The Common Markers Are Essentially Present
A report from USA Today on Tennessee. “In Nashville, the median home price was up 8.6 percent annually at $263,000. That came on the heels of four consecutive years of double-digit price increases, Moody’s figures show. But the soaring prices have taken a toll. Homeowners devote 35.1 percent of their monthly income to housing costs, up from a 27.8 percent average over the past 13 years, according to ATTOM Data Solutions. Metro area sales fell 4.3 percent in 2017 year and are down 0.5 percent so far this year.”
“‘Things have slowed down,’ says Sher Powers, president of Greater Nashville Realtors. ‘It’s not a bad thing for the market. It can’t sustain itself endlessly. There has to be some correcting. It’s still a sellers’ market.’”
From Crain’s Detroit Business in Michigan. “Real estate market watchers are looking for clues on the next downturn as home prices continue to rise on shrinking inventory in Metro Detroit. Housing price bubbles have been on the minds of some real estate market observers, Realcomp said in its monthly market statistics analysis.”
“Demand is still strong — a decline isn’t forecast as imminent. But ‘the common markers that caused the last housing market downturn are essentially present,’ as wage increases aren’t keeping pace with climbing home prices, the Realcomp news release said. Worries about lack of affordability could lead to falling sales.”
From Multi-Housing News. “Real estate players have been gearing up for the next phase in the cycle for a while now. Borrowers and lenders alike are watching closely as the Federal Open Market Committee continues to raise short-term interest rates. Josh Migdal, partner with Mark Migdal & Hayden, specified. ‘In the wake of the financial crisis, banks have become more discerning as to whether borrowers should qualify for loans. This included larger down payments and lower levels of debt-to-income ratios. However, in recent years, people have begun to forget about the crisis. In fact, the Financial Times reported in March 2018 that subprime mortgage bond issuance in the first quarter of 2018 went from $666 million to $1.3 billion.’”
“In some cases, non-bank lenders have taken advantage of the opportunity, Migdal explained, leading to situations where loans get approved through less lenient vetting procedures. ‘I believe that lenders are really trying their best to vet proposed borrowers based on well-thought-out underwriting guidelines, but are also getting somewhat creative for these loans to be pushed through and ultimately reach approval.’”
“Developers are finding ways to offer incentives to buyers. G&L Real Estate Development, the American division of Empresas Guzmán & Larraín, has put together a special lending structure for the company’s first U.S. luxury project, One Bay Residences. ‘The lending structure we offer our buyers allows them to purchase a residence with up to 97 percent financing, with the remainder of their deposit going to cover closing costs and upgrades, additionally removing the need to dip into their savings. This is essentially unheard of in Miami’s condo market, where deposits can range from 30 to 50 percent,’ according to Nicolas Guzman, CEO of G&L Real Estate Development.”
The Herald Tribune in Florida. “The Sunshine State’s delinquency rate rose by 1 percentage point from May 2017 due to the continued effects of Irma’s widespread destruction in September 2017, according to the CoreLogic. Florida had the third-highest delinquency rate of any state at 6.2 percent. Analysts say it’s the ongoing aftermath of Irma, which damaged homes, put some people out of work at least temporarily and left some homeowners unable to make their payments promptly.”
“In Charlotte County, May’s delinquency rate reached 4.1 percent, an increase from the 3.2 percent mark last year. ‘Serious delinquency rates continue to remain lower than a year earlier except in Florida and Texas, the hardest-hit states during last year’s hurricane season,’ said Frank Martell, president and CEO of CoreLogic. ‘We have observed continued challenges for families to make mortgage payments in regions impacted during the 2017 Hurricane season.’”
The Tampa Bay Times in Florida. “The priciest house for sale in the Tampa Bay area could soon become its biggest foreclosure. A Miami company has filed a lis pendens on a Clearwater mansion that was once part of the storied Century Oaks estate and is now on the market for nearly $19 million. Built in 1915 on a huge lot overlooking Clearwater Harbor, the 23,919-square-foot house has had a tangled recent history.”
“In early 2017, powerboat racing champ Hugh Fuller sold it to Princess Yenega Properties LLC for $11.18 million — the highest price ever paid for a bay area home — and Mystery Key LLC took out a $14 million mortgage. The managing members of both companies are Blaise Carroz, whom Bloomberg News once described as a ‘French-born, Dubai-based real estate developer,’ and Marata Tapsoba Carroz. The couple, who had been leasing the house from Fuller, put it back on the market just four months later for $19.75 million. The price was lowered in March to $18.999 million.”
“In 2013, a Louisiana bank foreclosed on a $5 million mortgage on the 28,000-square-foot Tampa home of former corporate raider Paul Bilzerian. That house, on a lakefront lot in the gated Avila community, once was priced at $18 million but sold two years ago for $2.85 million.”
From Realtor.com on California. “Napa County is known for its premium wines—and premium housing. Which makes it an unlikely candidate for one of real estate’s most ignominious titles. We usually don’t see grand, French-inspired estates in Northern California falling into the hands of creditors, but Villa Vigne is the exception. The nearly 40-acre spread is on the market in Saint Helena for $5.5 million—making it the most expensive foreclosure in the country.”
“If you think bank ownership means you can make a lowball offer to score a deal, don’t get your hopes up. Listing agent Julie Larsen notes that both she and the bank carefully researched the right price for the property. ‘They are not into the idea of giving properties away,’ she says.”
‘Things have slowed down,’ says Sher Powers, president of Greater Nashville Realtors. ‘It’s not a bad thing for the market. It can’t sustain itself endlessly. There has to be some correcting. It’s still a sellers’ market.’
Ebola.
‘The Sunshine State’s delinquency rate rose by 1 percentage point from May 2017 due to the continued effects of Irma’s widespread destruction in September 2017, according to the CoreLogic. Florida had the third-highest delinquency rate of any state at 6.2 percent. Analysts say it’s the ongoing aftermath of Irma’
It wasn’t even that bad of a storm. And they say a storm caused the big increase in defaults in Texas. Just how does a hurricane on the coast, spring of 2017, cause foreclosures to spike in Austin and Dallas?
Are you minimizing the plight of these FB victims, Ben?
That would make me very emotional.
“In some cases, non-bank lenders have taken advantage of the opportunity, Migdal explained, leading to situations where loans get approved through less lenient vetting procedures.
B..b..but I was just informed by several trolls, er, posters in the preceding HBB sections that following the crash of Housing Bubble 1.0 banks had tightened up their lending standards and so lending to the manifestly non-creditworthy was no longer an issue. So now you’re telling me it’s NOT different this time?
My illusions are shattered.
Obama’s greatest legacy - Mel Watt - would disagree.
I guess it depends on the dates. 2008-2013 was very tight. Likely thanks to Ed DeMarco, who tightened up Fannie and Freddie to protect the taxpayer from moral hazard. Of course, DeMarco was widely lambasted as bringing down the economy since people couldn’t fog-a-mirror, get mortgage anymore. (once you go lax, it’s hard to go back.)
Then when DeMarco was tossed, Mel Watt tried to invent new instruments. Luckily, we were again saved by, of all people, Elizabeth Warren who started the CFPB. CFPB labeled the toxic mortgages as “risky,” which drove the banks away from offering them. As a result, houses were bid up by a new class of buyers: institutional buyers who circumvented the mortgage system by getting their money from Auntie Yellen at rock-bottom interest rates.
‘Luckily, we were again saved by, of all people, Elizabeth Warren who started the CFPB. CFPB labeled the toxic mortgages as “risky,” which drove the banks away from offering them’
Ahem…
May 25, 2018
“In his corner of American finance, where hard selling meets hard luck, Angelo Christian is a star. Each time Christian sells a home loan, the company he works for, American Financial Network Inc., takes as much as 5 percent. Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. ‘If he can help me, he can help anyone,’ Taylor says. ‘My credit history was just horrible.’”
“Christian can do this kind of deal because he is, in effect, making the loan on behalf of the federal government through its most important affordable housing program. It’s a sweet deal: He gets his nearly risk-free commission. Taylor puts no money down. If things go south, the government ultimately bears the risk. Many borrowers ‘are living paycheck to paycheck and, if they lose their jobs, they go into default immediately,’ says John Burns, a housing consultant.”
http://thehousingbubbleblog.com/?p=10443
“Senator Running Deer was outraged by this report from Bloomberg, demanding to get to the bottom of this blatant exploitation of low income borrowers and taxpayer loan guarantees.”
The HBB Onion.
Besides interest rates below 4%, credit standards started being loosened in 2014 and you can really see it in the numbers as prices start accelerating.
For a while DTI couldn’t be higher than 40%, needed at least 5% down, and you actually had to put the money down yourself. No loans, no gifts, no seller concessions.
Today DTI is at 50% (1/4 loans in Q4 2017 had DTI close to 50%) and loan limits are higher. Government backed mortgages at 3% down, but this doesn’t actually have to be cash down. Example, seller concessions count. Combine super loose lending standards with mortgage rates under 4% and you get prices rising abnormally.
Simply having buyers on the market that are bidding up a price equivalent to the mortgage payment being 50% of the monthly gross income, drives up prices.
Not sure how much looser lending standards can get unless the government decides to subsidizes down payments or do a tax credit (remember the tax credit in 2009-2010 for buying a house?).
Bahahahahahaha … so the higher go the prices the closer to the top prices get and the closer to the top prices get the greater grows the risk which, in a logical world, should cause thoughtful lenders to TIGHTEN their standards, not loosen them.
But we do not live in a logical world, instead we live in a world populated by millions of dummies, tens of millions of dummies, some dummies who have access to money, other dummies who allow access go money. Whatever.
And what is the result of all of this money that dummies get access to or allow access to? Bahahahahaha dumb prices that’s what. Dumb prices that, globally - GLOBALLY - tens of millions of dummies interpret as …
As what? Can you believe the answer to such a question is …
(drum roll)
… wealth? Dumb prices bid up by dumb people translates to solid wealth?
Bahahahahahahahahahahahahahahahahahahahaha.
OK, so I need to harp on this yet again.
Christian’s loans feature low-money down and low FICO. They are *not* ARMs, they are *not* I/Os, they are *not* neg-ams. Those are the loose standards I’m talking about. Those are what the CFPB labeled as “risky.”
In fact, for Joe Taylor, one of Christian’s buyers: Monthly debt payments now eat up half his take-home pay. If it weren’t for Warren and Cordray, Taylor could be paying interest only, not full PITI.
Not paying full PITI per month, THAT’s how standards can get looser. Without those, Mel Watt is limited to chipping away at the margins of FICO and down payment. But buyers are still stuck with that full monthly nut So please, why does HBB keep thinking that credit standards are as loose as they were in 2006?
Lending standards are lower in the last 10 years than the previous 8 years.
Nothing says Subprime Mortgage Meltdown like 3% down payment mortgages.
“For a while DTI couldn’t be higher than 40%…”
@Patrick-
While it’s common knowledge on the HBB that easy credit has driven housing prices abnormally high your detail of the situation is insightful and appreciated.
I am hearing from an MLO that a big credit Union is doing loans his company won’t touch. He wanted to give me the details but my eyes glazed over.
Also, i remember reading that a credit union (in CA?)was giving $1.00MM loans with 0 down payment (100% LTV). These were NOT Med-Pro loans. Lots of companies make 100% TLTV loans to MDs/DOs.
We may find the first DQ issues with Credit Unions this time if he is correct.
‘Buy a home with just 3% down? Yep, it’s possible’
‘Freddie Mac has its own 97 LTV program, Home Possible. The program assists low- to moderate-income borrowers with loans made for certain low-income areas. Repeat buyers may also qualify.’
‘While Home Possible will continue to be Freddie Mac’s “flagship” affordable mortgage product, Patricia Harmon, senior product manager at Freddie Mac, says there’s even more flexibility in a new program called HomeOne.’
‘At least one borrower must be a first-time home buyer, but there are no income limits or geographic restrictions.’
May 25, 2018
“In his corner of American finance, where hard selling meets hard luck, Angelo Christian is a star. Each time Christian sells a home loan, the company he works for, American Financial Network Inc., takes as much as 5 percent. Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. ‘If he can help me, he can help anyone,’ Taylor says. ‘My credit history was just horrible.’”
“Christian can do this kind of deal because he is, in effect, making the loan on behalf of the federal government through its most important affordable housing program. It’s a sweet deal: He gets his nearly risk-free commission. Taylor puts no money down. If things go south, the government ultimately bears the risk. Many borrowers ‘are living paycheck to paycheck and, if they lose their jobs, they go into default immediately,’ says John Burns, a housing consultant.”
http://thehousingbubbleblog.com/?p=10443
Not only is it 3% down but seller concessions count as the down payment, meaning if the price is lowered 3% that would qualify.
“The nearly 40-acre spread is on the market in Saint Helena for $5.5 million—making it the most expensive foreclosure in the country.”
Gosh, I can’t shake a growing unease that someone might’ve overpaid for this property.
Oh dear. As housing bubbles start to burst, the vultures are moving in.
https://www.bloomberg.com/news/articles/2018-08-09/-widow-maker-trade-gives-way-to-shorting-australia-retailers
Clackamas, OR Housing Prices Crater 9% YOY As Negative Equity Crushes Portland Area
https://www.movoto.com/clackamas-or/market-trends/
‘The lending structure we offer our buyers allows them to purchase a residence with up to 97 percent financing, with the remainder of their deposit going to cover closing costs and upgrades, additionally removing the need to dip into their savings. This is essentially unheard of in Miami’s condo market, where deposits can range from 30 to 50 percent’
I remember when they boasted mightily that it was 50% - period. Then it started to unravel and ta-da! 30%. Now it’s just like the FHA crap. That 3% is gonna be hard to walk away from, huh Nicolas?
Around 2015 I found an article in Miami Today where a broker admitted buyers were refinancing pre-construction airboxes and using the money to buy more. That’s right, refinancing their deposits out on condos that hadn’t been built.
Aren’t Ponzi schemes illegal?
Oh, wait. The Fed turned our entire financial system into a giant Ponzi.
‘In 2013, a Louisiana bank foreclosed on a $5 million mortgage on the 28,000-square-foot Tampa home of former corporate raider Paul Bilzerian. That house, on a lakefront lot in the gated Avila community, once was priced at $18 million but sold two years ago for $2.85 million’
Now that’s a haircut!
“If you think bank ownership means you can make a lowball offer to score a deal, don’t get your hopes up. Listing agent Julie Larsen notes that both she and the bank carefully researched the right price for the property. ‘They are not into the idea of giving properties away,’ she says.”
Of course not. But in the good old days of GAAP eventually they might have no choice if they made enough bad decisions in an attempt to get rich quick. Luckily now they have the Fed to foam the runway and protect them from their mistakes.
I’ve got all the time in the world, Julie. You and the bank don’t.
Not giving it away….
I just love that phrase!
‘They are not into the idea of giving properties away,’ she says.”
Bug$; “eh, say doll, just how many propertie$ do you & the wanker.banker$ have ànywho?”
You can research all you’d like Julie. What you list for is no where near what I will offer. And in the end it’s the banks decision on the sale price, not yours. The banks aren’t your “Not gunna give it away” old people. If they want it off their balance sheet they will let it go. Gotta love these Real Estate Analysts and Experts.
If they want it off their balance sheet they will let it go.
That’s where GAAP needs to come in. But now it’s just a suggestion.
im cash poor but equity rich.
That $ounds like a Puerto Rican hurricane proverb
Parma, ID Housing Prices Crater 10% YOY As Boise Housing Correction Expands
https://www.zillow.com/parma-id/home-values/
*Select price from dropdown menu on first chart
FWIW, CoreLogic just reported the lowest mortgage delinquency and foreclosure rates in 12 years. So overall at the national levels, home loans are in good shape.
Early stage delinquency dropped 0.1% year over year. So basically no change.
Their data does not jive with the anecdotal stories I read here that a lot of poorly underwritten loans are being issued / quickly going bad.
So why is everybody freaking out about the market? How many times have we seen “don’t panic” in the past 2 weeks?
July 26, 2018
‘Distressed sales — sales of bank-owned homes, short sales, and sales to third-party investors at foreclosure auction — accounted for 11.9% of all single family home and condo sales in Q2 2018, down from 14.9% in the previous quarter and down from 13.5% in Q2 2017 to the lowest level since Q2 2007, an 11-year low.’
‘States with the highest share of distressed sales in Q2 2018 were New Jersey (23.9%), Delaware (22.5%), Rhode Island (18.6%), Connecticut (17.6%), and Illinois (17.3%).’
‘Among 148 metropolitan statistical areas analyzed for distressed sales, those with the highest share in Q2 2018 were Atlantic City, New Jersey (42.1%); Trenton, New Jersey (26.0%); Youngstown, Ohio (25.4%); Syracuse, New York (24.8%); and Hagerstown, Maryland (22.1%).’
‘Among 52 metro areas with a population of 1 million or more, those with the highest share of distressed sales in Q2 2018 were Baltimore, Maryland (20.7%); Philadelphia, Pennsylvania (20.2%); New York-Newark-Jersey City (20.0%); Cleveland, Ohio (19.0%); and Providence, Rhode Island (18.7%).’
https://www.builderonline.com/money/economics/median-home-price-hits-all-time-high-in-q2_o
This situation is disastrous.
How many times have we seen “don’t panic” in the past 2 weeks?
“Remain calm - all is well!”
https://www.youtube.com/watch?v=zDAmPIq29ro
The journey of a million defaults, start$ with a few fir$t homeloaner $uckers mis$teps … do you hear the cicadias, gra$$hopper?
Allen, TX Housing Prices Crater 11% YOY As Real Estate Media Attempts To Conceal Dallas Housing Bust
https://www.movoto.com/allen-tx/market-trends/
Cashcallmortgage.com
Lamb Chop
is this the song that never ends?
Chino Hills CA Housing Prices Crater 8% YOY As Subprime Mortgages Issued 2008-2013 Fail
https://www.movoto.com/chino-hills-ca/market-trends/
What happens when the financial crack cocaine from the central banks stops flowing to the debt junkies?
https://www.scmp.com/news/china/economy/article/2159734/low-hanging-fruit-and-mountain-debt-how-chinas-credit-binge