, Yes! Can I just get in today? So tomorrow I can start reaping the benefits.’

 
Comment by Auntie Fed
2017-06-16 16:17:32

They just cash-out refi and never look back. Maybe they have interest-only payments or something.

 
 
 
Comment by Ben Jones
2017-06-16 08:51:56

There’s a hotel bubble:

http://www.hospitalitynet.org/news/4082501.html

And now:

‘Restaurant oversupply worsens’

‘Restaurants add 18 new units per day, outpacing supply, and hurting unit economics’

‘Same-store sales are falling because restaurants are opening too many locations. The industry has added about 40,000 new restaurants over the past six years, according to a recent study on the impact of industry supply by Credit Suisse. That’s about 18 new restaurants per day.’

‘Unit count growth has outpaced population growth in four of the past five years, leading to an overall increase in the number of restaurants per capita, according to the study. While the total restaurant penetration remains below recessionary levels, chain restaurant penetration is at an all-time high, according to the study.’

‘Same-store sales fell 1 percent in May, a month when the industry should be at least modestly recovering, while traffic was down 3 percent. Same-store sales haven’t increased since February of last year, according to Black Box. We’ll remind you that February of last year included an extra day.’

‘Investment dollars are flooding into the industry, driving new unit growth, while existing concepts are pushing expansionary plans. Some franchises have also revived a recessionary practice of development incentives as they search for unit growth. ‘

‘Even when companies do close locations, they quickly get filled. The buffet chain Golden Corral, for instance, recently bought several shuttered Old Country Buffet locations. Indeed, almost any time I write a story about store closures, I will almost invariably receive emails from a handful of chain site selection specialists, looking to find where the closed units are located. They want access to those sites.’

‘When weaker units shut down, the higher volume concept moves in, which makes the market that much more competitive.’

Comment by 2banana
2017-06-16 09:02:13

Housing, stocks, personal debt, student debt, public debt, autos and now hotels and restaurants.

Everything is in a bubble* - where even one of these bubbles 20 years ago would have been unimaginable.

Now there are everywhere. And hardly an eyebrow gets raised.

Our entire economy and way of life is dependent on these bubbles.

Massive amounts of money and political pressure is applied to keep these bubbles going.

And cheap, cheap credit. With little to low standards and the government backing up all.

And we are close to them all popping.

* with small exceptions like gold and silver

Comment by Ben Jones
2017-06-16 09:09:36

Don’t forget global agriculture and commodities. I’m not sure if I would describe each category as a mania. Take oil: the oversupply may have been an outcome of mania related events (China’s QE, done because the global housing bubble was leaking air) but I don’t know if people were flipping oil assets or not. Farmland is in a bubble, but wheat isn’t necessarily.

Autos: the debt market may be in some sort of a mania, but I don’t think anyone expects a new car to be worth more later. But there’s no question prices, leverage and oversupply are getting a little crazy out there.

Comment by scdave
2017-06-16 09:23:50

oversupply ??

Of everything…..

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Comment by 2banana
2017-06-16 09:25:42

Well, here is at least one bubble that has popped.

++++

.22 Ammo Prices Dropping
gunwatch.blogspot.com | 6/16/2017 | Dean Weingarten

I have been tracking .22 rimfire ammunition and availability for some time. The .22 Long Rifle bubble has lasted for years. With the election of President Trump, I expected the bubble to bust. Instead, it has been deflating, like a balloon with a pinhole leak. The demand for .22 ammunition has been so great that a 20% increase in supply, and a Second Amendment friendly administration did not bust the bubble. Instead, they stopped the growth, poked a hole in the bubble, and started a downward spiral of prices.

At Cal Ranch Supply, I expected there to be some .22 ammunition at high prices. The prices were above historical averages, but they had dropped considerably. There was plenty of ammunition available in several brands. The man behind the counter and I had a discussion about the situation. He showed an excellent practical understanding of basic economics.

Supply of .22 was no longer a problem, he said. The store did not have any limits on purchase. Walmart has dropped their 3 box limit nationally, as well.

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Comment by Mr. Banker
2017-06-16 21:04:02

Here’s some 5-year price charts of various grains:

http://finviz.com/futures_charts.ashx?t=GRAINS&p=m1

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Comment by In Colorado
2017-06-16 09:24:07

‘Restaurant oversupply worsens’

‘Restaurants add 18 new units per day, outpacing supply, and hurting unit economics’

No wait for a table at Applebee’s now!

Comment by 2banana
2017-06-16 09:26:54

But I saw a line at Applebee’s on a Friday night last month…

The economy is booming!

 
Comment by Jingle Male
2017-06-17 13:13:27

That is why I sold my Chipotle stock at a small gain. There is over saturation danger, plus when the next recession hits, all upside will be ended.

 
 
 
Comment by Carl Morris
2017-06-16 10:15:37

Norm Miller, real estate finance lecturer at the University of San Diego, said 1 percent down payment programs ignore a lesson from the housing crash: Not having a high amount of equity in a home can be asking for trouble.

Let’s not confuse correlation with causation. If housing always goes up, then less equity should be fine. Does allowing people to buy with less equity cause housing to go down? Nope.

What really happens is that those low equity buyers are the last ditch effort/designated bagholders when it’s getting really difficult to keep housing going up. So yes…when you see them being allowed to purchase you know the end is near, but they are the symptom, not the cause of “trouble”.

 
Comment by SJ
2017-06-16 10:21:04

Sorry but I am not going to order home delivery for an overpriced steak.

Comment by butters
2017-06-16 10:55:40

Yes you will. Otherwise you will not have time to watch amazon videos.

 
Comment by In Colorado
2017-06-16 11:15:43

Hey, Omaha Steaks has been home shipping mediocre, way overpriced steaks for decades.

 
Comment by oxide
2017-06-16 18:18:28

Truthfully I don’t think I would take chances with home delivery of perishable groceries. For all I know, the grocers pick the oldest and ugliest steak for you and the truck breaks down on the way. I just hope that the farmer’s markets keep going strong.

My local store has a pickup location right at the store. The put your food in lockers right on the curb. You pull up and just load your stuff in the car. I was telling a friend that this didn’t make much sense to me — you’re already at the store, why not just go in? She said “It’s great for moms with small children. You can keep your kids strapped in the car without putting them in the cart where they can whine and beg for candy.” Hmm.

Comment by In Colorado
2017-06-16 21:15:51

Our local Kroger chain (King Soopers) offers the same service.

 
Comment by SandalTanLines
2017-06-17 06:05:56

I’ve been having my groceries delivered for a few years now. Its such a time saver, and although I’ve never ordered steaks, I’ve always gotten good quality meats, vegetables and dairy. I’ll take shopping for groceries online while I relax at home over spending 2 hours in the store any day.

Comment by Ben Jones
2017-06-17 06:07:52

I’ve never spent two hours at a store in my life.

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Comment by Raymond K Hessel
2017-06-16 10:50:45

When will China have its Lehman Moment?

And Australia?

And Canada?

And the UK?

And the EU?

And us?

https://www.bloomberg.com/gadfly/articles/2017-06-16/xi-risks-china-s-lehman-moment-by-cutting-anbang-adrift

 
Comment by Apartment 401
 
Comment by nolookpass13
2017-06-16 11:51:03

So where are buyers looking now for large tracts of land?

“A big trend right now is mobile home parks. (Buyers) will take a mobile home or RV park when they get to the end of their economic life and maybe rezone it for townhomes or apartments.”

Equals more poor folks losing their homes (trailers are all they can afford) and panhandling outside of Whole Foods.

Comment by scdave
2017-06-16 13:08:21

So where are buyers looking now for large tracts of land ??
“A big trend right now is mobile home park ??

No so much…It just makes big headlines…The cities have actually put to Kabash on that activity in any number of ways mainly by making the developer, or land owner or both compensating the Mobile Home owners in a significant way…

What is happening is the conversion of Industrial and professionally zoned land to residential…Thats happening in a very big way around here…

 
 
Comment by Auntie Fed
2017-06-16 11:51:41

‘Typically in bubbles, you have easy money, where if basically if you fog a mirror, you can get a mortgage,’ Arbit said. ‘And we don’t really have that anymore.’

Really? Less than 4% interest and a 3% down payment isn’t easy money? If not, then what is? I guess we’re still waiting for the no-doc loans. I wonder how long it will take for those to come back.

Comment by Ben Jones
2017-06-16 15:41:48

It’s been more than a year since Freddie started making loans to illegal aliens who can put anyone down as income to get a loan. Unlimited number of anyones.

 
 
Comment by Auntie Fed
2017-06-16 12:00:24

…real estate finance lecturer at the University of San Diego …

So, what are all those tuition payments actually for, anyway? Oh yeah, it’s to pay the salaries of real estate finance lecturers. Of course.

Comment by In Colorado
2017-06-16 21:14:28

As an alum (class of 85) I can tell you that USD has become ridiculously expensive, so much so that I never considered for even a nanosecond to send my kids there.

 
 
Comment by snake charmer
2017-06-16 12:44:32

“Historically in Tampa, an apartment complex built in 1985 in Carrollwood is getting $1, maybe $1.30.”
_____________________________/

Palmetto, anything to say about this? When I first moved here in the early 1990s, I lived for a couple of years in an apartment complex in Carrollwood that was built about that time. I paid $450 per month for a one-bedroom, about 650 square feet in size. The internet informs me that the same unit now rents for $850 per month. The complex itself has been re-branded with a gate and an upscale-sounding name.

I actually like “old Carrollwood,” which is east of Dale Mabry Highway around Lake Carroll. But everything else (including “Carrollwood Village,” west of Dale Mabry where I lived) is dull and generic suburbia.

Comment by palmetto
2017-06-16 15:37:12

Hi, snake, good to seeya. I am a fan of old Carrollwood myself. A nice, shady, green, established area. Heck, there’s even a little beach there on Lake Carroll. No need to make the trek to Pinellas, unless you absolutely have to have salt water. If I weren’t here in South Hillsborough, where I do have a pretty good deal on rent, that’s where I’d want to be.

The rent’s too dang high there, though.

 
 
Comment by junior_kai
2017-06-16 14:57:53

“Norm Miller, real estate finance lecturer at the University of San Diego, said 1 percent down payment programs ignore a lesson from the housing crash: Not having a high amount of equity in a home can be asking for trouble. He said a buyer who overpays for a property by 5 percent, but only pays 1 percent down, could quickly find themselves with negative equity. ‘That’s not an unrealistic scenario,’ he said, noting data from 2005 to 2008 that showed it happening frequently. ‘It’s déjà vu all over again.’”

As I’ve said before, my analysis was that the bubble, measured in price/sq. ft. peaked in late 2003 for San Diego at the high end and then spread throughout the county, state and country over the next 3-4 years. We’ve already seen the top in this bubble, its just that the music hasnt stopped everywhere yet. San Diego was first out of the gate when Greenspan cut rates after 9/11 - articles were in Forbes back then talking about the annual 20% gains at the time. We got about 3 years of that madness before it burnt itself out and fortunately I sold just as I saw my neighborhood starting to turn. Its taken over 12 years for it to come back in nominal prices, but the reality is the current bubble peak will be a lower high than bubble 1.0 when doing an apples to apples comparison IMO.

 
 
Comment by Raymond K Hessel
 
Comment by Neuromance
2017-06-16 15:49:22

Interesting - Kashkari is an aerospace engineer, not an economist, a finance major or even an English major like his one-time boss, Goldman CEO and Treasury Secretary Hank Paulson. Merkel’s a physicist/chemist. Interesting to see unexpected careers pop up in finance or political positions.

https://www.bloomberg.com/news/articles/2017-06-16/neel-kashkari-is-the-fed-s-toughest-internal-critic

 
Comment by palmetto
2017-06-16 15:50:47

Anyone follow any summer resort areas? If so, do you notice an unusually large number of homes for sale? I was browsing the listings in one Cape Cod town where I used to go in the summer and holy jeebus, it’s like the entire town is up for sale.

Comment by Blue Skye
2017-06-16 16:18:01

Lakefront here is cottage country. Not seeing many for sale signs.

I used to go to Chatham on Cape Cod, back when tent camping parks were popular. Early 60s.

Comment by palmetto
2017-06-16 16:55:40

Heh, that’s exactly the town I was browsing. Also saw some new listings pop up in Stonington, CT, which is usually rather stagnant in terms of inventory. Looks like people held off until the summer season and then decided to put their best foot forward. Stonington is not a “summer resort” town, per se, but it is a shore town with a certain percentage of summer residents. Westerly, RI is right across the river and also has that year-round/summer thing going on, but gets way more summer residents and tourists because of the great beaches. However, it doesn’t seem to have much of an increase in summer showcase listings. I think if people have a halfway decent house there, they tend to hang onto it.

 
 
 
Comment by Apartment 401
2017-06-16 16:34:16

All the music stops when you sign your name on a mortgage.

Some music for those sad souls who forgot what it sounds like…

A Tribe Called Quest — Buggin Out:

https://m.youtube.com/watch?v=NaIDj6vBEoU

 
Comment by MightyMike
2017-06-16 18:33:41

Don’t Underestimate This U.S. Expansion: It’s Headed to a Record
by Sho Chandra and Steve Matthews

June 15, 2017, 9:00 PM MST June 16, 2017, 6:28 AM MST

Economists see 60% chance growth streak will pass 10-year mark

Recession is likely later in Trump presidency, survey shows

This U.S. expansion may be moving like a tortoise, but it’s on its way to win the race.

Widely disdained for its relatively weak growth and pay gains, the expansion is about to complete its eighth year — and it’s headed to become the longest on record, according to a Bloomberg survey of economists. Respondents put a 60 percent probability, based on the median estimate, on the growth streak running through at least July 2019 and thereby reaching 121 months, topping the 10 years of gains during the 1990s.

They’re betting on it even as the Federal Reserve raises interest rates and President Donald Trump’s fiscal policy-induced bump increasingly seems more hope than reality. As the economy made up lost ground after the financial crisis, the lack of big spurts or excesses resulted in an expansion that’s more slow and steady, which makes it well-placed to be extended.

“The U.S. economy looks pretty healthy right now when you think in terms of sectors that could blow up,” said Stephen Stanley, chief economist at New York-based Amherst Pierpont Securities LLC. Having avoided any “violent bounceback” during the recovery, “most sectors seem to have room to run,” signaling continued moderate growth, he said.

A strong job market, subdued inflation, low borrowing costs and healthier finances will be a tailwind for consumer spending while business investment, a laggard so far, is expected to join the drivers of growth. Even trade may become less of a drag.

https://www.bloomberg.com/politics/articles/2017-06-16/don-t-underestimate-this-u-s-expansion-it-s-headed-to-a-record

 
Comment by palmetto
2017-06-16 19:09:01

Major props to Laura and Jack! Gerbils would be proud!

Comment by palmetto
2017-06-16 19:23:31

adding, not replying to my own comment. By tomorrow, some of you will know what that meant. But here’s a hint:

’twas a lovely summer evening and the degenerates in New York were watching Shakespeare in the Park. And then…

 
 
 
Comment by Mr. Banker
2017-06-16 20:41:19

“Other lenders — Quicken Loans, Guaranteed Rate, United Wholesale Mortgage — have 1 percent down programs, but Guild Mortgage allows the borrower to have the most debt and allows for more sources of income, said an analysis by HousingWire.”

Quicken Loans. Hmmmm … let’s type into Google the words “quicken loan complaints” and see what we come up with …

Well, lookie here: Top 3,280 complaints and reviews about Quicken loans. Go here:

https://www.consumeraffairs.com/finance/quicken_loans_mortgage.html

Some of them make for some good reading.

 
Comment by Professor Bear
2017-06-16 21:36:09

“…and now a large national mortgage company has gone all the way…”

Meet the Fockers.

 
Comment by Raymond K Hessel
2017-06-17 04:57:08

Securitization of debt and assets - another financial engineering scam waiting to go wrong.

http://www.reuters.com/article/us-china-markets-securitisation-idUSKBN1970I6?il=0

 
Comment by Prime_Is_Contained
2017-06-17 05:15:16

and now a large national mortgage company has gone all the way, requiring absolutely nothing down.”

Nothing down? Translation: infinite leverage!!

 
Comment by Prime_Is_Contained
2017-06-17 05:32:46

“One Egg Harbor Township resident who contacted Public Eye said he’s taken the first step in getting a neglected foreclosed home addressed. The concerned resident said the committee helped him get as far as identifying who currently owns the property, Ditech Home Loans, to which notice has been given. But there has been no response from the Florida-based company.”

I’ll tell you the easiest way to solve the problem of abandoned properties: encourage urban homesteading by strengthening adverse possession laws. People could move in right away (but be legally required to notify the banks), and if the bank doesn’t act on the required timeline, they lose their security interest in the house. That would reduce blight rather quickly, at least in attractive areas where the properties have real value.

Comment by Raymond K Hessel
2017-06-17 06:21:36

That would be a viable solution if “our” representatives weren’t owned by their financial sector donors.

 
 
Comment by Dkatl
2017-06-17 10:24:27

This is just a small section of town … Just as many new projects in other parts of town!!

 
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