Better To Call It A ‘Corrected Market’
The Myrtle Beach Online from South Carolina. “Sales for homes and condominiums fell again in August on the Grand Strand. Home sales dropped 22 percent and condo sales dropped 52 percent compared to August 2005. ‘Believe it or not, prices have not gone down. It’s just that inventories have gone crazy,’ said Bill Barrett, who spoke during the S.C. Association of Realtors annual convention in Myrtle Beach on Tuesday.”
“On the Strand, there’s about a year’s worth of inventory on the market, said market analyst Tom Maeser. Maeser expects inventory to be absorbed once the market gets more permanent home and second home purchasers. That’s because the market has lost the rental income investor as its main buyer, Maeser said.”
“Barrett told agents it’s better to call a buyer’s market a ‘corrected market,’ because the market is experiencing a correction.”
From the Ledger in Florida. “Polk County’s building permit numbers dropped a record 62 percent last month to 373. Richard Greenwood, Haines City’s community development director, is making plans to accommodate possibly 1,400 homes into the city. ‘It won’t be slow for long,’ he said. ‘I’ve got a lot in the pipeline.’”
“‘I think the market retracted,’ said Mike Hickman, president of Hickman Homes in Lakeland. ‘The frenzy last year couldn’t sustain. There is a lot of inventory out there.’”
“Builders are pushing sales and offering many incentives to new home buyers to rid themselves of the excess inventory. When fall and winter come, the market takes an even cooler turn. ‘We are really trying to push sales right now,’ said Callie Neslund with Southern Homes. ‘When November comes, no one wants to go anywhere.’”
The Daytona Beach News Journal reports from Florida. “Rising interest rates, coupled with surging property taxes and insurance bills, are making it impossible for hundreds of area families to keep up with their mortgage payments, housing counselors say. As a result, growing numbers of new homeowners are in danger of losing their homes through foreclosure.”
“Banks and other lenders have filed 2,354 foreclosure lawsuits against property owners in Volusia and Flagler counties over the past 12 months. That’s 26 percent more than the 1,868 that were filed the previous 12 months. Filings grew markedly higher last month, 199 in Volusia compared to 115 the previous August, and 56 in Flagler, up from 19 a year earlier.”
“Credit counselor Greg Kiefer said the seeds of today’s foreclosure surge were sown about three years ago when home buyers rushed into adjustable-rate mortgages, trying to meet soaring housing prices on stretched budgets. ‘They had a fixed low rate for two or three years and that got them into a house,’ Kiefer said. ‘Then the mortgage became adjustable just as rates started to rise, and their monthly payments have gone up substantially. We would anticipate that as rates continue to rise, it’s just going to get worse.’”
“Mid-Florida Housing Partnership points a finger at lenders specializing in mortgages for high-risk clients. ‘Their methods are borderline predatory,’ said Fran Gordon, the partnership’s executive director. ‘They say ‘Come on in and we’ll do whatever it takes to get you a mortgage.’ They don’t care what the applicant’s credit score is or what their income is. These lenders are going to pick up their fees at the closing, so they don’t care what happens afterward.’”
“In many cases, Kiefer said, the homeowner facing foreclosure obtained a mortgage by just giving a rough estimate of his or her income on the loan application. Some lenders don’t bother to verify an income figure if it seems reasonable for the person’s occupation and the person has satisfactory credit.”
“Kiefer described the plight of a Deltona couple who had recently started a landscaping business moved into a home with a $1,000-a-month interest-only mortgage payment. After one year, the interest-only period ended, and the loan became an adjustable-rate mortgage. The monthly payment shot up past $1,600, but their business is clearing only about $2,000 a month. Even though relatives have lent them money, they have missed four mortgage payments.”
“Kiefer said foreclosure seems inevitable. ‘Even if they filed a Chapter 13 bankruptcy, that process still requires them to make their mortgage payments, and there’s no way they can do that on their income,’ he said.”
“Linda Jones, Volusia County’s deputy court clerk, said, ‘We’ve been having quite a few more homes come up for foreclosure in the last six months or so.’ About three to six properties are being scheduled for auction almost every weekday.”
“At a Sept. 15 auction, no one made any offers except a young man who submitted two $100 bids, the minimum allowed, and was declared the winner of the two houses put up for sale. Jones explained he was a process server who simply was entering bids on behalf of the mortgage companies to protect their interest in the properties. By taking ownership of the houses, the lenders could try to resell them later and get at least some of their money back.”
Countrywide may cut jobs by 10%
Thanks to desi dude for the tip-
Countrywide blames housing sales slowdownBy Jim McLain, jmclain@VenturaCountyStar.comSeptember 20, 2006
The end of the real estate market boom is forcing one of Ventura County’s largest employers to cut 5 percent to 10 percent of its work force over the next few months, a top executive told workers Tuesday.
Countrywide Financial Corp., the country’s largest mortgage lender with about 5,700 workers in Simi Valley, Thousand Oaks and Westlake Village, instituted a 60-day hiring freeze and plans to reduce staffing in several areas, Dave Sambol, president and chief operating officer, said in a memo obtained by The Star.
The memo does not mention layoffs, but several workers leaving the company’s Westlake Village office as security guards roamed the parking lot declined to discuss layoffs or said they were told not to talk with the media.
A Thousand Oaks woman who did not give her name said she received two weeks severance pay after working for the company the past 2 years. She clutched a packet she said contained information to help her find another job.
She added that layoff rumors that had been swirling on the Countrywide campus for weeks were confirmed Tuesday morning.”You found out because your vacation time on your paycheck was gone,” she said.Countrywide officials did not return The Star’s repeated calls for comment.
The Calabasas-based holding company, which offers a range of financial services, has more than 56,000 employees and some 900 offices nationwide. That means the cutbacks might directly affect as many as 5,600 workers.
“Credit counselor Greg Kiefer said the seeds of today’s foreclosure surge were sown about three years ago when home buyers rushed into adjustable-rate mortgages, trying to meet soaring housing prices on stretched budgets. ‘They had a fixed low rate for two or three years and that got them into a house,’ Kiefer said. ‘Then the mortgage became adjustable just as rates started to rise, and their monthly payments have gone up substantially. We would anticipate that as rates continue to rise, it’s just going to get worse.’”
Please correct me I’m wrong…but..
Wouldn’t the payment on any ARM (3 5, 7 yr) have gone up substantially at the reset, whether or not rates went up in general?
For example..Let’s say a 3 yr ARM was taken out in Oct 2003 with a rate of 3.50%, wouldn’t the rate have gone to about 5.50% in Oct 2006 regardless of whatever else happened? refi’ng aside of course…
Yes.
Wouldn’t the payment on any ARM (3 5, 7 yr) have gone up substantially at the reset, whether or not rates went up in general?
Not necessarily. That depends on what the initial rate was in relation to the index and margin. If, for example, the initial rate was set at 6%, and index was LIBOR and margin 2.5%, then if LIBOR was hovering around 3.5% there would be no increase.
There were indeed ARMs like that on offer over the last few years, but they were not the ones that cash-strapped FB’s went for. They usually went for contorted transaction with teaser rates.
In their eyes: Why go for a straightforward loan like the one described above when instead, you can get a low teaser rate? Well, why not is because that low initial rate is generally offset by a much higher margin above the index and/or big fees and/or prepayment penalties! Traditional ARMs don’t do that.
So in the above deal, if you went for a teaser loan that was set at, say LIBOR+0% for a year, then adjusted to 4% above LIBOR, you are “skewered”! And then if LIBOR goes up as well during that time, you are double skewered! Bad enough if rates rise with the normal, traditional ARM scenario I described, but the teaser scenario can be true financial disaster if you haven’t got money in the bank or a large monthly income buffer.
So when exactly did these teaser rate suicide loans become available? I would argue that part of the problem here is that nobody expects to be around when these things reset. When rates were steadily falling, say 2000-2003 EVERYBODY refinanced, some of us multiple times. The mindset of everyone, borrowers and banks changed. Prudent borrowers could lower their payments without increasing their debt load essentially lowering the cost of their housing. Rising prices meant that the feckless could borrow more money without increasing their payments. If a loan is only for a few years interest rate is reduced for lenders. A period of lowering interest rates is like jumping out of a window, for the first 100′ it’s “whee I’m flying,” but there’s a limit to how low you can go.
I think that a big part of the problem is the fact that the issuers of the neg-am loans can book the unpaid interest as a profit, as if they’ve actually received the money, with no recognition that there is a steadily increasing risk of default the further underwater the borrower gets. This adds to the flying not falling impression. Many will only realize how stupid the whole thing is when large numbers of defaults happen and borrowers start hitting pavement.
“So when exactly did these teaser rate suicide loans become available? ”
I have been following this all pretty assiduously for the past couple years and I can tell you comparable stats are hard to come by. Teaser rates have become very big over the last few years, and as short-term rates went way up, they became an increasing distortion. The big question to my mind was this: were people being qualified based on their ability to pay the real, underlying rate, or just the teaser rate? Just a week or two ago, Washington Mutual admitted that they had “mistakenly” been qualifiying people on the teaser rate for 18 months in 2004-2005. They are one of the largest mortgage banks and I think it’s a safe bet many less scrutinized lenders are still making the same “mistake.”
Personally, I think the financial crackup is going to be a much bigger deal than the homebuilding crackup. If everyone were buying houses the way they did 25 years ago, with 30 year fixed mortgages and 20% down, even if prices fell 5-10%, it wouldn’t be such a big deal. The homebuilders would still have their glut, and people who hit a bad patch might be forced to sell their house, but by and large, it would be a temporary thing.
But that’s not how it is. Comstock did a nice summation of the situation.
I think these teaser rates have been around for 7 years. I had a customer tell me last year that his step-daughter and her husband lost their townhouse to forclosure. They had taken out an adjustable rate mortgage, and when it reset at year 5 they could not make the new higher payment. This occurred in the Baltimore area.
“From the Ledger in Florida. “Polk County’s building permit numbers dropped a record 62 percent last month to 373. Richard Greenwood, Haines City’s community development director, is making plans to accommodate possibly 1,400 homes into the city. ‘It won’t be slow for long,’ he said. ‘I’ve got a lot in the pipeline.’””
I don’t understand that paragraph. Building permits are down 61%, but wll be going up 275% from 373 to 1400 soon. How is that possible? What, is Prince Abu from Saudi Arabia building a whole neighborhood down there?
Some city budgets use a Sept. 30 fiscal year, like the feds. Just IMO, of course — could be that Mr. Greenwood is trying to protect his projected raise.
Thr Polk county managers are idiots with their head in the sand, and the Lakeland Ledger still refuses to say anything negative about the market. The may state the negative facts (like permits down 62%), but they immediately try to put a positive spin on it by finding an industry shrill spouting that it’s only a minor/temporary blip. Even the Orlando Sentinel has been more realistic in their RE market commentary.
I’m glad the site is back, I was having serious withdrawals.
Amen, brother.
Yeah!
here here. I guess I can put away my tinfoil hat now…..
ROTFL !!!!… I kept clicking and clicking yesterday.. glad to know I wasn’t the only addict.. lol
Talk about feeling like a junkie. Whew! It was TOUGH without today, Ben. I wish you could have seen me all day, clickin’ links to blogs, wondering what happened. I wanted somebody to PLEASE tell me what happened and how we can make it right! Oh, woe!
Ok…I’m back now. I’m better.
BayQT~
I thought the RE propoganda machine had made a “hit” on Ben!
[In Polk County] “‘I think the market retracted,’ said Mike Hickman, president of Hickman Homes in Lakeland. ‘The frenzy last year couldn’t sustain. There is a lot of inventory out there.’”
I’m sure that Mike is a nice guy, just trying to make a buck. Too bad his grade-school English teacher didn’t teach him the nuances of the language. Forget the “I think” part, fella. It’s not needed, to be polite. “The market retracted” is succinct and the dead-on truth.
Reminds me of (while Jethro nods to a very noticeable basketball), “I think she’s knocked up.”
- The monthly payment shot up past $1,600, but their business is clearing only about $2,000 a month. Even though relatives have lent them money, they have missed four mortgage payments.”
NO ONE should buy a home based upon 2000.00 income per month.
But real estate only goes up. If I can’t make the payment I’ll just pull out cash for another years worth of payments. Hey man all is well, life is good, aint the housing atm a great thing?
Great to have the site back up. I was going nuts this morning looking for good bubble news.
“NO ONE should buy a home based upon 2000.00 income per month.”
Not one without wheels, anyway.
- Outstanding! Trailer Trash!
That anecdote screamed “illegal immigrant” to me. How many of these toxic loans were sold to illegal immigrants so they could buy a home that was way better than what they had in Mexico? Do you think the loan agents explained to the earnest, grateful illegals what they were getting into or did they inwardly smile while pocketing the fat fee and think “adios sucker”.
anyone know what the hell is going on with the site? ben, dont do this to me again
Ben’s blog is adjusting to a tidal wave of newfound popularity now that Ben’s initial premise has been proven right beyond any reasonable doubt. All of a sudden, the whole world is tuning in. Keep your wit sharp, matey, and your spelling pre-checked, for it’s on a world stage you’ll find yourself now.
Those landscaper folks can make their payment. They just need to tighten and eliminate all other unnecessary things. A few suggestions: food, gas, clothes, medical needs, cleaning supplies, insurance, utilities, savings, retirement (that is the house), soap, schooling needs, computers, books, travel, etc. With those cut out, should be no problem to pay the mortgage and the taxes due. LOL
N2LvCa…That’s what i was thinking..what are they going to do paying anything with only $400 extra at the end of the month? Especially now that their insurance went up 400% as well.
Yeah shoe soup sound delicious.
Three years ago, Countrywide built a call center upwards of 100,000 sq. ft. here in Lancaster. The City was so happy to have recruited such a major employer that they allowed the adjacent street to be named Countrywide. Latest rumours are that it’s going to close. Boo hoo.
aaaand… from the sun sentinel
http://www.sun-sentinel.com/news/local/southflorida/sfl-920pbudget,0,3507175.story?coll=sfla-home-headlines
” Palm Beach County commissioners are set to impose a 16 percent property tax increase Thursday when they adopt their budget for next year, despite a growing chorus of residents, business owners and political leaders angry over mushrooming tax bills.”
” On the opposite extreme: people like Maurice Costigan. He owns the O’Sheas pub and five loft apartments in downtown West Palm Beach, which can’t be homesteaded. His proposed tax bill surged to $28,000 — almost double what he paid this year.”
Im actually getting worried, serioulsy worried that FL’s economy is not gonna hold up… city goverments got accostimed to think this is a fancy high-end state with high-end cities… I i’m really worried for I have now lost count of how many people have gone, (my social circle is not large at all) My hospital CEO has bolted for GA for christ’s sake!
At a Sept. 15 auction, no one made any offers except a young man who submitted two $100 bids
Wow. Those houses must have been total POS to get that little interest.
Yesterday there was a blurb on Boston talk radio which noted local financial analysis were forecasting a minimum of a 33%!!!!!!! correction in MAZZ real estate values.
My guess is these dudes will be on the low side so as not to cause a panic.
Also-the town of Salem MAZZ has implemented a work program for senior citizens who can do public service jobs for the city with compensation going to reduce their property taxes.
And to think slavery was supposedly ended in 1865.
‘Believe it or not, prices have not gone down. It’s just that inventories have gone crazy,’
Slack Action - that’s what this is!
Back in the day when freight trains still had cabooses, the caboose crew had to hang on for dear life on startup as the slack from dozens of freight cars ran out - and SNAP, BANG - it ran out at the end of the train.
Now, imagine the economic slack that is building up in RE right this very moment as prices remain articifically high while inventories soar from coast to coast! When this slack runs out - well - I agree with the pessimists - this will likely be the most infamous economic event in this nation since 1929.