“It’s Payback Time”
Some housing bubble reports from Wall Street and Washington, the LA Times. “Is the Ameriquest empire assembled by Roland E. Arnall about to be dismantled? The Los Angeles billionaire’s financial lending business has declined sharply since his appointment as ambassador to the Netherlands in February.”
“(Consultant) David Olson is among those who think a sale or outright closure of Ameriquest and Argent is increasingly likely. The sub-prime market ‘has been a disaster for the past six months,’ he said.”
“Olson said the company still faced the threat of lawsuits by aggrieved borrowers. ‘I can’t imagine who would want to buy them as a firm since there would be huge potential legal liability,’ Olson said.”
“Ownit Mortgage Solutions, an Agoura Hills-based wholesale lender, has ceased operations and laid off 800 employees nationwide, part of the shakeout in the sub-prime lending business.”
“‘The small and mid-sized lenders that specialize in those loans have been facing a lot of pressure lately,’ said John Bancroft, managing editor of Inside Mortgage Finance Publications Inc. in New York. ‘These are companies that depend almost exclusively on new loans. That market grew rapidly in the last 10 years, but it couldn’t last forever,’ he said. ‘Eventually you reach just about every marginally qualified borrower you can.’”
“In its statement, Ownit blamed Merrill Lynch & Co. for the closure, saying the company was one of its primary lenders and had cut off its funding Tuesday.”
From MarketWatch. “The end came quickly for Ownit. ‘We were all working yesterday, assuming we were fine,’ Dave Hanthorn, a New Jersey-based employee who sells the firm’s loans to mortgage brokers, said Wednesday evening. ‘At 5:15 last night we got the call that we were ceasing operations.’”
“Ownit laid off all its staff, according to a headhunter, who received an email that was reviewed by Dow Jones from a friend who worked at the firm.”
The National Post. “Economist Benjamin Tal said he had expected to see the earnings of major mortgage lenders, which were quick to lend the money, get hit as the number of defaults began to increase. ‘It’s payback time,’ he said.”
“Mortgage giant Fannie Mae has…completed a restatement of past earnings but still faces tough work to make its financial reporting current. The restatement for 2001 through June 30, 2004, wiped out $6.3 billion in profit for the government-sponsored company, which finances one of every five home loans in the United States.”
“Analyst Jim Vogel said that for Wall Street, the concern is ‘if there’s a pattern of sustained quarterly losses that appear to reflect more difficulties in risk management than the market had thought.’”
The Chicago Sun Times. “Executives of several of the largest home builders predicted that inventories would decline, and prices and home starts would rise, in the latter half of 2007, as they spoke at the 10th annual Homebuilding Conference.”
“Toll Brothers Inc. CFO Joel Rassman declined to predict when the market would hit bottom. ‘Nobody can know when the bottom is,’ Rassman said. ‘I think there’s a reason to believe that when the big builders control 50 percent to 60 percent of a market, they’ll probably have to eat each other,’ he said.”
The New York Times. “The broadest government measure of house prices is calculated by the Office of Federal Housing Enterprise Oversight, the agency that oversees Fannie Mae and Freddie Mac. But it has three big weaknesses that end up making it much less useful than it could be. First, it excludes any mortgage over $417,000, because Fannie Mae and Freddie Mac, the two big mortgage buyers, don’t own loans so large.”
“Second, the data for individual metropolitan areas includes not just house sales but also appraisals done for a mortgage refinancing. Appraisal values, as many people know, tend to be inflated.”
“Finally, and by necessity, the index includes only houses that have actually sold lately. In a falling market, with an enormous number of properties for sale, the houses that are selling tend to be more appealing than the average house. ‘We’re dependent on houses that are actually transacting,’ said Patrick Lawler, the chief economist at the oversight agency. ‘It’s true that may not evenly reflect the market.’”
From USA Today. “Dozens of sawmills around the country are laying off workers, shutting down temporarily or trimming hours, as a steep drop in home building hits demand and prices. ‘In lumber, basic economic rules apply: supply and demand. The demand dropped off quickly, and so did the price,” says Joe Kusar, VP of Tolleson Lumber, the largest lumber maker in Georgia.”
“In Northern California, Pacific Lumber said Dec. 1 that it was laying off 90 people, or 19% of workers. ‘A (price) decline of this magnitude is virtually unprecedented in the last 20 years,’ says Pacific Lumber spokeswoman Andrea Arnot.”
“Tim Cochran of an independent newsletter specializing in softwood lumber, calls the current downturn the longest bear market since 1990. ‘(Prices) went up so high with the housing boom … and so when they go up hard they just go down that much harder,’ Cochran says.”
The Arbutus Times. “With a cooling housing market in the state, the Maryland Association of Realtors recently launched a lobbying group that plans to advocate for lower home prices. Despite its name, the League of Maryland Homeowners’ 34,000 members are almost all Realtors, though Kessler said she hopes to recruit more homeowners.”
“Ilene Kessler, president of the Maryland Association of Realtors, said the lobbying group is necessary because there is a ‘gap’ between what the average buyer can afford to pay for a home and the actual prices of homes on the market. The group plans to push for tax credits for first-time homebuyers and employers that donate money to nonprofit organizations that help build homes.”
“The move comes at a time when home prices are falling nationwide and growing more slowly in the state. In Maryland this summer, home sales fell at least 20 percent in every jurisdiction. ‘Some say the (housing) bubble is bursting, but the market is just adjusting,’ Kessler said.”
We need an REIC dead pool… I am losing track of all the players who have left us.
Sounds like a job for the F-ed Company website. Or are they still tracking the deaths of dotcoms?
yeah…what a great site. I remember when they were ‘finally’ featured on CNBC during the tech bust.
I got a new post up about this:
“Ownit Mortgage Solutions, an Agoura Hills-based wholesale lender, has ceased operations and laid off 800 employees nationwide, part of the shakeout in the sub-prime lending business.”
SoCalMtgGuy
http://www.housingbubblecasualty.com
Maybe Bill Dallas, the founder and supposed Man of God, will find it in his heart to pay severence after all. Nah! He probably WILL give them all free passes to his Fox Sports Clubs, though.
had a transaction released to record (close) and we never received the money. We smelled something very wrong. Poor people involved in a purchase deal had house in boxes and movers were hired. Unbelievable….multiply that by X amount of transactions brokered to Ownit across the country. Trouble.
Anyone suprised?
Soon to be followed by a new company. “don’townit bankruptcy solutions”.
I’m still hung up on first payment mortgage defaults. Got one more example up on my page. No doubt ownit mortgage solution had plenty of this in their porfolio.
Bubble Markets Inventory Tracking
Bruce Dickinson, Ownit’s chief operating officer, said he couldn’t immediately comment pending discussions with lawyers.
I hope this wasn’t “The Bruce Dickinson” Should have used more cowbell!
There has been a virtual monopoly on timber prices in california for years yet no one does anything. A lot of major lumber companies left the state years ago and really there is one major player left in the central sierra nevadas to buy your timber, Sierra Pacific Industries based in Anderson California.They have a huge mill in Lincoln, near Sacramento where hundreds of loads of logs arrive in the summer months. During the housing boom timber prices paid by SPI really did not go up at all, except cedar which is being sold at home depot and lowes as 1* 6 fenceing. Huge profits in that right now.The price per 1000 bd ft went to around 700- $800 couple years ago for cedar.Prices for ponderosa pine have been stagnant for awhile. If you have white fir then sometimes it does not even pay to get the logs to the mill, especially if you have to log by helicopter or cable yarding.
That would be hundreds of loads per day in summer months coming in to mill. I have heard 300 loads / day is not uncommon.
adude;….You know quite a bit about lumber….Did you work in that industry ???
Scdave,
Yes I am a forester. Been doing stuff forestry stuff for years around sacramento. I refuse to buy a home in california at current prices.
He was a lumberjack but he’s ok?
Not too bad… other than working all night and sleeping all day.
Good info here. The affects of NIMBY and eco-laws do occur, though I believe wholesale watershed destruction is intolerable. Thr central Sierra is truly a managed ‘natural resource’ (check your sarcasm at the door) and small mills were long ago shut out. SP owns tens of thousands of acres here, and can set the price at will. But even they will not escape this time.
Last I checked SPI owned over 1.5 million acres in california. They are the largest private landowner in the state.I think the owner of SPI (Red Emerson) and ted turner go back and forth as the largest private landowner in the usa.
Believe me, California has very strict rules on timber harvesting to prevent watershed degradation etc. Why don’t you check out the laws in brazil, russia , canada etc. I would rather have our lumber come from areas that are managed properly.
Actually, I totally agree with you. My ‘check sarcasm’ comment was directed at the lack of oversite - though CA is a world leader in this regard. I just wish the small guy wasn’t slammed as much. That and the fact that though we are eco-friendly, it s results are that we produce something like 25% of the lumber products we use - and then import the rest from places with much less regard for their practices. Kind of like banning hunting while eating a Big Mac.
Loan officers will be standing on street corners holding card board signs will loan for food.
“Loan officers will be standing on street corners holding card board signs will loan for food.” A long time successful subprime local lender (about 3 years ago!) folded up cuz the major bank money was so easy to get for buyers…he told me he just wanted a job checking groceries in the local super.
For real?
They might have to fight Suzanne for that street corner….
.” ‘At 5:15 last night we got the call that we were ceasing operations.’”
Must check Crammer on CNBC to see if Onwit will be upgraded to a “strong buy”
Pump and Dump Crammer is the poster child for Wall Street Hype.
Who’s “Crammer”? …or do you mean CRAMER?
Ownit. Nah, go to Dallas Capital website. This month’s featured employee is a Thousand Oaks native who’s looking forward to a great career with Ownit
Great info!
… a lobbying group that plans to advocate for lower home prices
The group plans to push for tax credits for first-time homebuyers…
Wait a minute. How are tax credits supposed to lower home prices?
If anything, the generous tax deductions that we offer mortgage-payers in this country has done the complete opposite, allowing people to bid prices even higher because their actual monthly cost is lower, thanks to the tax benefits. Tax credits will simply allow people to bid even higher!
NoVa Sideliner,
Once, twice, thrice. I dub thee SIR NoVa Sideliner!
How is it possible to bend over any further to accomodate RE more than we already have! Perhaps a “hybrid” of old AND new would do the trick. Not only can you write off points etc., mortgage interest, taxes AND virtually any cap gains after 2 years we can ALSO advise homedebtors to keep their reciepts for light bulbs and toilet paper and make them qualified as Schedule A deductions as well!
Sorry, but there doesn’t need to be any guvment involvement.
Let the market do its thing. As much as it is going to suck, people need to take their lumps. They ran in for the easy money like the stock market…and like all ‘irrational’ bubbles, must come to an end.
I hate the way guvment tries to provide ’solutions’ to problems. Often times, the guvment solution ends up being worse than the initial problem.
SoCalMtgGuy
http://www.housingbubblecasualty.com
SoCalMtgGuy,
I can tell you’re young b/c you don’t even realize what we are dealing w/today is THE RESULT of gub’ment tinkering! Prior to 1997 we only had A ONE TIME EXEMPTION. So from 1776 to 1996 nothing of this magnitude! 200 years of “inflation plus a point or two appreciation”. The bubble didn’t start in 2005 for crissakes.
So you position is:
Interesting,
WRONG!!!
But…… interesting.
All that SoCal is saying is that more government intervention is likley to exacerbate the bubble problem that you submit the government had a hand in creating. You’re arguing his main point: that government solutions are worse than the problems they try to fix.
First off, I know it didn’t start in 2005, and I know that guvment involvement contributed to it to an extent. But the loose lending, creative financing, and lax standards contributed to this bubble more than the guvment changing tax laws in 1997.
As far as guvment tinkering goes….this isn’t directly real estate related, but I know that things started changing incrementally back in 1913 when the guvment first floated the idea of ‘tax withholding’.
The public basically revolted. Then, and during the next 30 years when it was tried another time or two. It wasn’t until WWII that income tax withholding was passed as a ‘temporaty’ measure to get through the war. Well, the war is over…how about we stop withholding of taxes?
If every American had to write a check or do a direct deposit every month for their tax bill, they wouldn’t go along with so much government spending. But like a good ’savings plan’ taking the money out before you see it makes it easier.
Most people don’t think they pay any taxes…they get money back each year!!!
I know this isn’t directly ‘housing’ related, but I am quite familiar with how guvment tries to dictate spending habits and such. There have been many incremental decisions over the past 80-90 years that have contributed to this one way or another.
But that still doesn’t change the fact that the lending environment has been ‘looser’ than it ever has been.
So no, I don’t think my post is wrong.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Thanks Garcap…you nailed it!
SoCalMtgGuy
http://www.housingbubblecasualty.com
garcap,
Socal and I agree on a LOT of things. This isn’t one of them. When you’re leaning on 200+ years of credible data what’s the abberation? 1776 to 1996? Or 1997 to our murky and uncertain present? When house flipping becomes the American workers retirement vehicle of choice we’ve got problems, like it or not. When you can walk away with $500,000 tax free 30 years before you reach 59 1/2 WhoTF needs savings? With MEW you can access YOUR money today!
As enlightened a crowd as this is I have to say I’m very concerned more people haven’t made the connection between tax give-aways and housing bubble. Let me put it to you this way. If we had to stay in our homes until we were at least 55 (without downsizing or taking the money “off the table”) would we have the problems we do today? If you had to pay taxes every step of the way would we be so eager to flip houses to one another? What’s next? Tax Deductible moving expenses to move down the block to your next flip? Connect the dots people.
I know this is going to rub some people the wrong way BUT:
You’re SO right SoCalMortGuy! Loose lending was the primary cause for all our problems today!
But you never seem to want to confront the fact that cheap money and even the slopiest of lending standards aren’t NEARLY as attractive when you get a “haircut” every damn time you flip! People would do it once, then think long and hard before they “hand over” the gub’ment their money like THAT again! You don’t see it b/c you’re not on the cap gains side! You just aren’t aware just how little a return investors are willing to take just as long as it’s STATE, FEDERAL and ALTERNATIVE MINIMUM TAX FREE! I see it everyday! You can “day-trade” a client’s account a make them a TON of money and be a “hero” that is up until April 14th. when their accountant tells them how big a check they’re going to have to pony up!
There’s a hell of a lot more to the financial arena than just lending.
The law started in 1997…but it really wasn’t until 2002 when things REALLY started taking off. And that was primarily due to the change in lending.
I understand what you are saying about the tax free gains. BUT you still have to have the property as a primary residence for 2 years to get the tax exemption. Most flips were done way under this time frame.
Besides, if property was appreciating in a ‘normal’ manner, there wouldn’t have been a ‘reason’ to flip houses.
I know there is way more to the financial arens than just lending. I’m by no means a financial expert. I am not an accountant or CPA, but was an Economics major from the Naval Academy, I have a Series 7/63, and I saw the inside of the mortgage industry at the ‘epicenter’ of the bubble in Southern California.
My point is, that having been on the ‘ground’ and seeing what was going on a daily basis, I know things that the best traders/investors/MBA’s don’t.
I have received another e-mail just today from a fund manager on Wall Street. I have been contacted by several major investment houses wanting to know what is ‘really’ going on with these loans.
So, I’m not saying the tax change didn’t have an effect on things, I’m just saying that the lending environment made everything worse.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Yes, but loose lending started with excess liquidity. Thank the Fed and the GSEs for that!
“how about we stop withholding of taxes?”
That one action would bring greater change to the U.S. Government than anything else that is possible, even war. Taxpayers would march on every government office when they got their bills. Which means it will never, ever happen. Government grows itself by snookering the little guy, over and over and over.
A future snooker is the idea of replacing the income tax with some other, such as a GSE or VAT. Regardless of the promises made (by politicians, remember), the IRS, sadly, will not cease operations on Jan. 1, 20xx and the income tax itself will not cease. There will be a late-in-the-game “emergency” or “problem” that will require the two to co-exist “for a short while” until “revenue replacement has been accomplished.” That’s the snooker.
Name any any country that created a GSE or similar tax and did away with income taxes. Will never, ever happen here.
Chip…
That is the sad thing…the typical American is clueless as to what they actually ‘pay’ in taxes. Great for guvment, bad for the country.
If people had to ‘pay’ their monthly taxes….they WOULD revolt when the payment was higher than their car payments and possibly even their mortgage payment. They would DEMAND to see value for their money…but when the money is gone before you see it, and nothing but 10,000 pages of tax code stand between you and the money already confiscated, most ‘fuhgetabouttit’.
SoCalMtgGuy
http://www.housingbubblecasualty.com
SoCal — I hope the guy who came up with the withholding idea is burning in Hell. Maybe Castro will bring him a cigar.
Well he did just die. Milton Friedman.
Note to employers: Next time, include voided check(s), showing the tax withheld, made out to “US Treasury” (and the relevant state, if appropriate), with every payslip. Every month. Make them look similar to the real paychecks except for the fat “VOID” overlaid on them.
DinOR,
I’m going to back SoCalMtg on this one.
RE is cyclical, as we all know, but the problem with this cycle is the loose lending. As SoCal states, the churning of sales is not what raises prices if you have a limited pool of buyers.
***You have to have someone willing to pay more than you did in order to get those cap gains exemptions.***
If we all could qualify for cap gains exemptions, but the housing prices were stagnant, the exemption wouldn’t mean very much.
Enter the low-doc/no-doc, neg-am 70%LTV borrower. The result is a tremendous increase in the number of new buyers. It is the NEW buyers (or people buying 2nd/investment homes in addition to their primary residences) which cause the pyramid to rise from the ground.
While the tax exemption might have cause more churning, it did not cause prices to rise. It may well have exacerbated the uptrend…BUT, I’d be more than willing to take a 40% hit (taxes) on a $1 million gain. It’s not taxes that count, but the profit that’s left over. If prices are rising, **and profits are there for the taking**, speculation will occur, irrespective of taxation.
We are experiencing the largest credit bubble in history. Prices have risen exponentially all around the globe. Each of these countries has different tax laws. What unites the bubble nations is availability of cheap & easy credit.
Change may be in the wind. I heard one Democrat proposal to bring in more revenue would be to phase out the property tax deduction, even on your primary home. That probably won’t happen (too many fat cat contributors who own expensive homes), but it makes it less likely there will be MORE subsidies for homeowners.
Wasn’t the $500k deduction strictly aimed @ the upper 2% anyway?
The idea of making that much on your house was simply unthinkable, until things got bubblicious, that is.
aladinsane,
Well exactly. When enacted the authors felt it was inclusive enough to be good for several generations. Yet look how quickly we bumped up against it. True things didn’t get smokin’ hot until after 9/11 in housing but look at the median chart for say the Bay Area. It begins a steady and undeniable ramp…… well frankly almost upon the law’s passing. Prior to that the RE market was stuck in a “trading range” then BAM! Break-out! I’d have to say that much of our appreciation in OR came in the late 90’s. (The safe time to be buying) Now? Pffft. Go to C/L for our area and see how many “Built in 2005, Never Occupied Homes” are available for sale, rent or lease w/option to buy! Other than the Pearl District we may have peaked early too!
What part of Lower The Price don’t they understand?
“Association of Realtors recently launched a lobbying group that plans to advocate for lower home prices… League of Maryland Homeowners”
These dirtbags could care less about lower prices. A more accurate name for their group would be “Maryland Realtors for the Expansion of Sales Volume” It’s all about the 6%.
When I get around to buying, I’m going to do my best to avoid Realtors. This should be pretty easy since there will probably be more bankers selling RE than Realtors.
Good point landlord - they make money by moving money.
It’s not the first time a government program or law has had unintended consequences.
“You mean some people won’t work if they can perpetually get welfare?”
“The market will compensate for the tax reduced cost of owning a house with a higher price?” Laissez Faire (spelling) cuts both ways. Too much regulation hurts, and too much incentive can hurt also.
TRich,
Yeah….. I can kind of dig where you’re coming from but now that we KNOW this has played no small part in creating the biggest asset bubble in recorded history how long we continue to pretend there ISN’T an elephant in the room?
I contend what NAR should be pulling for is not lower int. rates but HIGHER cap gains exemptions! The heck w/soft landing, we’re on to The Boom (Phase II!) Had we still the “one time exemption” in place I assure this wouldn’t have been nearly as rampant as we clearly see today.
The tax exemption did help the bubble…but nowhere NEAR as much as the lending environment did!!!!!
People wouldn’t have these huge gains that were not taxable if it weren’t for the lending environment that drove prices so high, so fast.
If people had to show income docs, and pay principal property never would have been able to reach such valuations, and therefore you wouldn’t have these large ‘untaxable’ gains.
In all the thousands of hours I was in mortgage offices, and talking mortgages with people, the tax aspect of it was merely a side note. Sorry, but most people don’t know crap about their taxes…but they do know how much money their friend or neighbor made by flipping real estate, or working in the industry.
Those factors contributed more than the new tax picture.
SoCalMtgGuy
http://www.housingbubblecasualty.com
I would have to agree with that. The lenders were gasoline to the fire. Even people who were previously afraid to move their investment property ie: Apartments, Strip Mall etc etc. because of tax ramifications or lack of uplegs were letting it fly. Not because of the tax situation. But because the gains were so high and money was so cheap it just didn’t matter if you had to pay taxes, find an upleg or not. The gains were unprecedented. “I have to write Uncle Sammy a check for 100k who cares I just made 800K”
The easy money was the biggest factor in the up market , but don’t underestimate the new tax law primary home exclusion up to 500K every 2 years on real estate capital gains .
Many people developed a two year plan of property ladder flipping because of it .
If lawmakers all of a sudden announced that they would take away the capital gains tax on stocks for instance up to 500k if you hold it for 2 years ,what do you think would happen to the stock market as a result ?
The favorable tax treatment on RE capital gains had a huge influence IMHO .
It did have an influence…but if property was tracking inflation like it historically does, the $6000 tax free cap gains wouldn’t be enough to get people REALLY excited.
Also, MOST flips were done in WAY less than 2 years.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Housing Wizard,
This is why we call you the Housing Wizard!
The “Two Year Plan” has become what it’s all about! I didn’t mean to be short w/SoCalMortGuy but I’ve grown tired of sleazy lending taking all the blame! I guess you could argue the chicken or the egg but I happen to know for a fact when considerable tax bills are part of the formula people sober up real fast. Again I’ve no idea why I’m bucking such a headwind on this but thanks for the support. To me it’s a no brainer.
SoCalMortGuy,
Sorry for being short there but I think we’ve come to a crossroads where we really have to broaden our very definition of “flipper”. You don’t have to be covered in roofing tar, paint and adhesives nor be on TV to be a flipper. When you’ve time go to flippersintrouble.com to see what I mean. Many of the dates (and the guy does an amazing job) are EXACTLY 2 years apart to the day! Originally my impression of a flipper was along these lines as well, but I’ve had to move w/the market.
DinOR,
I completely see your point, and I know people were on this 2 year property ladder thing.
Just look for the posts I have coming up on my blog. I really think it is going to BLOW people away.
I have ‘consulted’ with several big finance guys and they were amazed at what I showed them. They had NO idea what was going on out there.
All in all, I think we are in agreement on things. And as far as being ’short’ with me…I have tough skin and I like having good discourse with intelligent people…so no sweat.
Feel free to post over on my blog as well…I always like to have quality content added in the comments.
SoCalMtgGuy
http://www.housingbubblecasualty.com
SoCalMortGuy,
Well thank you for the invite! Frankly I don’t know why I get so damn emotional about this but I do? Housing Wizard brought up a good a point in saying what if stock cap. gains were treated the same way after 2 years? It’s impossible to seperate loose lending and the bubble, no question. What I’d like to see if we can’t revert to the “one time good deal” is to move the exemption out to at least 5 years or maybe longer! Stabilize neighborhoods and get people focused on their damn jobs instead of how much their house has gone up on Zillow!
For what it’s worth I was Navy too! Aviation Boatswain’s Mate! Philippines 1983-86 and a couple of carriers. Not much mention of “economics” outside of the Academy though!
Yeah, I just wish guvment would BUTT OUT, streamline the tax code via the ‘fair tax’ (heck, it might not be perfect…but it is time for a change!), and let people live thier lives.
All these ‘feel good’ measures and ‘good intentions’ end up creating more problems…and guvment bureaucracy that NEVER goes away.
As far as the chicken/egg thing. I think the loose lending made the huge capital gains a ‘reality’ that the guvment hadn’t planned on. but when does guvment plan….
California had huge revenues during the stock boom…but they spent it all thinking it would go on forever. Same thing with the RE boom. They got all this extra property tax money…but have squandered that as well.
From the Federal Guvment all the way down…they have set the ‘example’ that saving and planning are ‘bad’. Do as I say, and not as I do…
Anyway, that is cool that you were in the PI. I never made it over there, but I have heard the stories. I’m sure you have some LBFMPBR stories
Take care…
SoCalMtgGuy
http://www.housingbubblecasualty.com
“Fair Tax”
Surely you jest, that would streamline the process. Quite a few government seat shiners would no longer be needed. The horror!
Yeah…the horror of keeping 100% of your ‘income’.
AND the horror in that politicians couldn’t pander to people by tinkering with tax rates on certain ‘economic groups’.
Another ‘pipe dream’ I know. Streamlined, efficient governement, in a society that has some element of personal responsibility.
It can be summed up with this one quote from Atlas Shrugged: “I swear, by my life and my love of it, that I will not live for the sake of another man, and I will never ask another man to live for mine.”
SoCalMtgGuy
http://www.housingbubblecasualty.com
Even in the old taxed system, couldn’t you sell your current house tax-free if you were buying a more expensive house?
Not exactly. You could transfer your basis to the new house. For most people, the distinction didn’t matter.
IMHO tax code doesn’t have much to do with property appreciation so long it is evenly applied across a nation. Consider China, Hong Kong, Japan, England and Canada…all who have very limited mortgage avaliability, no mortgage tax deduction or rental depreciation and different gains taxation, where property values are equal or higher than expensive US neighborhoods. IMHO this RE bubble is caused by loose lending practices. IMHO Chinese RE, which has been a sparkling performer, will continue strongly because of that nations superior savings rate (40%) and low urbanization (25%)…and will affect US west coast RE values. This minicrash will be godsend to the Chinese.
How about cutting realtor fees. Say from 6% to 1%. Bingo instant 5% decrease in selling prices. Congress doesn’t have to pretend to care.
And, more importantly those of us not upside down on our mortgages or desperate to sell at an inflated prices don’t have to subsidize yet another half-assed wealth distribution program.
As we speak (figuratively) a bill is moving through the Senate, and will very likely pass, that makes mortgage insurance tax deductible.
If somebody else is paying your mortgage insurance. Should you send them a thank you holiday card?
They’re discussing this on Minyanville and one guy is selling those companies short on this.
txchick57,
Uh, wouldn’t inviting homeowner’s insurance into the “Great Realm of All Things Deductible” create a rally instead? As in, WTF shoot the works Mr. Ins. Agent (we all know it’s tax ded. anyway!)
dipster,
Full Speed Astern!
This is exactly the WRONG direction we need to be taking. Firstly, we’re in NO position to be passing out candy and secondly how much more can we bend over (backwards?) to accomodate “home ownership”? Pffft, you know what? Let’s make anything and everything you can get up your driveway tax deductible! Dope, hookers….. whatever. Pimp my tax return!
…How about cutting realtor fees.
NAR is fighting that one.
http://clarkhoward.com/archives/clarkshow.html
(11/29/2006)
Realtors tampering with MLS listings
The NAR is now removing discount brokers
from the MLS in an effort to keep all
the business for themselves.
file name is 112906_1b.mp3
I think a shot was just fired across the bow of the NAR this week. You can now list your house on Zillow. If they can grow their database of listings fast enough, the NAR might finally get some credible competition.
I saw that announcement in the L.A. Times. Kiss of Death my friend Kiss of Death
As much as I don’t like it, Mr. Incomestream is right.
A million realtors are sharpening their daggers now for Zillow.
I don’t recall which mobster movie it was in but…
There is a great quote about not messing with a man’s livelihood.
His ego got the best of him. He did a 360 on what he said he was going to do. Like you said he just made a million enemies and hasn’t turned a profit. The down market is going to kill him.
LOL! Realtors claiming they are ‘working’ for lower prices is like democrats claiming they are working for lower taxes!
Why would anyone be surprised that what they advocate would actually send them higher?
“Tax credits will simply allow people to bid even higher!”
Yes.
The Government should just reach into my back pocket, take whatever they find, and just buy a house for everyone and be done with it. After all, owning a house is a right…look it up in the constitution.
Exactly, if anything, there should be no tax incentives on housing priced over, say, the cost of an average, three bedroom, house in a particular community.
Giving tax incentives for mortgages over $300,000 is simply subsidizing gluttony. Its charity for the rich. I’m all for home ownership, owning property is a good thing for communities. But subsidizing the entry process to home ownership is one thing, subsidizing the trade-up and McMansionization is dumb economic policy. Capital is misdirected into “dead” entities. Why both parties don’t understand and act to correct this speaks volumes about the power of the real estate lobby.
Eliminate the subsidies for ever bigger homes as well as vacation properties. Take the taxes saved and subsidize families (not individuals) who actually need homes. To me, this would be a win, win, win proposition for a rational politician (or a rational party) but I guess that’s an elusive commodity these days.
jag,
Exactly! I’ve advocated this for years. Now obviously it needs to be tied to the median price for your area but that can be very easily done. I especially like your description of “dead entities”. Nothing defines it better! I’m tired of DINKS and well paid execs. gaming this system like a birthright at everyone else’s expense. Especially the 2nd home. If you’re so freaking rich you can afford a 2nd home pay for it your damn self and quit looking for us to subsidize it for you! For all of the things we get bent out of shape about around here I don’t understand why more people aren’t angry about this?
Here’s a thought: How about making homes more affordable by selling the homeowner the basic “shell”, and providing them with instructions on how to finish it? I’ll bet that there are quite a few handy-people, along with those who’d like to become handy, who would jump at such an opportunity.
Think “IKEA meets the housing industry.” Or something like that.
And, if memory serves correctly, isn’t this how Sears sold the Craftsman houses in the early 20th century?
What a good idea .
Along the same lines, how about a modular house?
Design living room, kitchen, bathroom and bedroom modules that can be easily added together. Start out in a bedroom+kitchen+bathroom+living room house, and add on more bedrooms and bathrooms as the family expands.
I bet homebuilders & realtors hate this idea, since you would need to move much less frequently. Might allow people to get more for their money, though, and might even be good for building neighborhoods (more permanent communities) and supporting local independent contractors.
Remember they used to do that. All those beautiful Craftsman homes from the early 20th century were “kit” homes bought by the home owner in pieces to be assembled by local builders or by enterprising families/friends. It made for some really nice homes and neighborhoods.
I read last week that Ikea will start selling this type of home in England soon. A kind of modern version of the Craftsman bungalow. A couple of weeks ago I stumbled upon a street in Long Beach that was almost all Craftsmans. They are truly beautiful. You look at that and then you look at the McMansions and you have to wonder what happened to Americans.
Tax credits for homebuyers will merely inflate home prices. The exact same effect has jacked up college tuition costs. As more and more students take on larger and larger student loans, colleges have raised tuitions.
finnman,
That is exactly the effect I was trying (in my own inept way) to describe!
The tax exemption for home mortgage interest should be eliminated. Why should I have to subsidize anyone’s house?
And no, I have no interest in subsidizing families. If you can’t afford kids, don’t have them, but don’t ask me to pay for them.
I’m a democrat and I’m tired of this republican “family” crap that’s a direct drain on my bank account.
The tax exemption for home mortgage interest should be eliminated. Why should I have to subsidize anyone’s house?
And no, I have no interest in subsidizing families. If you can’t afford kids, don’t have them, but don’t ask me to pay for them.
I’m a democrat and I’m tired of this republican “family” crap that’s a direct drain on my bank account.
You sound like a conservative democrat. Whats funny is rich liberals.
I agree with your statement. I also belive that thier is an ever shinking distance between the dems and rebubs.
Question is what do most average people do about it?
Might be Spike’s a libertarian. Keep the government out of your life to the extent possible; each person is responsible for him/herself; those who truly cannot survive unaided should go to charities for help.
Except that the student loans are means tested, heavily, while everyone gets the mortgage interest deduction.
Good sourcing - I think this is just the beginning of the collapse so long predicted “In lumber, basic economic rules apply: supply and demand. The demand dropped off quickly, and so did the price.” If only housing moved as swiftly.
But I think it’s great that Realtors (TM) themselves are now lobbying for LOWER home prices. Obviously nothing is moving and they’re starving, so it’s in their best interest to jump start the market no matter how. And the homebuilders keep on building. Beautiful.
In unrelated news, the second episode of flippernation is out. Not as funny as I expected.
I didn’t find the first episode to be all that funny either.
In fairness to the guys at flippernation we’ve been lampooning this stuff for at least all of 2006! For us, it’s a day late and a dollar short. (Kind of like walking into the comedy club when Kramer is making a spectacle of himself and trying to peddle last years Seinfeld DVD?)
If you want a real laugh go to youtube* and search for “Real Financial Heros!” Now that stuff is funny!
It is. Ramen noodles on a granite counter.
…always taste better
Costco sells Kirkland ramen noodles now.
I thought the first “Flipper Nation” was all right, but then it got better each time I watched it again. Lines like “I am a real-estate mogul” from a first-time flipper evoke images of Casey and all the RE genius wannabes this boom created. Great satire. Not to mention the Realtor talking about the difficult classes she’s gone to, how she has a license, etc. We’ll see about episode two.
Anyway, DinOR, I didn’t see your question until late yesterday. The oil bust here hit in 1984 and prices crashed the next three years. March 1985 newspaper headline? “Buyer’s Market”
Tango,
Well I sure never would’ve figured oil was that big a part of your GSP!
Remember in the dog days of oil in the mid 1980’s the joke in Texas was that if you bought a toaster, they’d give you a bank…
If you think flipper nation was funny, read Ben’s archives during the golden age of the HBB.
In my estimation it was mid 2005 to Spring 2006.
Bubbles the Clown
Robert Cote
Bubblefucious
Haikus
and amazing parodies of realtors dealing with Trolls before Ben upgraded his software.
ah, the haikus
one by one they fall
soldiers of liquidity
the sword cuts both ways
Rainman18 was responsible for both BTC & Bubblefucius. Man I miss that guy!!!
Instead of lobbying Congress for lower prices, they should lobby sellers.
how about concrete and steel
Unfortunately concrete also tied to public works projects, given CA’s bond measures, concrete prices will drop less than everyone thinks. Steel has/will come down a bit more than steel, but likely a bit less than lumber.
Steel will/has come down more than CONCRETE…stupid me.
if I also remember, canadian lumber is flowing like mad into the country so they can sell it before quotas or import duties apply.
remember though, lumber and housing can move different ways. doesn’t mean that lumber can’t rise again.
John Law,
Exactly! Here in Stumptown (Portland, OR) lumber traders will tell you (if you by them “another” beer) that housing starts are only the most visible aspect of dimensional lumber pricing. Many times “acts of God” like Katrina or even uncontrolled wild fires can be enough to shift prices, along with many other factors I never had enough $’s to get schooled on.
“acts of God”
OR people acting like God !!!!
After Dubya invaded Iraq, Plywood prices skyrocketed…Don’t have any hard data but I believe the price doubled…The scuttle butt was that the Goverment had purchased large portions of current inventory and laid claim to future production to supply the troops for the flooring in their camps….
It is amazeing how much lumber is imported to the usa. I guess you can thank the NIMBY folks. We have the best management practices to protect the environment in california and yet we import timber from countries with very piss poor policies. I thought we all lived on the same planet.
AZ — I think we import a lot of it from Canada, which has a vast, manageable and probably well-managed supply. They have so much to sell that the U.S. constantly ponders one protectionist measure or the other. Wish we could burn pine in our cars.
That is an unintended consequence of strict environmental laws.
The destruction is outsourced.
Japan’s forests are in great shape. They import most of their lumber, pulp, etc from Indonesia and their forests are a wreck.
For a more detailed discussion see Jared Diamond’s book Collapse.
Both Guns, Germs & Steel and Collapse ought to be required reading in the schools throughout the land…
A couple of monumental books~
A well managed MUSLIM country??!!! For flippers out there…howabout BAGHDAD the ultimate turnaround RE play.
“Executives of several of the largest home builders predicted that inventories would decline, and prices and home starts would rise, in the latter half of 2007…”
Don’t these guys understand that they’re not the only ones adding to the inventory? Just because they cut the # of homes the make doesn’t mean inventories will decline.
If they said “We will be cutting our prices by a significant amount” then maybe I would believe them.
Even that wouldn’t do it. There are sooo many people who are going to get their financial comuppance in the next couple years because of these bad loans that the supply of homes on the market will be uprecidented. Even if HB’s unload all of their inventory it won’t mean a thing.
It’s about time for another chorus of how the media is causing all this to happen from the stuck flippers and HELOC cowboys of the world.
Most are still denying that it *is * happening. Remember, this is just a market “correction”, and we are probably near the bottom already…8)
and, it’s a gov agency
all of which are useless
“Ownedit blamed Merrill Lynch for the closure”
Really? Merrill never called previous to this expressing concern? This was the first you guys in Agoura Hills heard of this? Funding cut off on Tuesday? Closed on Wednesday! Nothing like the old college try!
This playing out as in the mid 90’s. Doing some work for these mtg players (audits) - they would be open one day and then the buyers would be gone the next. Everyone fired and told to get out of the building.
The run up back then was a small fraction of the run up this timearound.
Sadly, recent buyers have not done any research thus not seen the parallels of the early 90’s. They will be taken out badly. Yes the run up is far bigger than before.
The last time there was a mega-implosion of the subprime lending industry, it was 1998. The Russian bond default that led to the Long-Term Capital Management crisis also caused ALL high-risk debt markets to basically seize up. The lenders had been originating lots of high-LTV loans, with the big product back then the 125% LTV home equity loan. Then almost overnight, the demand for bonds backed by pools of those high risk loans dried up. Went Poof! That caused several firms to fold or sell themselves off to better capitalized institutions. And that was back when home prices were still relatively reasonable vs. incomes, and when housing wasn’t coming off the biggest bubble conditions in U.S. history (like it is now). We will likely see more carnage like this over time.
http://interestrateroundup.blogspot.com
We will likely see more carnage like this over time.
You’re a master of understatement.
You mean subprime lenders giving people 100ks of dollars that could have never have traditionally qualified for a mortgage during normal times are now going under because of defaults? You mean people making the average household income should not have actually qualified for a loan to buy the current median priced house? It wasn’t a good idea to “expand” home ownership to a greater number of people than ever before?
No way! And to think that credit scores, ratings, and lending standards actually were in place for a reason! What a concept. Here’s a thought: these people didn’t own a home in the past for a reason, and a lender shouldn’t be looking for a way to get around that reason since that reason generally serves their long term interests.
You mean that those higher interest rates that we charged them were actually indications that the A and Alt-A brokers thought that they were at higher risk of default? They weren’t just a reward for allowing them to own a home?
This came from a “friend” on the Own It Story (via email):
Wow. The crazy thing is that I know the person that was speaking on behalf of the Ownit employees: Kevin Panet. He actually trained me when I first started and then started in the same position as me about a 1.5 years ago. He has 2 daughters and a wife…lives up in Simi Valley.
And he said he didn’t expect a severance? I bet senior management is getting a pretty big one.
Panet said he didn’t know how much pay would be coming to employees.
“I’ve been told not to expect anything as far as severance goes,” he said. “It’s not sure we will be getting a last paycheck on the 15th.”
crispy & cole,
Given your familiarity with these types of meltdowns would you say (and I don’t want to speak for you) that upper management has an “income bubble” around them and they did the calculations as to where exactly the estimated litigation expense would cut into their “lifestyles”?
Ha ha ha! You bet they do!
The best example for me was an OC mtg company that did a reverse merger (SCAM) and then loaded the company up with debt and gave away stock options like they were food stamps. They had big salaries and then installed puppet managers when they saw the handwrting on the wall. They made out ok - while the rank and file were on the streets.
They just blamed the new management for bringing down the company and walked away with their pockets full of cash
crispy & cole,
I guess that’s what we would call “best practice”? Thanks, even though it’s more disgusting than I thought the answer would be.
Simple curiosity, why is a reverse merger a scam. I ask because I recently was presented something that had the term. Non-real estate.
Usually a fledging company that can’t obtain financing from normal channels or can’t perform an IPO. They will reverse merge into an exisitng “public” shell. These shells trade on the NASDAQ pink sheets (OTC) market.
IMO, 90% of the product on the pink sheets is just a market for scammers. Most of these companies get on the pink sheets and then issue private placements and try to suck even more fools into their scams.
Maybe I am just jaded - but I would stay away from this stuff for long term investments - maybe a short term trade but that is it.
Yea, I knew the mechanics. I was just interested why you thought they were all scams or 90% as you clarified. i agree actually, It’s been my experience that most folks who use this technique are not around very long. It always seems that once you flesh out the opp they are more interested in getting listed then actually doing business. As if being listed is going to magically make money float through the door. Jaded? Nah astute is more like it in cases like that.
I’ve dealt with seveal reverse mergers in my litigation practice. They are usually scams, but sometimes they are done by honest businesses taking huge, huge risks.
A reverse merger is when an operational company that is not registered with the SEC “merges” with a shell company that is registered. There are a number of shell companies out there that are registered with the SEC ; a lot of them are bankrupt tech and pharma companies that have no assets and haven’t done any buisness for years and years. However, so long as someone keeps filing the quarterly reports with the SEC, the companies can keep their registration current. In a reverse merger, an unregistered company basically buys one of these shells and “merges” with it. The unregistered company then becomes an SEC-registered entity without ever doing an IPO. There are lots of other specific things that happen during the course of a reverse merger, like stock splits, but that’s the basic idea.
Why does someone do a reverse merger? Because it’s cheaper than doing an IPO. An IPO will cost you around $400,000 in legal fees, a reverse merger can save you a couple hundred grand.
I once represented a guy who wanted to buy old 727 aircraft and install new, state-of-the-art engines and cockpits in them. Although he put together an impressive team of aeronautical engineers, etc., no one would finance his venture because it was too risky and required a huge amount of start-up capital (like $100mm.) He needed to raise money but didn’t have enough money for an IPO, so he did a reverse merger with a shell company.
He was a totally legitimate businessman, though, he actually did try to make his plan work; he sunk around $200,000 of his own money into the deal. The venture did not work out and eventually went under, but it was legitimate.
Unfortuatnely, reverse mergers also tend to attract many people who aren’t legitimate. There are a bunch of hucksters out there who go from one reverse merger to another, raising money and pumping and dumping the stock of these thinly traded shell companies. There are even securities law firms that specialize in representing these scammers. That’s why reverse mergers often get a bad name.
Management had to see it coming down. They probably socked away money in seceret accounts so they can cruise the world on their yachts.
No offense intended, but I think you guys are giving these people far too much credit.
I know quite a few people in the subprime industry (who started their own firms in the past few years). Many of them were making $1M+ per year as owners and senior management. They also led lifestyles of those who make $1M+… as if it would never end, never decrease, and never pop. Some of them are now trying to sell their primary pad because thier $10K/month mortgage payment doesn’t work when their firm is losing money. Every wonder why there is a 26Month inventory for $2M+ homes in OC?
Welcome to Subprime pain central.
severance implies that a former employee is separated from an going concern or still existing entity…. who would write the severance check? the company does not exist anymore.
garcap,
Uh, kinda got me there! Hey where are the perma bull trolls today? S t e a l t h trolls? Pretending to be “on the fence” trolls? Ohhhh, down at the unemployment office! I gotcha.
These subprime mortgage companies have also been complicit in the largest orgy of criminal fraud in the history of the world. When it’s all tallied up, I have a feeling that the dollar amount lost to pump-and-dump flipper schemes, straw buyers, massive equity extractions (and then bolt back to third-world country of choice), inflated broker fees, foreclosure “counseling,” and appraisal inflation will be in the multiples of the S&L crisis. And companies like Ameriquest were complicit every step of the way.
We’re talking 10s of thousands of people involved, and now we have an entire generation of American workers infected with the expectation of easy money and an utter disdain for ethics.
Forget about the Nigerian scammers. They’re amateurs compared to these guys.
But don’t discount the Nigerian scammers (and Russian ones, among others) because they are quite involved in this as well.
vioviv,
Bravo Zulu! (good job)
Anytime I find myself in a business or even social setting with a bull (vested interests of course) I always make an effort to point out that it’s the issues you bring so well to light here, that have me on the sidelines. That way you can tell them, “it’s not prices that have me concerned” so you get to make your point without blowing up the relationship (and the account!)
Let them figure out the appreciation curve is unsustainable on their own dime.
Well said vioviv . The sooner the sub-prime mortgage scum gets taken out the better off we all are .
What will happen to the MBS sold by these folding mortgaging companies?
Whom do the MBS holders go after for non-payments, defaults?
Good question
Anyone see the advice by John Markman— “Time to buy horrible home building stocks” PLEASE!!!!!!!!
I would not touch those damn things with the money of someone elses - who knows someone elses money.
Another big pump and dump.
It wont be a good time to buy home building stock untill after the bottom of the RE market is here.
WOW, This guy should be sued! Any good Lawyers!!!!
The time to buy them was in the summer and I did but I didn’t get nearly enough of the move.
txchick,
Any thoughts on when their current move will turn around? Or do you not expect them to fall again when the “soft landing” theory explodes?
looked at toll brothers (tol) from peak to trough in last housing bubble (1987-92)…down a whopping 86%!!! if that happens this time, the stock would drop to $11. It’s $31.84. I’d say it has a ways to go.
any 04 prices yet ?
not auctions but regular brokered deals
tia
Yes, but it is not the norm. Mostly on must move *now* stuff.
‘Some say the (housing) bubble is bursting, but the market is just adjusting,’
We are different in Maryland, we have a view of the Potomac river…
UCLA analysts back forecast of ’soft landing’
(LAT)
http://tinyurl.com/9×3ct
Link was to Chalet des Erables
Try http://tinyurl.com/yzh2ku
for LAT story of “soft landing”.
One of the great real estate quotations of the year, imho:
His conclusion: “The models say ‘recession’; the mind says ‘no way.’ I’m going with the mind.”
Yeah. My conclusion? My mind says “run up your credit cards and HELOC like crazy to buy cars for all your friends this Christmas!”
Unfortunately, my own personal financial models are telling me otherwise. In my case, I’m going with the models.
Calculated Risk had a great post. The comments pointed out that the REIC opened up the checkbook and really sponsered UCLA’s Anderson Forecast.
Hope this wasn’t posted…
Thresholds set for oversight of bank loans
(LAT)
http://tinyurl.com/yg2aqy
Analyst Recommendation:
St Joseph figurines upgraded to strong buy from market underperform by economist David Lereah.
“I think demand for these little suckers is really going to skyrocket in the spring. When people start running out of fingers and toes to cross, everybody tends to buddy up to their little plastic friend as a last resort.” says Lereah.
test
Another Downgrade Hits the Homebuilders
By David Peltier
RealMoney.com Contributor
12/7/2006 9:41 AM EST
URL: http://www.thestreet.com/p/rmoney/stocktalkblog/10326465.html
This morning, Credit Suisse analyst Ivy Zelman downgraded the homebuilding sector to underweight. This call could be called either courageous or downright stupid, depending on which side of this pitched battlefield you are.
In the past couple of months, it seems like every stock has been moving higher, no matter how good the fundamentals are. The ones that don’t get bought out!
This has especially been true for the homebuilders, which, according to Zelman’s research note, now trade at 16.2 times forward earnings. In the second of her 10 reasons behind the downgrade, she goes on to say:
“Historically, there are eight distinct instances when the stocks have exceeded 14 times forward earnings ranging from 14.0-19.2 times. In those eight occurrences, the stocks underperformed the broader market for the immediate next 3-12 months every time with a median annualized underperformance of 45%.”
Say what you will about housing prices, a short squeeze or the current land shortage, but valuation rarely lies in the stock market, especially when Toll Brothers (TOL) showed us this week that a downward bias to earnings remains in the sector.
I know I’ve been wrong with this sector lately, but I believe Zelman’s call will prove correct in 2007.
I thought I read somewhere that an analyst said the HBs bottom out at 0.5 price to book.
To me there is somthing very fishy when it has been stated that earnings are going to be way down and the stock improves.
Perhaps you could clarify this for me?
That is completely normal, as the homebuilding sector is on a completely different model than the rest of the investing universe — share prices have been steadily rallying on every bit of bad news since May 2006…
txchick,
Have you looked at puts on HB stocks? I was looking today they seem expensive.
hey, it’s Ivy “what-Koolaid-have-you-been-drinking-Mr.-Toll” Zelman again!
“(Consultant) David Olson is among those who think a sale or outright closure of Ameriquest and Argent is increasingly likely. The sub-prime market ‘has been a disaster for the past six months,’ he said.”
One of the main reasons why properties are continuing sell in this market is because of subprime loans, which, of course, were a major contributor to the bubble. As this spigot turns off, the housing price crash will pick up steam.
“who think a sale or outright closure of Ameriquest and Argent is increasingly likely. The sub-prime market ‘has been a disaster for the past six months,’ he said.”
Two weeks ago nobody said anything about mortgage lenders, though we all knew they had to be getting hit. Now ever second headline is about that sector.
Things are starting to accelerate.
The ironic thing about the recent lender news stories is the timing. Everyone in the housing industry is expecting a rebound in spring. However, the lending industry is going to melt down between now and then. By spring it will be much, much harder to get a mortgage. That alone will insure that that the market DOESN’T rebound ! Its a catch 22 situation now !
Good point ,where are the sub-prime lenders going to be to get all these marginal and fradulent buyers into inflated purchases ?
IMO the sub-prime lenders drove the market up . The key difference between the new sub-prime lenders and the old type of sub-prime lenders is that the past lenders would not go high on the loan to value on a marginal property or buyer,(65 to 75 % ) It just blows my mind at the kind of lending they were doing . Is it any wonder that realtors were running to these scum lenders with every Tom ,Dick and Harry they could squeeze into a loan?
Oh, I saw this coming. I bought some early next year stock puts on many of the mortgage lenders and have been sweating ever since since they keep magically going up, until now that is.
“Ilene Kessler, president of the Maryland Association of Realtors, said the lobbying group is necessary because there is a ‘gap’ between what the average buyer can afford to pay for a home and the actual prices of homes on the market. The group plans to push for tax credits for first-time homebuyers and employers that donate money to nonprofit organizations that help build homes.”
——————————————————————————
It just warms my heart to see the Realtor Association go to this much trouble to help the “average buyer” and to think all this time I thought they were just looking to line their pockets! (Sarcasm off!!).
[quote] It just warms my heart to see the Realtor Association go to this much trouble to help the “average buyer” [/quote]
It’s the holiday season, how about the Realtor Association giving up their broker fees for the “average buyer”, a six percent price cut for the buyer and a sold house for the seller would be a great Christmas present.
“With a cooling housing market in the state, the Maryland Association of Realtors recently launched a lobbying group that plans to advocate for lower home prices.”
With a record large crop of apples this year and lessening demand for the fruit, local orchardists recently launched a lobbying group that plans to advocate for lower apple prices.
lol
With a record large crop of apples this year and lessening demand for the fruit, local orchardists recently launched a lobbying group that plans to advocate for lower apple prices…
—————————-
…by distributing a $100.00 credit to be used on your next apple-buying expedition.
No better way to get “lower prices” in my book. (sarcasm off…)
“Kessler said the lobbying group is necessary because there is a “gap” between what the average buyer can afford to pay for a home and the actual prices of homes on the market”
It just gets dumber everyday. Okay, hardly anyone can afford these overpriced s**t shacks so what do we do? Lower prices? Noooo - Instead form a lobbying group to increase tax incentives & build government funded houses. And who is going to buy the houses that are priced so high, since lowering the price seems not to be an option? Aliens from the planet GF?
“But it has three big weaknesses that end up making it much less useful than it could be…”
“…Finally, and by necessity, the index includes only houses that have actually sold lately. In a falling market, with an enormous number of properties for sale, the houses that are selling tend to be more appealing than the average house. ‘We’re dependent on houses that are actually transacting,’ said Patrick Lawler, the chief economist at the oversight agency. ‘It’s true that may not evenly reflect the market.’”
—————–
Excuse me? You’re saying that actual sales numbers are misleading, and that the true measure of the market is ASKING PRICES? Wow.
The houses that are currently selling aren’t selling because they’re better houses - they’re selling because the seller is asking for a reasonable price.
The true measure of something’s worth is not what price someone asks for it, but what price they actually sell it for. Seems like someone needs to go back to Econ 101.
Actually, I think he was making a different point. First, his bias shows in his second point. He said:
“Second, the data for individual metropolitan areas includes not just house sales but also appraisals done for a mortgage refinancing. Appraisal values, as many people know, tend to be inflated.”
, which is a statement that he wouldn’t say if he wasn’t trying to make the point that it is actually worse out there than the numbers show, since the numbers include the “inflated” appraisals.
Also, the OFHEO numbers are based on individual house values, not a median, or mean, so when he talks about his third point, I read it to mean that the current numbers are more about value movements of BETTER houses (the ones that are selling), not all houses. The implication to me, since it IS my belief that better real estate holds value more in down markets than infererior real estate, is that the OFHEO numbers are skewed upwards because of this effect. Which leads him to his statement that the numbers may not be an “even” measure (i.e. skewed toward value movements of more attractive housing, not the average house).
One related point–over the past few years, the greatest beneficiary of the bubble was inferior houses having gains greater than they should–this not only means housing in outlying areas, but also houses in inferior locations in a particular market. Said another way, the percentage difference in value between great locations and poor locations narrowed. It only makes sense that this difference should widen as the market tries to come back to normal–which means better real estate will tend to hold their prices better than inferior locations, which leads to better houses selling now, with poor houses not selling. And this is what I’ve heard is the case–good houses sell will minor price adjustments, but, with one problem (i.e. on a busy road, etc.), and the house will sit unless there is a more significant price adjustment.
makes sense. quite similar to how the stock market works.
“Second, the data for individual metropolitan areas includes not just house sales but also appraisals done for a mortgage refinancing. Appraisal values, as many people know, tend to be inflated.”
This is starting to sound like the jewlery racket, in which your purchase is gauranteed to appraise for at least twice what you paid…
Does anyone know if the past and present Fannie Mae bosses will have to return the monster bonuses they got?
(OK, I know the answer to that one)
“Toll Brothers Inc. CFO Joel Rassman declined to predict when the market would hit bottom. ‘Nobody can know when the bottom is,’
Apparently the CEO knows something the CFO does not. Or the CEO is full of crap.
“With a cooling housing market in the state, the Maryland Association of Realtors recently launched a lobbying group that plans to advocate for lower home prices. Despite its name, the League of Maryland Homeowners’ 34,000 members are almost all Realtors, though Kessler said she hopes to recruit more homeowners.”
Typical realtor duplicity. How many actual homeowners have a vested interest in lower home prices? Also, how does “advocating” for lower home prices, make it so?
If you want prices to drop, DON’T BUY AT THESE PRICES!
“The New York Times. “The broadest government measure of house prices is calculated by the Office of Federal Housing Enterprise Oversight, the agency that oversees Fannie Mae and Freddie Mac. But it has three big weaknesses that end up making it much less useful than it could be. First, it excludes any mortgage over $417,000, because Fannie Mae and Freddie Mac, the two big mortgage buyers, don’t own loans so large.””
Yes but many, manny people have a second between 10% and 50% of thr first while Fannie and Freddie hold the First, some of those have a HELOC but thats just for fun…DOH
“Toll Brothers Inc. CFO Joel Rassman declined to predict when the market would hit bottom. ‘Nobody can know when the bottom is,’ Rassman said. ‘I think there’s a reason to believe that when the big builders control 50 percent to 60 percent of a market, they’ll probably have to eat each other,’ he said.”
Cannibalism will lead the market’s way towards a soft landing…