‘Discomfort Factor Works Its Way Through’ In Chicago
The Chicago Tribune reports from Illinois. “Bankruptcies have started to move back upward after an unusual roller-coaster ride over the past year. Though the numbers of new filings were low during the first three months of this year, each month was higher than the one before. Chicago bankruptcy attorney Melvin Kaplan says filings are starting to pick up again locally. ‘It seems more people are in trouble than before,’ he notes.”
“There is a significant increase in late mortgage payments among sub-prime borrowers. Nationwide, just over 10 percent of sub-prime borrowers are at least 30 days late on their mortgage payments.”
“What causes a person to fall into unmanageable debt? Sometimes there’s one dramatic event that upends a household’s finances. But often these are the final blow to a budget that was teetering on the edge. ‘They’re the frosting on the cake. The money troubles have been there,” says Catherine Williams, VP for the parent company of Consumer Credit Counseling Services of Greater Chicago.”
“One of the ways consumers coped with the rapidly rising cost of homes in the early part of the decade was by relying on new types of adjustable-rate mortgage loans that shrunk their payments-at least in the early years-to rock bottom. There are also ‘interest-only’ loans. According to LoanPerformance, interest-only mortgages made up nearly 20 percent of all new loans in the Chicago area in 2005 and 2006, and option mortgages accounted for another 4 to 5 percent.”
“‘Within another year we will probably start to see a large number of those loans being recast,’ predicts Bill Schwers, Chicago-area mortgage manager for Bank of America. Most borrowers facing the big payment jump that comes with a recast will try to refinance into a more affordable loan, if their employment and credit standing allow them to qualify.”
“Williams says she thinks problems with such loans are ‘the boogeyman that will come out about next February. There’s a little wiggle room, about four or five months, for this discomfort factor to work its way through the checkbook,’ she says.”
“Tessa Thouma of Carol Stream, didn’t wait for increased interest payments to hit and recently refinanced out of an interest-only mortgage and into a fixed-rate loan. When she bought her one-bedroom condo in Carol Stream in 2005, she avoided making a cash down payment by taking out an interest-only mortgage at a relatively high rate of 7.8 percent and a second mortgage at an even higher 10.9 percent to cover what traditionally would have been the down payment. ‘It’s just a horrible loan,’ Thouma says.”
“Think twice, however, before you call one of those phone numbers broadcast on late-night television promising to help you wipe out credit card debts. Often they’re pitching a home-equity loan that you would use to pay off the credit card debt. ‘In theory, wrapping high-interest credit card debt into a home-equity loan works,’ says Williams. ‘But you only do it once!’”
“Instead, she says consumers often come to counseling after refinancing their home-equity loans two or three times, often borrowing more of their home equity in the process.”
The Chicago Sun Times. “The South Side neighborhoods affected by a controversial mortgage law designed to protect would-be homeowners from being gouged have seen a 45 percent drop in home sales in the law’s first month.”
“‘This law is like a thief in the night,’ said Julie Santos, a McKinley Park Realtor who is collecting signatures in an attempt to repeal the law. ‘I think it’s discriminatory. It’s ridiculous.’”
The Rockford Register Star. “Even with a healthy run up in property values this decade, Rockford’s housing market is more affordable than ever for mid-level executives. ‘I had a client come in from California and they were able to get quadruple the house they had before,’ said Michelle Lundsten, a relocation specialist in Rockford.”
“She added the prices differences also makes it tough to leave sometimes. ‘A client in Machesney Park had to relocate to Arizona for a couple of years because of work. They had to move into a house half as big as what they had here for twice the mortgage payment.’”
“Of course, this year the housing market has cooled both here and nationally. In fact, the dropping prices in major metropolitan markets actually is slowing the influx of Chicago residents. ‘There have been a number of people in Chicago who want to move here but can’t because they can’t sell their house for what they owe,’ said (realtor) Karl Gasbarra.”
‘ The clank and growl of bulldozers may be slowing in America’s teardown suburb of Hinsdale, but it isn’t grinding to a halt. After hitting a record last year, when 118 houses were torn down in the community, only 51 permits for demolition were issued in 2006 through the end of September, said Daniel Schoenberg, Hinsdale’s director of community development. ‘Clearly, teardowns this year have been slower,’ he said.’
‘While construction of McMansions continues in the wealthy western suburb, buyers’ appetites for megahouses have waned dramatically, said housing consultant Tracy Cross. The slowdown in teardowns, and the overall real estate market, is taking place everywhere in the Chicago area, not just in Hinsdale, he said. The most notable decline in activity is being seen on the North Shore. Cross said the continuing construction of huge homes on teardown lots in Hinsdale may mask the local housing market’s weakness. ‘At the end of the day, there is an accumulation of unsold inventory, and it is not certain that there is a market for all these houses,’ he said.’
‘Economic consultant Robert Dederick, who lives in the eastern portion of Hinsdale, said the teardown trend has become muted because many opulent houses are slow to sell. ‘There is a plethora of unsold homes. and some of them are sitting for many months,’ he said.’
I used to live in the Hinsdale area (1994-2001). I’ll bet it’s unrecognizable to me now.
- What causes a person to fall into unmanageable debt?
- Sometimes there’s one dramatic event that upends a household’s finances.
- But often these are the final blow to a budget that was teetering on the edge.
The majority has to be folks who did not have the income to validate the purchase of a home in the beginning. My brother is a sub prime broker and he told me that there is a new ‘Pick a Pay’ loan with a 5 year time before reset.
There’s all sorts of new stuff being tossed out there daily by sub-prime and Alt-A. It’s interesting….we keep waiting for tighter lending standards, but it remains to be seen. But the shimmer has disappeared from these products. Media coverage and word of mouth has helped expose the virus of toxic loans. Due to this, although still very uninformed, the sheep have become wary. Also, even those aware of ther risk are backing away these days due to the lack of reward in the risk/reward equation. Many were willing to roll the dice on their financial future when it seemed to them it could only be a win-win situation. In a market where there is no appreciation, not to mention flat out declines, only the biggest of the fools will step out to the edge of the cliff with the wind at their backs. I think in the short term these products will wither without any outside help. We’ll watch and see.
I remember reading that some enormous percentage of bankruptcies were caused by expenses from unexpected medical emergencies. Can’t find the link at the moment tho…
http://www.washingtonpost.com/wp-dyn/articles/A9447-2005Feb8.html
yep, that was the one I read. Quick summary: 50% of bankruptcies are from medical expenses. 75% of those had medical insurance.
Don’t get me started about the state of US medical care.
soon it will be a right !
PER DNC
Nooooo. I meant the quality of the output of existing medical schools, faulty diagnoses, the pharma industry, and the complete inability of doctors to communicate about the limits of their knowledge.
The means to overpay for this lame state-of-affairs is a whole different high-blood pressure episode.
I’m for complete de regulation
worked for airlines
I’m for complete de regulation
Right. So when your legs are ripped off in a car accident, you’d like to negotiate for the best ambulance service? Or when you show up in the ER with blood pouring out from your esophogus, you’d like to comparison shop for ear-nose-throat surgeons on the web?
Gimme a break.
jp
Exactly. The police would end up have to administer “coup de gras” to people with anything other than a scrape at traffic accidents.
> I’m for complete de regulation
> worked for airlines
Dean Baker has argued for an opening of the protected US market for doctors. Free trade in medical (and legal) services would limit the pay of doctors (and lawyers). Because these two groups are allowed to regulate entrance to their professions mostly by themselves, they have used it (and fearmongering) to restrict supply of these services.
BK information:
http://nacba.com/files/new_in_debate/truth_about_bankruptcy.pdf
Top three reasons for BK: Medical cots, job loss, divorce.
costs
Medical costs are out of control.I’m disgusted with the greed in that profession.Pretty soon a lot of people will be going to other countries for medical care. Maybe there will be assistants who work on you from doctors orders over video on the internet. Who the hell knows but this mess has got to change.
“Medical costs are out of control.I’m disgusted with the greed in that profession.”
Which profession? Doctor, hospital administrator, insurance company, or regulator?
My dad had to retire from obstetrics because he could no longer afford malpractice insurance–and the maximum pay from the insurance companies is such that he would have to deliver something like 200 babies a year just to cover the insurance premium. The number of obstetricians has plummeted.
People already are traveling to Thailand and India for health care…
Which profession? Doctor, hospital administrator, insurance company, or regulator?
ALL of them. Repeat: All.
Taking financial advantage of sick people is about the lowest thing I’ve witnessed in my years on earth. Truly disgusting.
Some Americans are going elsewhere for their medical care. I have read how Italy is a great place to get very competent dental service for a fraction of what it costs in the USA.
I had to have emergency surgery which cost $50,000 and I had no insurance. Upon applying for charity, I found out that if I were an illegal alien with no social security number, they would have written it off completely. But since I am a US citizen, they wanted to put the screws to me. It was only after I showed them I would be forced to file for bankruptcy that I was able to get it reduced down to around $10k. Most of the doctors gave me little, if any discount. It was a terrifying experience. I still have no health care and it is always in the back of my mind. It seems if I had a life threatening condition which required long term care, they may just let me die. Why? Because the day after my surgery, when I was still in massive pain and on morphine, they sent a representative into the room to ask me how I would be paying for my care. It gives me chills just thinking about it again.
So, what do you think about a national health care insurance system?
The national health care insurance system for the elderly and indigent has made health care unaffordable for everyone else.
I’d say it’s inadequite reserves built up to handle uncertainties that come with life (such as medical emergencies, job loss, and divorce). I’d guess that most folks can come pretty close on the odds of at least one happening, but that only a few do anything about it.
I would recomend all those sympathetics voting for socialized healthcare take out several 100K worth of loans to go to grad school or med school so you can work 80hr work weeks to advance medical research for 10yrs…and then have someone call you greedy.
I am an internist in Dallas. I actually work ONLY in the hospital with critically ill patients. I work at one of the large hospitals in town that is fairly financially stable.
As part of my job - about one third of the patients have no insurance — NONE. I guess I may be a bleeding heart - but you should hear some of the stories of what these people have to endure - illegals, poor people, people down on their luck etc. I go to my billing clerk daily - and just say - don’t bill it - just write it off. I have to be able to sleep at night - and what these people are going through is bad enough - getting calls from a collection agency added to the mix is over the top. I have found that I am a distinct minority - maybe the only doctor here that does that. I went in to medicine as a ministry - not Christian - but to help people - unfortunately - many of my colleagues did not. I can often only do so much - I am not a surgeon - and if the patients have to have a surgery - they will go bankrupt. There is not a single surgeon here who will do anything out of the goodness of their heart. In fact - the attitude towards these poor people is absolutely disgusting. Many many days - I am absolutely ashamed of my profession. I am ashamed that they have become whores to an industry that promises a lot for a lot of cash - but in reality does very very little for people — BIG PHARMA - if you want to understand - google the difference between relative risk ratios(what gets reported to the American population on the nightly news - as huge advances in science) and absolute risk ratios - (the real data). BIG PHARMA makes a 0.25% improvement over placebos with their drugs sound like 33%. Yes - it is that twisted. And then there is the insurance companies - who get to decide when people can be treated and for how long — and the hospitals who just roll over and take it. I have prayed for the day that the United HealthCare CEO buys the farm for his immorality - according to the NY Times this morning - the day has arrived. Now - he needs to join Andy Fastow and Ebbers in the Big House.
Yes - it is all about money - in every possible way - and at every link in the chain. The system is horribly broken - beyond repair - and only a few people in our society are benefiting - and benefiting big. I have control over my little world - and my patients - but that is all I can do. It is very very reflective of our entire society. EVERYTHING is about money and greed. Somehow - the idea of liberty and freedom has been kidnapped with a cheap, sleazy life of greed and hedonism. What people do not realize - is doing good for others - is the best medicine for the soul there is - and I get doses of it every day. Many people cannot pay me money - but what they are able to do is much more than anything money can do. When I get little pictures from 8 year old girls - drawing me by her mom’s bedside - Thank you for saving my mommy - that is all I need. When I get homemade peach cobbler from the little old 80 year old lady (that almost died from pneumonia last month) that has no money but a heart of gold - that is all I need. We call ourselves a Christian nation - but somehow have forgotten - what the Man stood for and came to the world to tell us - DO UNTO OTHERS AS YOU WOULD HAVE THEM DO TO YOU - DO NOT STORE UP FOR YOURSELVES TREASURES ON EARTH - BUT IN HEAVEN. The one and ONLY time that JC ever mentioned from his own lips the day of judgment - it was NOT how many gays did you bash - how many infidels did you kill - how many murderers did you inject - how many countries did you invade - NOPE - it was how many times did you visit people in prison - how many times did you take care of your neighbor - how many times did you feed the poor —
I was with my grandma - (who - along with my grandpa - lost it all in the depression - and then lost 2 brothers in WW2) at a store the other day - in the store we were behind a lady in line who was my age - about 35- who was buying the most godawful vases ever - for a grand total of 800 bucks - she went through 8 bounced credit cards before the cash register actually took her credit and did not decline it - and she was cussing out the poor clerk the whole time. My grandma and grandpa always taught me that credit was about the most evil thing there was - and I have a credit card only for emergencies. They are not going to leave me anything financial - but what I got from them was wisdom - a far more valuable commodity. My grandma and I get back to the car - and she had a tear in the eye - and announced - “Son - I never thought I would ever say this - but what this country needs and needs desperately is another depression” . I do not think she is too far off.
The day of reckoning is on the way - may God bless you and keep you.
SORRY ABOUT THE RANT - I just had to put in my two cents about medical greed and corruption—-
Compassion won’t pay the bills.
I agree, compassion won’t pay the bills. However, this MD is rich in ways that only people like him will experience
because he lives by faith.
For those without faith,there can never be enough proof. For those with faith, proof is not necessary.
P.S. God bless you, dagan58.
I agree medical expenses are out of hand.
Just think, I read that 33% of your medical bill goes to the lawyers… Think of how many tests are performed to prevent lawsuits.
Many of my family members are doctors. All of the doctors discouraged me and my younger cousins from going into the field due to the insurance mess, school bills, etc. The system must be changed. The first thing must be to control the lawsuits. Instead of paying out huge sums, dink the doctors. Too many dinks… you’re not a doctor anymore.
One of my relatives is a doctor, she lost a suit. Why? She refused to give an adict narcotics. The adict sued and won. From now on my relative’s malpractice is higher… That relative got out of the emergency room as fast as possible. Why? Emergency room doctors get sued, a lot. Soon you cannot afford your own malpractice and become a surf to the system.
The US medical system is screwed from so many perspectives.
Medical tourism is already here. Its going to be huge soon. In the past, the US “exported” medical care to the world (Mayo clinic et al.).
Neil
Funny how some want government regulation when it suits their particular interest or belief, but not when it doesn’t suit them. In many cases, these people assume other parties don’t know what they are talking about when they proffer an opposing point of view on government regulation in other areas. Lack of government regulation does not mean the system will work in the free market.
For example, deregulation of the electric industry is a prime example of how certain natural monopolies do not work for the best interest of all in a free market. Of course, some folks at what was Enron might disagree, but then it cost many of them their retirement money. The point is that government regulation works in this case.
In the instant case, the real problem is physicians’ malpractice, not the insurance cost, nor the cost of making right the people harmed by physician malpractice. One intent of the tort law is to remove incompetent doctors from the profession. Like most insurance, a small number of physicians account for most of the cases. Further, the overall cost of malpractice insurance is a small fraction of medical costs.
Review Liebeck v McDonalds: http://www.answers.com/topic/liebeck-v-mcdonald-s-corp
Review the real facts of the case, not the TV Infomercial News urban legend. But, it is in the interest of the tort reform lobby to continue to proffer these urban legends.
Tort reform is just another business interest position that will be borne on the shoulders of the vast majority of Americans to benefit the few; not the other way around. Can you imagine if a drunk ran into your family car, and you were limited in how you could make that right? Punitive damages are high for a major corporation, but always relative to the harm, to encourage them to stop the harmful practice.
In any case, a single payor system for a national health insurance plan like every other Western nation has, will moderate the problems in the system, especially access and affordability for all.
I was going to comment (positively) but no you just about said it all and your grandmother is very right. To many people hand over a tithe to their Religious leader not understanding what Jesus said tithing was all about, but when the crdit bubble crashes let’s see how many Super Churches stay afloat. Giving personally to someone in need is the best therapy in the world.
Another source:
http://www.citizen.org/congress/civjus/tort/myths/articles.cfm?ID=785
The Chicago Sun Times. “The South Side neighborhoods affected by a controversial mortgage law designed to protect would-be homeowners from being gouged have seen a 45 percent drop in home sales in the law’s first month.”
“‘This law is like a thief in the night,’ said Julie Santos, a McKinley Park Realtor who is collecting signatures in an attempt to repeal the law. ‘I think it’s discriminatory. It’s ridiculous.’”
The law is to PREVENT people from be taken advantaged of due to their financial illiteracy!! This law has reduced the sales 45%. Well I guess it answers who is still buying!!! The Realtor is calling this discriminatory. “What we can no longer prey on the inocent and finacially illiterate- That is killing my business. It is discrimanting against my RIGHT to make easy money and destroy peoples lives. They are the only sheeple left for me to prey on” Says the Realtor
Talk about self centered and self serving!!! She makes me ill!!
Notice, also, that the Sun Times gives absolutely no description of what the law really does, only the “realtor’s” poor characterization of what it does. The major media area still pretty well predisposed to listen to “realtors” with no doubt of their credibility, even given their obvious confilct of interest.
Perhaps some locals can tell us about the law. I haven’t heard about before.
Here is a SunTimes story which talks about the program, all it says is that people getting loans in a test area have to get counciling before they get the loan but the loan companies are pulling out of the area rather then have give loans to people who may actually know something.
Also the cases mentioned seem not to realize that since they can’t afford a $750 mortgage payment now its doubtful that they will afford one latter and no amount of fancy mortgage paperwork is going to cover it up for long.
http://tinyurl.com/y2y65h
The thing, though, is that the test areas are in traditionally poor and minority areas. Yes, these areas are definitely prone to mortgage fraud and have high foreclosure rate, but I’m not sure that the courts are going to see it that way. I think it will be found unconstitutional. This smacks of the old time redlining, but from the side of “protecting” the borrower, rather than preventing the borrower from getting a loan at all. I’m not saying that the motives of the law aren’t good, just that it was not well thought out as to what the consequences (both legal and commercial) would be.
“The thing, though, is that the test areas are in traditionally poor “
The real thing is that few want to state the obvious, if you are poor you are not going to own a lot of things and that includes houses. No amount of exotic loans is going to cover up that basic fact, that poor people are poor. All you are doing with the exotic loan is making them even poorer, it just sounds good when they say they “own” the house when in fact the only thing they do own is a mortgage.
If we want to reduce poverty the one proven way is to have jobs for them, but unfortunately our poor aren’t poor enough to compete with the poor of Mexico or China so all those sorts of jobs are leaving.
To all: the bill is HB4050 - the law is discriminatory and was enacted to try to protect borrowers but like almost all well meaning bills, its intent reduced the number of lenders that would consider lending in those areas. The lender is required to PAY for credit counseling for the borrower. The cap on lending rates eliminates many subprime lenders. Etc., etc., etc…..
Is that in the Illinois state legislature?
This is a horribly complicated, back-door way to solve the problem. Simply eliminate gov’t. purchase of the mortgages (FNMA, etc.) The lenders will then have true liability for underwriting decisions, nobody to sell off the loans to, and this fairy-tale “mortgage school” will not be necessary.
Two government entities are working against each other, (one is promoting loans to unqualified idiots, the other is trying to restrict loans to unqualified idiots), with taxpayers footing the bill for both teams.
Exactly right. Government does this far too often (lots of examples may be found in import tariffs and agricultural subsidies).
Am I correct in assuming that this is a state law? I doubt that cities would get into the business of regulating lending. If it is a state law, it would presumably affect more that one side of the city of Chicago.
It is a state law governing a few zipcodes in Chicago.
I am posting a link for a mortgage brokers blog in Chicago that I read occasionally to learn the troll reports.
http://tinyurl.com/y73cub
Century 21
from Century 21’s blog
“# HB 4050 is a pilot program in Cook County (Illinois) designed to protect mortgage applicants from unscrupulous loan originators.
# The pilot program lasts four years.
# HB 4050 was passed in July 2005 and became Illinois state law January 1, 2006. It will not be implemented and enforced until the physical database to compile and store data is completed, however.
# HB 4050 applies to state-chartered loan originators (i.e. mortgage brokers and local mortgage bankers). Therefore, federally-chartered banks are exempt (i.e. Chase, National City, Fifth Third, Bank of America) from the law.
# HB 4050 requires “High Risk” individuals to receive financial advice from federally-approved financial counselors before completing a mortgage transaction.
# The definition of “High Risk” is stated in the rules of the law. These are summarized as follows:
* Applicant FICO score is less than 620, or
* Applicant FICO score is between 621-650 and any one of these conditions is true:….”
I’m from the south side of Chicago and now live (rent) in San Diego. YOu think that a law like that will ever be passed in SoCal?????
Sure, you’d just have to pretty it up with Liberalese. Blame whitey Republicans for stealing from the poor with their hateful lending practices.
“Sure, you’d just have to pretty it up with Liberalese. Blame whitey Republicans for stealing from the poor with their hateful lending practices.”
Exactly. Then you could get back to good conservative practices like puppy kicking and kitten torturing.
I’m sitting in my big house freezing my arse off…I could turn on the heat but its a tad expensive…last year we brought in the kerosene space heater….somethings got to give.
something will give…it’s called a RE implosion
I hope you are kidding about heating with kerosene indoors.
Dude you need a fireplace or woodstove. Wood is cheap and it is good exercise.I knew of a guy who got all hammered on cheap wine and frooze to death.
Every year here in Los Angeles (as in NOT COLD) there is usually a story every year of recent Immigrants, living in garages suffocating in just this manner…
The new mortgage law: There are a ton of foreclosures & borderline mortgage fraud stemming from 10 zip codes in Chicago. Almost all the mortgage fraud and a significant percentage of the area’s foreclosures come from these 10 predominantly minority zip codes.
In response to this, the legislature passed a law that screens out unqualified buyers. Buyers are required to take budgeting classes and brokers have to certify certain information on a loan. It will also keep down mortgage fraud by discouraging straw buyers.
No offense but - the nanny state strikes again.
Rather than fix the root of the problem - going after the people who commit the crimes of fraud, they penalize the whole societal group (in this case anyone who lives in that area), by forcing them to attend a class that they may or may not need.
“No offense but - the nanny state strikes again.”
Well, nice try, but no. This law was enacted because the private marketplace failed to self regulate. You had some slimy operators encouraging elderly, mostly minority homeowners to refinance. These elderly homeowners almost always owned their homes free and clear. After their home was foreclosed upon, they sleazy lender would buy the home and kick out granny.
There is no private marketplace as long as Fannie, Freddie, and the Federal Reserve exist.
Yup, funny how they always forget entitlements when they claim a “free” market isn’t working.
When does the buyer take responsibility for knowing what the hell they’re doing when making a major life purchase?
Let’s face it, everyone is not able to afford a home. It is not a God-given right, it’s something you aspire to do. There are no free passes in life. I’m so sick of people trying to get something for nothing.
If you don’t need the classes, great! You may still learn something you didn’t know. People who don’t want to know, or are willing to trust someone who is making money off them, oh well, too bad, so sad. These will be the first people crying that they didn’t understand what they had done in an attempt to nullify the contract. There isn’t a dumb bone in my body. Yet, I had to pour for weeks over the materials and do extensive research before I would sign anything. If I had left it up to my broker, lender, realtor, or anyone else, I’d certainly be broke and homeless. I’m glad I look at everything with a tint of suspicion. It’s amazing that people are that willing to place their lives in someone else’s hands.
“Not all lending officers seem clear on what the law requires. Maxine Hatchett, 56, of the Roseland neighborhood, was told by an HSBC Bank representative she’d have to pay for her counseling herself when she tried to refinance her home.
After a reporter contacted HSBC, Hatchett was told she didn’t need counseling after all, and her interest rate was switched from an adjustable rate of 9.175 percent to a fixed rate of 7.5 percent.”
From the article, looks like some lenders are steering unsuspecting clients into more expensive products when they actually qualify for better terms. Some regulation of these slimeballs looks like a good thing.
Or Hatchett could simply go to a different lender who knew what they were doing, who would have offered here the better rate.
It absolutely kills me that some people will check out the prices at three or four different stores to find the best deal on a pair of shoes but can’t be bothered to visit more than one bank to shop for a mortgage. THIS IS PROBABLY THE MOST IMPORTANT FINANCIAL DECISION OF YOUR LIFE!!!!! GET OFF YOUR ASS AND DO A LITTLE RESEARCH!!! If “them numbers” give you a headache, take some fraking Advil and read thing two or three time until you understand the terms.
People who “prey” on “vulnerable” homebuyers are generally scumbags. But ultimately one is responsible for his own lot in life. If you can’t be bothered to look out for your own self-interest, then you deserve your miserable fate.
My work hasn’t blocked the blog today…
Some robust stats contradict the market-gone-bust reports
http://tinyurl.com/y4s6be
Three words -
Dead
Cat
Bounce
based on the recent drop in interest rates, which caused the bubble in the first place, and is thus now just re-inflating the bubble. The problem is - evey time the bubble gets re-inflated, the skin gets thinner. Eventually there will be no more re-inflation.
Hey do those robust stats include all those cancelled contracts from the homebuilders? You know the ones that say we’ve had 40-80% cancellations?
Not even a dead cat bounce. Pure fluff. They are using whatever measly national statistic they can find to back up the article, and from the way ithe article is written, It doesn’t even aound like the author believes his/her own words.
From Lansner’s blog; OC Register
California a tough draw
California continues to have trouble attracting other Americans to live here ….
Fresh 2005 Census data shows that California tied with Michigan and New York for the states with the lowest percentage of its residents that lived in other states the year before — 1.3%. Nevada was tops at 5.5%. The U.S. average was 2.5%.
I recently discovered that United Van Lines reported earlier this year that 55.7% of California moves it handled in 2005 were outbound and that last year “marks the first time the state has seen a high outbound number (55% or more) since 1995.”
I moved to California this summer from Chicago, and it cost me much less than if I was moving in the other direction.
Where did you move to?
I bet you will miss those Chicago winters…NOT…
The United van lines story is more credible to me than the story about the percentage of the population that lived somewhere else last year. Like anything else having to do with percentages, the statistics could be misleading. 1.3% of CA population is 440,331, or approximately the population of Wyoming. 5.5% of NV population is 109,904. This is a typical MSM story that makes it sound like more people are moving to NV than to CA, when 4 times as many people actually went to CA than to NV.
The MSM does a horrible job of reporting this stuff, and because people don’t take time think critically about what they read, they are misled or think incorrectly about a LOT of different topics (don’t even get me started on relative risks of different activities).
Also it doesn’t mention illegal immigration, which I believe contributes at least a million new CA residents each year. As such, the state’s population growth is still quite strong.
I’m an Illinois native, but this comment almost cost me a new keyboard: “…Rockford’s housing market is more affordable than ever for mid-level executives.”
Pardon me, but what ‘mid level executive’ would ever want to consider living in Rockford? I know I shouldn’t make fun, but Rockford?
I’m a Chicago native and you nailed it. Rockford is not a reasonable commute to Chicago. It’s an hour away (w/out traffic) from the far north suburbs like Hoffman Estates / Barrington / Schaumburg at least. I think this illustrates the absurdity of the RE market nationwide for the past several years.
I used to live right on Lincoln Park and worked regular as a consultant at the Sears HQ out in Hoffman Estates. That was a brutal commute. It was lucky that I could do my own hours and could avoid rush hour traffic.
A Rockford-Chicago commute would be the equivalent of a Stockton-San Jose commute. Except they’d get the winter snowstorms that never happen in California.
I worked briefly for SBC at their monster Hoffman Estates Campus and there were coworkers who lived in Rockford…it took them an hour to get there without traffic or inclement weather. I commuted from Hinsdale to HF…UGH, that was bad…far worse than a Temecula to San Diego commute.
Another one from the Register..
Lenders go on offense
It might be time to consider refinancing your home loans.
http://tinyurl.com/wpsrg
OT, but had an interesting conversation with my mother on my regular Sunday call with my kids.
She lives in an affluent suburb of Kansas City, MO, and attends an affluent Catholic parish. The pastor of the church got up during the homily on Sunday and read the attendees the riot act: out of 2200 families enrolled at the church, in 2003-2005, 1700 gave regulary contributions either by tithing or through Sunday contributions. In 2006, said the pastor, the level of giving had dropped to 800, less than half the previous year. The church is being forced to lay off 4 full-time and 4 part-time employees to cover the deficit.
My mother noted ruefully that the church parking lot is full of late model SUVs, BMWs, Mercedes, etc.
Not sure whether to laugh, cry or stand up and cheer.
In both NY and Boston the Bishop’s appeal is way down. A lot of people don’t like the thought of their donations being used for lawyers or settlements. Something tells me that the priest did not mention this fact.
Don’t know if demographics impacts the collections issue more.
Our parish is mostly lower middle class. Really lower. Collections are higher than ever, same number of envelopes. Seems to be related to the gas price. I’ve been tracking it over the last few years.
Now, my friends who attend a church on the “right” side of the tracks are telling me the opposite…same story as you, vioviv. Money’s way down.
Guess it’s time for the eight laid off employees to make their way to the “other side of the tracks” for humility lessons!
‘There have been a number of people in Chicago who want to move here but can’t because they can’t sell their house for what they owe,’ said (realtor) Karl Gasbarra.”
I simply don’t understand why people put off major life decisions because they can’t sell their house for a high enough price.
…maybe because it’s worth less than they owe (think HELOCed BMWs, Hummers, jetskis)?
They can’t sell for what they owe and have no savings to pay the difference. They’re stuck.
“They can’t sell for what they owe and have no savings to pay the difference. They’re stuck.”
In another year, the number of these types of individuals will be staggering.
It’s always “different here”, no need to lower prices.
I live in Chicago (Lakeview/Wrigleyville area). Just as a point of reference, I have lived here for 4 years, and lived in the burbs before that (I am originally from Ohio). Lakeview is an awesome, fun place to live. Most areas of Lakeview have been converted to condos and yes, they are overpriced A friend of mine bought a recently converted 1 br condo for $250K — this was last summer, near the intersection of Belmont and Broadway. The place has no w/d in the unit, and is shaped, floor-plan wise, like a shoebox. There is a pool on the roof tho. Her income was 55K — so she had to get an interest-only loan at 5x salary just to get this stupid place. She has no debt, other than her mortgage, but she is completely mortgage-poor. She cannot buy clothes, nor hardly ever eat out or go out anywhere to enjoy the nightlife Lakeview offers. She cant even afford to buy paint to paint her walls. She is screwed. I rent — for $1200 a month, but that is waaaay cheaper than what most people here pay for a mortgage payment. She is jealous of me, but other than a bankruptcy, there is no way out of her situation.
These condos here are cute, charming and quaint, and are affordable if you have a husband/wife or boyfriend/girlfriend to live with you and help make the payments, but who the hell wants to live in one of these places for 30+ years? You cant raise kids in them either.
Negative equity? Remain positive
“Homeowner equity is your house’s value minus all debts secured by the property. If your equity is negative, the debts exceed the property value.
“Homeowners who see themselves as tenants may not be bothered by negative equity. As long as they make monthly payments, they can live in the house — just as if they were tenants.
“But those with a homeowner mentality are looking to a future in which they build equity. For them, negative equity is a psychic burden — and it can turn into a curse.”
“Some robust stats contradict the market-gone-bust reports”
That is an interesting article… and inspires me to write a commentary on my observations to this issue as a whole. I’m a moderate when it comes to housing forecasts, meaning that I think housing is extremely over-priced but do not believe it will drop by 50% in the next few years. As usual, any supporter of a view will accentuate the present condition to fit more in line with their point of view. Therefore, we get realtors who can only see the positive side and the doomsayers who only see the negative. Let’s take a look at an “event” through the two points of views:
“The market is merely correcting to an overpriced situation, and we will soon get back to normal level”
“The market is overpriced, and a crash will take it down to the level it really belongs”
If you observe these two statements, it is really saying the same thing, just with a different spin. Both says the market is too high and a correction is needed, but in a tone that fits their point of view. The key question is, “What is ‘normal’”? To the realtors, ‘normal’ is something a bit less than now. To the busters, it’s something like 50%. But if you assume that in a boom market such as LA the median price doubled since 2001, which is 15% increase per year. If you took a more ‘normal’ approach to appreciation, that median house should have appreciated about 25% in those 5 years assuming a 4.5% appreciation rate. This is a simplistic approach to the comparison, but does point to the inordinate level of appreciation during this time. So, a ‘normal’ price could be something like 35% or so less than what it should be now. I know that LA’s appreciation is higher historically, so at ‘normal’ growth rate of, say, 7.5%, that house would be overpriced by about 28%.
When the realtor says ‘normal’ levels, is that what he means? That the market will correct down 28% and then we will be all fine? That sounds like a crash to me. Conversely, how is a correction of 50% justified, when that would bring the level back down to 2001 level? Shouldn’t the ‘normal’ growth in home value be something positive, and therefore more of a historical growth rate? And in the next two years, would it not only make sense that based on ‘normal’ growth rate, the market will need to retreat about 17% from today’s values to be back at ‘normal’?
Of course, these expected numbers do not take into account the herd mentality, and prices tend to fall below that ‘normal’ level at the bottom. But from a homebuyer’s point of view, if the market declines by 20-25% from today’s values in the next couple of years, it looks like a reasonable time to trade-in that tenant label for a mortgage in the LA area. Other less volatile regions would obviously be looking at less of a decline. Trying to wait for that bottom to buy at the lowest price is merely another way of using your house as an investment instrument. While that is a desirable effect, it certainly should not be the goal. You may be waiting a LONG time and indeed be pricing yourself out of the market waiting for that 50% decline.
Conversely, any realtor expecting that the recent modest retreat is their definition of the ‘normal’ level, may find themselves out of the realty business before things actually get down to ‘normal’. The numbers indicate prices have a ways to go (down) before it reaches ‘normal’, and it’s not going to happen in the next few months. That would really be a disaster.
“Twice she and her husband, Patrick, tried to get rid of her credit card debt by consolidating it into the mortgage for their Niles home. In retrospect, Schutt realizes that consolidating debt was just another invitation to take on more debt. She estimates she and her husband spent about $30,000 on the costs related to the transactions, and soon afterward she was using the credit cards again. It wasn’t long before the balance was up to $16,000, and she was using household money to try to pay unmanageable bills.
She started taking it seriously when her mother-in-law went through her three closets, pointing out unworn clothing still carrying price tags, and shoes and handbags for every outfit. She sought a way out at Consolidated Credit, where she is on a payment schedule. She can’t use credit cards again; if there is shopping to be done, her husband does it so she’s not tempted.”
I’d love to have been a fly on the wall when the mother-in-law went through her son’s closets and pointed out the unworn clothing, shoes and purses to his wife.
What an absolute idiot. Some people are so dumb. Really, really dumb.
If that had been my wife, I’d be divorced by now. Or maybe a widower.