“The Only Debate Now Is The Depth Of The Slowdown”
The LA Times reports from California. “Despite the housing downturn, the California and U.S. economies are headed for a ’soft landing’ because trouble in one sector alone is not enough to trigger a recession, UCLA economists said in a quarterly forecast to be released today.”
“A national recession is also unlikely, UCLA Anderson Forecast director Edward Leamer said. ‘If you are a builder or a broker, it will feel like a deep depression,’ he said. ‘But the rest of us will hardly notice.’”
“Many models say that a recession in the next 12 months is a virtual certainty,” though Leamer’s Anderson Forecast report, ‘Models or Minds?’ states that ‘this time, unlike every other time, the problems in housing will stay in housing.’
The Union Tribune. “‘The only debate you hear among economists right now is whether next year’s slowdown will be modest or severe,’ said Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto. ‘The UCLA people have it right in saying that the depth of the slowdown depends on how weak the housing market gets.’”
“During the first 10 months of this year, weakness in the real estate sector pushed the state’s rate of job creation 36 percent lower than in the same period of 2005. Construction companies in San Diego County, for instance, have cut at least 3,400 jobs since hitting a peak in June.”
“Economist Ryan Ratcliff compares the state’s current reliance on property taxes to its reliance on income taxes and taxable sales during the dot-com boom of the late 1990s. Both the state and federal governments enjoyed budget surpluses during that period. But once the boom ended, those surpluses turned into massive deficits. ‘Six years later, our circumstances sound eerily familiar,’ Ratcliff said.”
“‘Depending on the timing and the severity, this budget crunch could be the second half of the double whammy that turns a California housing slowdown into a housing recession,’ he said.”
The Pasadena Star. “A housing slowdown affects construction, loan agents, landscapers and many other related businesses, said Michael Carney, executive director of the Real Estate Research Council of Southern California. ‘Concern for the housing market as a whole may spill over into consumer spending,’ Carney said.”
“Builders are reacting to sales declines by not getting permits to build new homes. California’s total units in permits is expected to decline 16 percent in 2006, and that number could be closer to 26 percent, Carney said. ‘Developers are clearly adjusting as fast as they can,’ Carney said.”
The Fresno Bee. “Fresno County could lose 1,400 construction jobs over the next three years. More than half of those jobs, a 3.6% decline, will be lost next year, University of the Pacific researchers said in a statewide housing forecast.”
“Some of those jobs have already been lost as home builders in the central San Joaquin Valley, coping with sharp reductions in housing starts, have begun cutting staff.”
“A 3.6% reduction is not that bad considering housing starts have fallen more than 40% in Fresno County and considering the glut of houses for sale, said Chuck Williams, dean of the Eberhardt School of Business at UOP. ‘The news could be much worse,’ he said.”
“It also said housing prices in some areas could slip up to 20% in a worst-case scenario. ‘A bubble bursting? Hardly. If Nasdaq had fallen 10 to 20% in 2001 from its high point, would we still refer to it as the dot.com bubble?’ the report asked.”
The Contra Costa Times. “Sean Snaith, a consultant for the University of the Pacific’s Business Forecasting Center, said he does not believe the slowdown will be that severe in part because he never believed the housing market would evaporate in a bubble style.”
“‘We have always been the anti-bubble, pro-soufflé proponents all along,’ Snaith said.”
“Mortgage brokers in California have developed a new worksheet checklist to help borrowers better understand the complicated world of home loans, including the pitfalls of interest-only and other exotic loans.”
“‘These exotic mortgages have kind of taken over,’ said Mike Tacconi, president of the East Bay chapter of the brokers’ association. In the Bay Area, 43 percent of loans taken out in 2005 were interest-only loans. Another 28.3 percent were payment-option, which can lead to a growing loan balance known as negative amortization.”
“In the three-month period ending in September, default notices sent to homeowners for several missed payments increased 89 percent compared with a year ago, according to DataQuick.”
“Before the worksheet was developed, association members, who connect borrowers with mortgage lenders, were on their own when it came to explaining the pros and cons of different mortgages to borrowers. ‘Some brokers might not have been as detailed (about different options) as this list is,’ Tacconi said.”
The Modesto Bee. “A Salida couple is suing a group that offers real estate deals at a Ceres flea market, claiming that the company didn’t deliver on promises to sell their home and get them a better one.”
“Instead, say Manuel and Marbella Salas, they have a new house with construction defects, haven’t sold their old home and have learned that the man who arranged the deals doesn’t have a real estate license.”
“‘I want people to know what they’re doing,’ Marbella Salas said. ‘We had good credit, and now we’re getting notices from the electric company.’”
“The couple’s mortgage payment was $2,200 a month; they bring home about $6,600 per month. VJ Singh followed up with phone calls saying he could help them sell or rent their home and buy a bigger one elsewhere, and only increase their mortgage payment by $200 a month, the couple said.”
“After they agreed to buy another house in Salida in December 2005 for about $500,000, they learned that the new mortgage would be $4,200 a month.”
“Marbella Salas said she’s afraid that others are getting questionable real estate deals with Singh and the company, adding that he still was set up at the flea market as recently as a few weeks ago. ‘He didn’t care about us,’ she said. ‘He only cared about his commission.’”
‘Developers propose to build more than 1,000 new homes on 200 acres near the southern edge of this slow-growth city, the second-largest housing project in recent years, Manteca’s chief planning official said.’
‘Most of the Bay Area saw a decline in mortgage risk in October, though a high number of foreclosures in Contra Costa and Alameda counties contributed to a slight rise there, Ela said. ‘Lenders are being more vigilant and they are managing their risk better,’ Ela said. ‘There’s constraint in the market right now.’
‘At least one economist questioned the report’s findings, saying that an increase in the number of loans with monthly payments that rise over time coupled with price declines has actually left the market less stable.’
‘The aggregate risk in the market is much higher,’ said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley.’
posted ” “Mortgage brokers in California have developed a new worksheet checklist to help borrowers better understand the complicated world of home loans, including the pitfalls of interest-only and other exotic loans.”
Mighty nice of them.
More homes in Manteaca? Manteca is commuter-ville. You’re talking about long commutes by car over a coastal mountain pass. These towns are (or were) affordable but dependent on access to “cheap” gasoline.
At least Manteca is 4-5 miles from the Almont Commuter Express train (Lathrop) that runs 70 miles SW to downtown San Jose.
Would you really want to live in a town, whose translation from Spanish to English means “LARD”?
How about “butter”?
Only if they’d named it Mantequilla…
Gotta call em as they spell em’
Off a website
” I’m a Mantecan (Manteca, California).
The “snootier” Manteca residents will tell you our town was named from mantequilla (butter) as a result of the Portugese dairy trade that was prevalent in this area.
Long-time Mantecans, however, will tell you the truth: “manteca” means “lard”. This was a pig farming town in addition to a dairy town, and yes, it was named LARD! So attractive of a name, yes?”
“The “snootier” Manteca residents will tell you our town was named from mantequilla (butter)”
Stepping back a few paces, isn’t it funny that a bunch of primates would argue about which was more prestigious: pig or cow fat?
“”Stepping back a few paces, isn’t it funny that a bunch of primates would argue about which was more prestigious: pig or cow fat?”"
That’s funny
Gotta ask, what’s the name of the local high school team?
Some sort of food product or such?
The “Manteca High Pedos”
“Would you really want to live in a town, whose translation from Spanish to English means “LARD”?”
No. And “Gordo” as a pet name for one’s child has always horrified me.
Per the Loan Officers forum or blog; the next Company to go down is:
“We also heard Sebring Capital has closed. We also heard MLN may be in the same boat.”
Its official. US sub prime loans are in trouble.
http://biz.yahoo.com/ft/061207/fto120720062004177556.html?.v=1
And rumor has it that Ameriquest and Nation Star MBSes got downgraded.
http://forum.brokeroutpost.com/loans/forum/2/74351.htm
Its only Thursday and it fees like a great week! The dominos are starting to fall…
How in the world can you call a soft landing? I am so sick of the spin and bullsh@t being fed to the sheeple. Why won’t someone in the media tell the real story. Everyday I hear lies about the data. We need someone with some balls in the media and step up to the plate and disect the NAR’s data. They cherry pick the data and hope the 80% of zombies out there believe it. California is screwed. I’m sure they are trying to figure out some new tax to compensate for the housing explosion takeing place.
“How in the world can you call a soft landing? I am so sick of the spin and bullsh@t being fed to the sheeple. Why won’t someone in the media tell the real story. Everyday I hear lies about the data. We need someone with some balls in the media and step up to the plate and disect the NAR’s data. They cherry pick the data and hope the 80% of zombies out there believe it.”
I totally agree. The media has missed the story all along, cheerleading all the way.
These blogs are incredible sources of information. Nobody sugar coats anything here and there are some darn good debates. You just can’t get reliable information from the media. I feel sorry for people who don’t read blogs.
Yes. The stock market is on the edge of a precipice too, waiting on jobs numbers.
Where do you think the number will come in? I’m worried it could be high due to seasonal holiday hireing. The market was pretty much flat all week, very little volitility. I wanted to wait till the jobs report to see what will happen. I feel we are going down from here a little.
For some time now the main number has been a smokescreen. The revisions to the back numbers have been where the action is.
Consensus is 110K. I’m guessing we’ll see 20-30K, with back numbers revised +150K or (less likely, would tank the market) -100K.
Dow Jones Industrial Average companies are picked from the editors of the Wall Street Journal. They provide news info (from their own website) to CNBC among other financial news services. Is it any wonder why they are biased towards dumping more money into the market? Not from me.
It’s all up to Gekko and his ilk to help the market continue its bull runup into the sky…
Okay, let me say one thing clearly: I agree with the consensus view of Ben’s blog that housing is going to hell in a handbasket, yada yada, and am off and on addicted in coming here to see the unfolding train wreck.
Yet I don’t see very well thought out arguments of why stocks are going to crash.
In my view, there are two ways for the government as a whole (let’s leave interest rates and the fed out of the equation for the moment) out of its current situation:
1) Inflate away gov’t and consumer debt
2) Cut way back on spending
3) Create incentives (along with the natural ones that will take place as people get cut off from credit) to consume less and produce more
or some combination thereof;
Also, I have no doubt that housing will have a hugely negative on the economy and stock market. The question is, what other factors will be in play?
If inflation truly takes off, at least some stocks might not be a bad place to be, after all they represent businesses with real assets in many cases. With high inflation, those assets have higher nominal values. Companies that are able to raise their prices in tandem with inflation will also see their nominal earnings rise. All of this might lead to stocks going up, no?
Personally, the US equity markets are neither a bad place or a good place to have my money in for long term investing purposes right now. What is the certain factor that will drag stocks down if inflation does in fact pick up?
This is a thought process and not a statement of fact, I want to hear arguments for and against the downcoming collapse of equity markets in the US that so many are calling for.
But shorting homebuilders, businesses with large amounts of MBS, maybe one of the big three, and perhaps businesses that live and breath by disposable income from the middle class might not be such a bad idea, in fact it would act as a very nice hedge against ownership in some of the stronger companies still out there.
Thoughts?
I believe the NAR over the media anyday. Luckily for me in the DFW area, the NAR explained to me back in Oct 2005 that we would have to lose 75000 jobs and have 17.5% interest rates before the median house price would decline 5% here.
I’m so lucky! -’)
“I’m sure they are trying to figure out some new tax to compensate for the housing explosion taking place. ”
Cali property tax is based on purchase price + fixed adjustments and not current value/assessment. But if they tried to change that, anyone who’s owned for more than 2 years would scream bloody murder.
It should get interesting then, when two years from now the value is half of what someone in 2005 paid. In 2008 the folks who are paying tax on the million they paid will be screaming murder when the guy who bought the house next door is only paying tax on a purchase price of $500K.
Naw, in Cali you can apply to have your house re-assessed if the value drops. So, they’ll both be paying the same. Of course, the government will be hurting, since they’ve already planned on spending all of the money and then tax revenues will drop.
Come on. If they have to lower assessed values, they’ll just raise the millage rate to compensate.
Bill:
Nope, the millage rate is fixed. Here is a quote from Wikipedia (I know it’s not the most authoritative site, but it was easy to find): “Under Proposition 13, the real estate tax on a parcel of residential property is limited to 1% of its assessed value, until the property is resold. This “assessed value”, however, may only be increased by a maximum of 2% per year. If the property’s market value increases rapidly (values of many detached dwellings in California have appreciated at annual rates averaging more than 10% over the course of several years) or if inflation exceeds 2% (common), the differential between the owner’s taxes and the taxes a new owner would have to pay can become quite large. The property may be reassessed under certain conditions, when additions or new construction occur; the assessed value is also subject to reduction if the value of the house declines, say during a real estate slump.”
Prop. 13 also requires a 2/3s vote of both houses of the legislature to change the 1% tax rate. So, no they can’t just raise the millage here. It stays the same (just as it does not go down if property values skyrocket, as they have).
One of the difficulties with an assessment appeal on residential property in Calfornia is that the Assessment Appeals Board wants to see 3 comparable sales supporting the lowered value. These sales must have occured within a certain time period before the enrollment date for the year appealed. When nothing is selling, it’s hard to come up with comps.
Also, the reduction is value is temporary, and the Assessor’s office can raise the enrolled value right back up again the next year. I know people who had to appeal their assessment over and over again during the real estate slump in the 1990’s. Also, you must pay the taxes when they’re due, then if your assessment is reduced, you’ll be refunded the amount overpaid. The Appeals board has up to two years to hear your appeal, and then it usually takes months more to get your refund.
Yea, it’s by no means a walk in the park.
Our home’s prop taxes were automatically reassesed after the value dropped below the inital assessmment made when we bought it. When the housing market recovered, the taxes recovered - we didn’t lock in at the lower re-assessment.
You were lucky that the county automatically lowered your assessment. Most didn’t. Was that Riverside County, by any chance?
Santa Clara Co.
You’d need to pass a referendum, right? Good luck with that when the majority of voters are homeowners.
This does a nice, political, job of shafting younger families and subsidizing older, very likely, voters.
Oh, and by subsidizing older voters it keeps them in houses, with maybe three or four bedrooms that are never used, while families struggle to find similarly adequate and affordable housing.
I love older people but subsidizing them to stay in large, often unmanagebly big homes, often does them no favor. If the elderly knew they’d be facing a higher and higher property tax bill they’d adjust their housing sooner in their lives…when they’re better able to cope with the change and the need to explore choices.
Distorting economic decision (along with subsidizing McMansion mortgages) is very dumb economics for all concerned.
This does a nice, political, job of shafting younger families and subsidizing older, very likely, voters.
But that’s the American Way! (see: social security)
I gotta disagree with you on this one. I understand that there are arguments on both sides, but I personally am in favor of Prop. 13 (and I’ve never owned a home, although I hope to in a couple of years after prices come back to reality).
By locking in taxes at a pre-set level (purchase price, plus whatever they’re allowed to raise per year - I know it’s not much, and usually well below inflation), it allows people buying houses to have a fixed tax payment, which allows them to better plan for their retirement by knowing their property taxes are a fixed cost. Not many people would have believed in 2001 that property values would triple in 5 years, but they did in many areas in California. How can anyone plan for that, since it’s never happened before?
As for the younger families getting “shafted,” well they are voters, too (or at least have the right to vote - you’ve got to be 18 to buy real estate or vote). Yes, they may and often do pay much more in property taxes than their neighbors who have lived in similar homes for many years. But those neighbors also paid a lot less for their homes, but nobody cries about that because we understand that the value of a home is whatever the market says it is, and the nominal value will likely increase over time due to inflation. But the younger family took the taxes into consideration when they purchased (they understand it is part of their PITI; OK, maybe that’s quaint these days, what with people not paying principal anymore, and sometimes not even all of the interest) the home. It is a fixed cost for them, and they feel comfortable paying it. So, from that perspective I don’t feel like they are getting screwed (and, again, I hope to be one of these first-time homebuyers who will be paying higher taxes).
I’m not trying to start a big debate here on this. We’ve had those before on this blog, and unfortunately lost Robert Cote from participating much anymore as a result. I’m just trying to express the reasons for supporting Prop. 13. I realize that neither one (Prop. 13 or repealing it) is perfect. But given the choice, I’d choose Prop. 13.
The real winners with Prop 13 are commercial property owners because by putting the property into a shell corp and selling this shell corp to the next buyer the property tax basis *never* resets to the higher sales price basis because the owner (shell corp) didn’t change. With residential property the tax basis zooms up to the new purchase price upon sale. Residential owners have been subsidizing commerical property big time since Prop 13 passed.
I have been looking up the taxes for my new neighbors and it is quite frightening. I have neighbors paying 8000 a year while I pay 1000 a year (home owned 20 plus years). I am not really sure that is fair. I am wondering how many will be killed by the taxes and not the mortgage payment. Let us say you buy a 200,000 dollar house 7 years ago. Your house increases to 550,000 during that time and you decide to upgrade and buy a 700,000 dollar house. While you may have a great down payment and a morgage your able to handle, can you handle the increase tax payment from 2000 a year to 7000 a year.
I’m not really lost. My immediate neighbor pays $26,000. I pay $2600. So what? I’ve got three kids in the local school, he has none. So what? He pays 1.08% and I pay 1.6% on purchase price. Is it fair that I pay so much more? Why or why not?
I pay 5750 and my neighbor pays under 300. He’s been there since the 70’s. If his taxes were as high as mine - he’d be on the street.
There’s got to be a way to let those homeowners who are not yet retired face assessment at some rate above the minimum rate which correctly protects those on fixed incomes from having to sell and move.
“There’s got to be a way to let those homeowners who are not yet retired face assessment at some rate above the minimum rate which correctly protects those on fixed incomes from having to sell and move.”
Rent now or be taxed-out forever! LOL!!!!
> There’s got to be a way to let those homeowners who are not yet retired face assessment at some rate above the minimum rate which correctly protects those on fixed incomes from having to sell and move.
The state of Minnesota helps paying the property taxes for elderly with enough equity in their house. The help is put as a lien on the house and recovered when the house changes ownership.
People on fixed income got hurt and the Citizens overreacted with prop 13.
As for telling folks to rent - I hope it was a joke. During the internet bubble, SF renters on fixed income were tossed on the street for condo conversions. People who had lived for years in places decades or more, with little money and little ability to find housing near city infrastructre were dumped on the street.
The idea behind prop 13 of limiting government growth was not bad, but it was badly implemented. A better measure would be to say CA expenditures can only grow at inflation and population growth.
This would automatically constrain growth in tax, as it could not be spent. Likewise, housing taxes would remain “fair” without causing the massive distortions that we see in prop 13.
Oliver
Proposition 13 blah blah blah. As I’ve said before, the bottom line is this: Is California better off today than it was in 1978?
I see alot of envy on this Blog. Young vs old, renter vs homeowner, etc. California makes more than enought money from taxes to support itself. It just isn’t a very smart or frugal place. I really have gotten tired of the complaining about Prop 13 on this blog.
It’s funny, many of you complain because the home prices in CA are out of reach for you because of “idiots” who overpaid for homes while taking advantage of questionable loan pratices. However, many of you same people see no problem with CA homeowners who owned homes before this bubble began having to pay unjust property taxes because of these same “idiots”.
California’s Prop. 13 was the best sting in the history of legislation–backed by commercial realtors. Commercial property owners who sell property held in corporations do not trigger higher values because ownership effectively transfers without triggering reassessment. In addition, commercial property changes hands less frequently than residential. Consequently, young families and frequent movers subsidize commercial property owners and long-term residents. They receive a tax subsidy–written into the Constitution of the State of Calfornia–while the public schools and state infrastructure have suffered. California’s schools have fallen from 1st among U.S. states in the 1960s to 49th in many surveys of achievement.
Guess all those proceeds from the Ca. Lottery didn’t quite trickle down to education, as claimed~ ha
“As I’ve said before, the bottom line is this: Is California better off today than it was in 1978?”
Make sure you control for other factors effective since 1978. Hint: Look at the increase in government spending caused by the importation of a large, poorer-than-average, extra-fertile demographic group.
One thing that I’m seeing over and and over for everyone that predicts a soft landing is they always say a slowdown in the housing market is not enough to crash the economy. What they always fail to mention is the effect higher housing costs are going to have on the economy once the equity atm runs out of money. In normal circumstances If someone has to spend an extra $100 a month in housing costs that is $100 less they have to spend on other things. We haven’t seen the effect from this yet because if the average FB wanted something they would just charge it and refi in year to pay everything off. Once the equity tap runs dry that extra money that was going to support the economy is now going to pay for housing since having a roof over ones head is a little more important than having a hummer or BMW.
A soft landing is possible if you can engineer another bubble
Soft because inflation will be so high. No other reason.
Have the Chinese signed on to the plan to inflate away the money we owe them yet?
Stucco figured it out, “Dear China, you are going to have to take a 20-20% haircut on that pile of US debt you’re holding, but you get to keep the export registers ringing”…..this keeps Wachovia, Wells Fargo, MBS Hedgies, Etc from owning homes that would sell for less than their balance sheets can handle. Perhaps this might come up during Paulie and Uncle Ben’s roadie. BUY GOLD NOW!
maybe tulip bulbs can save the FBs… maybe.
So let’s talk about all those job layoffs and plant closing in California.
Yea, we still haven’t felt the backlash of Nissan leaving or Boeing shutting down here in SoCal. Doesn’t Boeing start laying off in Feb?
So is there a recession hitting Cali?
That subprime lender that bellied up out in Agoura Hills might have an impact. Disney just laid off 300 from Animation last week. But Leamer sez “no recession”. Whatever.
I don’t get how or why CA industry and business is going to trip-up and fall into recession over a “depression” that hits builders and brokers.
Like them or not Brokers and Builders put a lot of money in the pipe. They have IMO basically held up So. California since the last downturn. When Aerospace left those jobs where not replace with for lack of a better term at the moment “good jobs”. Take away the REIC and all you have left is Entertainment which from what I gather is having there own problems. My explanation is simple and wine induced. Hopefully some of the bigger brains will present a clearer picture.
So is there a recession hitting Cali?>/i>
I heard an economist say that there was a high probability of a virtual certainty that the possibility of recession is looming on the horizon.
close
crap Ahhh!
Grrrrr close please
sorry folks
Jtz wrote ‘I don’t get how or why CA industry and business is going to trip-up and fall into recession over a “depression” that hits builders and brokers.’
Simple: Lack of consumer spending since a great deal of Californians spent way beyond their means and the house ATM machines ran dry. California-based businesses will have to lay off people, due to lower revenue. More layoffs will add to more foreclosures. The Boeing layoffs that will happen are just a part of the deal. Unfortunately, all this is based on Americans being consumers and we cannot seem to produce much of anything of value to justify $700,000 homes. Maybe $100,000 homes.
OT. A feel good story from upstate NY. Subprime lender, one of the areas “50 best places to work”. No warning, no severance, no pay check…
http://albany.bizjournals.com/albany/stories/2006/12/04/daily33.html?jst=b_ln_hl
Wow, another one ! These companies are falling like dominoes ! I didn’t realize that things were so bad already ! How many is that THIS WEEK ?
$hit - the hits keep on coming.
During Christmas season at that.
Jim,
It seems like the mortgage companies are just blindsiding their employees. How much more of this until the employees start to panic? Not that low employee morale will really impact much besides their productivity…
Which will further tighten credit. It seems we’re finally seeing a tightening of credit in the US… the odd thing is that this seems to be a domino. Did a big player pull out of the MBS buying market? (e.g., Merril Lynch was rumored to pull the plug on Ownit.com.)
Not exactly a stable system… Interesting.
Not the Christmas present I would want (if I were a mortgage broker)! Not that I have any pity on anyone who suckered a GF into an option ARM…
Neil
“It seems we’re finally seeing a tightening of credit in the US… the odd thing is that this seems to be a domino. Did a big player pull out of the MBS buying market? (e.g., Merril Lynch was rumored to pull the plug on Ownit.com.)”
I know ! I was waiting and waiting for the the lending side of the industry to start getting hit. And nothing was happening other than they were saying it was slowing down. And now its like someone opened the tap !
I think they were just staying quiet, hoping it would blow over. I wonder how many are trying not to say anything until after Christmas ?
I wonder if there is a biggie out there that is on the verge of getting sue over some of the MBSes it originated with fraudulent documentation ? Now that will be interesting. You know its not a matter of if, but when !
I suppose you wouldn’t want to be short, or have any outstanding sort of options on a company when they go belly up. Everything just vanished, unless you plan on waiting in limbo while it goes through bankruptcy court.
It’s fine to be short a company that goes belly up. Covering costs 0 dollars.
And if you never cover because the stock goes out worthless, it’s tax-free!
As these mortgage companies go down in flames, one of the consequences is being overlooked. The scammers who vastly overpay for a property and then get the extra cash back from the seller after settlement and then never make a payment will be even less likely to be prosecuted, because the paper trail will disappear.
The perfect crime?
“”because the paper trail will disappear.”"
“”The perfect crime? “”
Hardly, unless the principals were using invisible ink.
“Merry Christmas. You’re Fired.”
“Merry Christmas. You’re Fired.”
And feel free to pick up a loan application on the way out.
““Instead, say Manuel and Marbella Salas, they have a new house with construction defects, haven’t sold their old home”
There are two problems with the whole housing market right now. Well, more than two, but lets start with these two.
1) Everyone that can afford a house has one. So when there are 18,000 houses on the market that need to be sold, what that really means is 36,000 houses have to be sold because everyone that buys one of the original 18,000 will need to sell theirs too before they can buy the new one.
2) people are tapped out financially ! How hard should it be to carry 2 mortgages for a couple months while they sort this out ? Instead the phone company is collecting !
The real implication of #2 is that the default rate is going to skyrocket. Foreclosures are going to become common and MBS holders are going to get screwed. That is going to drive a tightening of mortgage qualifications, if it hasn’t already. When that happens, the pool of potential buyers is going to dry up making things even worse.
When that happens, the pool of potential buyers is going to dry up making things even worse.
Yep. Scaringly fast too… I can’t believe the pace…
Neil
1) Everyone that can afford a house has one. So when there are 18,000 houses on the market that need to be sold, what that really means is 36,000 houses have to be sold because everyone that buys one of the original 18,000 will need to sell theirs too before they can buy the new one.
Interesting point, except that “afford” should have been in quotation marks.
Everyone that can ‘afford’ a house has one. So when there are 18,000 houses on the market that need to be sold, what that really means is 36,000 houses have to be sold because everyone that buys one of the original 18,000 will need to sell theirs too before they can buy the new one.
This looks better now.
Apparently Credit Default Swaps provide insurance against MBS defaults. It should be interesting to see how that game plays out.
My guess is that there will be massive defaults by those who issued the Credit Default Swaps. And those MBS buyers who thought they had hedged their risk will realize that it wasn’t hedged so well. Gotta love the hedge funds (since they’ve issued so many of the Credit Default Swaps).
Then the swap holders lose and the price of the Default swaps goes through the roof. Then the lenders can’t get them and then the rates go up to reflect the real risk.
Riiiiiiight. Now if we can only find the counterparty to that risk. Oops, looks like the CDS has been traded 18 times since the origianl debt issue. Oh well, I’m sure Goldman Sachs will figure out who will pay you on your default….
Mish has speculated that the counterparty is Madame Merriweather’s Mud Hut Malaysia…
People need to stop talking about MBS like its a monolithic market. These are very customised deals, with everything from US Government garantee’d GNMA pools to residuals from pools of 500 FICO HELOCs.
The people in trouble will be those who are doing credit enhancement (by whatever method) on pools of mortgages where realised credit risk turns out to be much greater than was expected when the MBS was created.
From a couple of months ago, this is interesting:
http://www.marketwatch.com/News/Story/1Hf8dQrgTmxk7vW1K7nFqpz?siteid=mktw%2C&dist=TNMostMailed
‘If you are a builder or a broker, it will feel like a deep depression,’ he said. ‘But the rest of us will hardly notice.’”
Right! Where do they find these clowns?
What about the flippers, will they notice ? What about the people with investment properties ? What about the people wanting another HEL, will they notice ? Hmmm…
Nope, they’re ok. Yep, they are just part of the majority of sellers who are just testing the waters. Move along, nothing to see here…
Man is this an interesting thread… Must pull away…
Its almost like we’ve had a train wreck a mile from a plane crash yet we’re all here because we know the interstate is iced up and the “Canon ball run” is about to drive by…
I’ve gotten over the inventory in Arkansas, I’m back to Schadenfreude.
Neil
You are forgetting another section of the population that bought during this time, college parents. I know that some parents bought a pad or home for their kids while they went to college. I am not certain what they all planned to do with their purchase, but surely a lot wanted the profit after the kids left college.
Yep, that was going to be the money to pay off the student loans, since the folks hadn’t actually saved for their kids’ college. Oh well, guess it’ll be a good education for both the kids (who will be strapped with their student loans) and the parents (who are stuck with an underwater home and are now unintentional landlords).
That’s ok, it will be another 5 or 6 years until these college pads aren’t needed by their kids (judging by today’s graduation rates).
Neil
You guys are right, these numbers are so over looked. Our newspaper ran an ad last month saying what a great deal it is for parents to by the condo for the kid while in school and sell it at a handsome profit(pay off college debt)after jr. graduates. Gonna be fun!
..also don’t forget the teachers ,and workers will be killed also ,as Calpers ,and the rest are heavily invested in RE..That boondoggle Condo project mentioned last week in Sac. was being financed by Calpers. ….as mentioned here so many times, the severity of this fiasco won’t be seen to it’s full extent until this really starts to unwind, and I believe we are in the first inning with 2 outs.
Funny you should mention parents buying houses for their college-aged kids. I can think of two examples of that right on my street. In both cases, I think the parents stretched too much to buy the houses. (They’re not being maintained very well.) And the kids seem to have missed the class where they taught the concept of yardwork.
So, unless the parents come up with a pot of imaginary money when it comes time to sell, these houses are going to be a TOUGH sell.
Wow… that’s a lot of debt. Obviously the people who will be bidding against me for my next house…
College loans and the condo mortgage for the kiddies… ouch.
Sort of ironic that the parents at Florida are now going to have to learn about “Alligators.”
Neil
Condos for college kids was all the rage in the 80s, also. But back then, even though EVERYONE admits it was a bubble — mortgage payments were about equal to rents!!!
So WTF is our bubble going to look like when it unwinds?
I’ve gotten over the inventory in Arkansas, I’m back to Schadenfreude.
LOL
Neil: I’ve gotten over the inventory in Arkansas
Not me 108 months of inventory! Bill Clinton is an Arkansas boy (I think) never going to find out what he really thinks.
I prefered this statement:
“prices in some areas could slip up to 20% in a worst-case scenario. ‘A bubble bursting? Hardly”
He went on to compare it to what people would have said if the tech bubble had only declined 20%.
Problem is; 70% of the population never owned tech stocks leveraged at an average of over 50%. Even if you bought “conservatively” recently (by putting down the normal 20%) a “mere” 20% decline just wiped you out.
That doesn’t even begin to consider the unraveling effect as buyers dry up and supply is FORCED onto the market. This recent collection of “wisdom” out of CA economists is worth saving…as an example of extraordinary cluelessness.
really funny that he compares it to the tech bust. First of all, only about 20% of the population were investors in that. They were also investing their SAVINGS, not DEBT. And the average values were in the tens of thousands, not hundreds of thousands !
And who says we couldn’t see a 60 or 80% correction, just like the tech bust ! It ain’t over yet. I’d say that realistically, once one factors in the RE industries fudged numbers, kickbacks and incentives, prices are down more than 20% already.
Only another 10% ? Ha, that is funny ! 71% of 2005 purchases with exotic financing and CA will only see a 10% drop. Man, that must be good Cool Aid !
“71% of 2005 purchases with exotic financing and CA will only see a 10% drop. Man, that must be good Cool Aid ! First of all, only about 20% of the population were investors in that.”
Good point. Not only that but most of these exotic loan investors also own multiple properties with zero down 100% negam loans to boot!!! So the leverage is way way way more than the tech bust.
And: tech stock holders who watched it all *poof disappear didn’t have monster carrying costs taxesinsuranceupkeephoa etc. etc. etc., and major difficulties selling even AT a take-a-bath price!
They — WISH — it was going to be anything like the tech burst. Not so lucky this time, I fear.
And: not to get too spelling Nazi on you, tweedle, but I believe it’s “Kool” Aid. The K seems to give an extra kreepyness, no? Kawlifohnya Association of Realtors. I like it.
Jim Jones, party of 900? Your table’s ready.
20% down, thats the 90’s bro
No $hit. No one’s put down 10% since 2000.
‘If you are a builder or a broker, it will feel like a deep depression,’ he said. ‘But the rest of us will hardly notice.’”
Move along, move along people. Nothing to see here. Nothing at all!!!
The way people are talking about this bubble is beginning to ressemble the issue of civil war in Iraq: you have a civil war, but it is not a civil war as long a you don’t call it that. You describe all the events that build up to a civil war, but you don’t name it, for some mysterious reason. To me, that is happening now with the housing bubble. CEOs dump their stock, people can’t sell, mortgage companies disappear, foreclosures shoot up, but they’ call it a “correction” no matter what.
So… a major recession is housing will not impact CA’s broader economy, eh? Hmmm…
http://www.rismedia.com/index.php/article/articleview/9680/1/1/
…of the 243,000 private payroll jobs added in the state in the past two years, 122,000 can be directly tied to the housing market, according to UCLA Anderson. “In short, a sector of the economy that makes up 10 percent of total private sector jobs is accounting for 70 percent of the total job gains.”
Mmmmm… tasty, delicious REIC Kool-Aid. I want some!
Ack! Close quote!
Busted! Nice work, HARM. BTW, if you really want to understand the Anderson School’s current forecast, consider their list of corporate supporters (aka, the REIC):
http://www.anderson.ucla.edu/x1223.xml
I thought this quote was weird:
“A housing slowdown affects construction, loan agents, landscapers and many other related businesses, said Michael Carney, executive director of the Real Estate Research Council of Southern California. ‘Concern for the housing market as a whole may spill over into consumer spending,’ Carney said.”
Of all the stupid things to call out as related to a housing downturn. “loan agents and landscapers”? I guess Mr. Carney was trying to downplay by choosing sectors not many people have jobs in or related to.
What should we call this effect? When new money comes into a system it has a “multiplier” effect (as in my $100 goes to a store who now has $100 goes to a wholesaler who now has $100…..). Maybe this is a “dividiplier” effect or a “divider”effect. I’m sure there’s a real word for this. What kind of an economist thinks this effect doesn’t exist? How will we “not notice”? I can tell you, thinks are quiet as heck in my holistic medicine center in west LA this autumn, and that’s with a lot of different practitioners’ businesses. How’s that for no effect?!!
reverse multiplier effect - just a multiplier in reverse
I remember in Econ 102 (long before they did away with silly supply side economics - actually I believe in supply side economics if you are doing intelligent things with the money), the sample multiplier effect was not defined, but could be 5, could be 10… if that’s true, think about the massive amount of money that could disappear
What if you worked at HP, how would the problems builders and brokers face impact your day-to-day life? How about a nurse at health care providor Kaiser? Would she/he be laid off or have to take a pay cut?
yes.
‘If you are a builder or a broker, it will feel like a deep depression,’ he said. ‘But the rest of us will hardly notice.’”
In one perverse, unintended sense, this is right.
Ignoring the economic plight of others is now an ingrained American habit (not to mention a spurious badge of pride). This ethos can probably still operate as the economy goes through the first in a series of painful throes, first convulsing the building and mortgage industries.
This politically powerful sector will be trying crazily to extract hand-outs from the very government it has elected to protect it from taxes. Expect a petrified government, Dem or Repub, to flounder.
Once the pain spreads, however, a loud call will go up for relief for “all.” Given our heavy reliance upon the Wal-Mart economy, that part of the crisis could be swiftly forthcoming if a deep recession hits.
Economic populism will be quite a difficult pill to swallow in the exurbs. Expect crack-ups, especially in the megachurch set who think soaring home values are acts of God. Cue lots of “what the Lord giveth…” sermons, which, sadly, won’t be enough.
Culturally, we could enter a very interesting time in contemporary U.S. history–a chance to reexamine the myths of triumphalist Reaganism. From the perspective, this time, of its victims.
“a chance to reexamine the myths of triumphalist Reaganism. From the perspective, this time, of its victims. ”
WTF? What does Reagan’s policies have to do with free people making dumb choices fostered by really dumb FED policies?
Utter nonsense. Apparently, vfm, you belong to the “devil made me do it” school of responsibility (or irresponsibility).
No one has ever put a gun to people’s head to buy (sometimes to sell, yes, but never to buy). Having lived through the Carter fiasco and the Reagan years I don’t recall anything Reagan did or said that suggested “go forth and leverage the crap out of yourself”.
If you have something to document that to the contrary, by all means, produce it. But give up the meme that some big, bad, conservative made people act like fools. People have acted like fools regardless of administrations…or were those who bought into the dotcom mania under “Don’t invest foolishly” Clinton somehow different then these real estate fools?
“A Salida couple is suing a group that offers real estate deals at a Ceres flea market, claiming that the company didn’t deliver on promises to sell their home and get them a better one.”
I go to the flea market to get stock and commodities advice, legal opinions, and corn dogs. You would think that a person should be able to get reliable real estate advice, too. It’s a darn shame that these people were hoodwinked. Gives flea markets an undeservably bad reputation.
“The couple’s mortgage payment was $2,200 a month; they bring home about $6,600 per month. VJ Singh followed up with phone calls saying he could help them sell or rent their home and buy a bigger one elsewhere, and only increase their mortgage payment by $200 a month, the couple said.”
They were taking RE advice from a golfer. That was the problem.
Right, who in hell buys a house at the flea market??? That has to be one of the dumbest things I’ve seen on this blog. No sympathy…
Better yet, who takes home $6,600 a month and buys a house at a flea market?
Common sense was exchanged for consumer trinkets years ago in this country. That’s right dannll - no sympathy - no sympathy at all.
Damn right! That’s where I go for all my investment advice. Just invested all of Grannies savings on a hot tip I got down at the flea market, even got as bucket of popcorn to boot!
You should really reconsider, and start getting your investment advice from spam. After all, you can re f1n@nc e your m0r g@ge through email.
(Who DOES that?)
“I go to the flea market to get stock and commodities advice”….can’t stop laughing, great one!
LOL - you know it. I thought flea markets were the center of knowlege and learning!!
Never should have bought that “whole life” policy at the flea market. Should stick to Chevy radiators and claw foot tubs only.
This is the best post of the week!
Who else but a golfer would have the balls? -
One sector…
Oh you mean when the whole Aerospace industry tanked in late 80’s in SoCal.
or
the Japanese dumped Semiconductor chips on the US market below cost bringing down Chip companies in Silicon Valley (NoCal).
Or Pittsburgh in the early 1980s when the steel industry checked out. Whoa boy.
or the oil patch in Tx., and……
Ot ,but did anyone catch the Ex Fannie Mae auditor suing because he was let go after turning up a 50M, and 5M error in less than 6 months. These were in addition to the current fiasco. His superiors said to not get involved ,and keep it quiet. Then let go because of non-performance. …You must conform to company policy ,and hide any disrepancies I guess….
http://www.chron.com/disp/story.mpl/ap/fn/4386772.html
I was in Pittsburgh druing the early 1980s. Who boy is a MAJOR understatement. That town was HURTING. Bigtime.
Me too. Dad was in the steel industry. Engineering side, not pouring-iron-out-of-ladles side. Never realized how bad it was until I lived in other places with more “normal” economies.
“…Leamer’s Anderson Forecast report, ‘Models or Minds?’ states that ‘this time, unlike every other time, the problems in housing will stay in housing.”
Someone is gonna have to explain to me how that can happen.
It can’t as we all know! Just shoveling out the feel good BS.
“This time, unlike every other time, the problems in housing will kick everyone out of their housing.”
Didn’t you read his conclusion? Its because he “feels” it…….gee, I wonder where he stands on the political spectrum?
Funny how those who keep making rosy predictions never, ever feel compelled to offer any explanations, isn’t it? Why don’t they just say “real estate always goes up” and be done with it?
A 20% decline in housing is even more devastating the the dot com bust. Why? You have leveraged a ton of money to buy that house. A 20% decline on $300,000 is $60,000 bucks. Well I didn’t lose quite that much in 2001…
“In the Bay Area, 43 percent of loans taken out in 2005 were interest-only loans. Another 28.3 percent were payment-option, which can lead to a growing loan balance known as negative amortization.”
So, only 71.3% of loans in the Bay Area in 2005 were for people who couldn’t actually afford to buy. No problem. I’m sure Bob Toll is right and we’re near the bottom and the prices will increase soon, since houses are so affordable.
(sarcasm off)
When you have 71% of all loans being like that, at 2005 prices, ie peak, you just know that someone, ie MBS holders are going to get creamed ! To say nothing of the market side of the industry.
I’m just shocked it went as long and as hard as it did.
Its like watching two trains run head on into each other. You never thought it was possible even though you could see them on the same track. And you can’t imagine the speed and force of the collision but yet its about to happen.
The Bay Area market is due for a major correction.
Like many other areas, here it was sacrilege for years to mention or even think that real estate could go anywhere but up. Put forth the notion and everyone in a room would shake their heads at you like you were retarded, before you could even finish your sentence or back up your point. People had more faith in Bay Area real estate than their spouses, families, and respective Gods put together. It didn’t matter how you financed it because equity was instant and losses impossible.
Hope they’re all losing sleep and sweating bullets now…smug & greedy ba$tards.
Tell it to Andre Agassi……
Looking at my old Castro Valley neighborhood, I think it is correcting. Saw a home on our former street about 4-5 months ago which was similar to ours, listed for 879k. then 859k ….. then gone, so I’ll assume it sold. Now, there is another listed there, also a comp, for 770k (MLS- 40216817). Prior to March 2001, all three of our homes would have sold for about 600k-650k, so I’m not really too impressed with this appreciation.
I live in Seal Beach. Homes that were $400k - $500k in 2000-01 are now over $1 million. Not much correction here yet, but it will happen.
“A national recession is also unlikely, UCLA Anderson Forecast director Edward Leamer said. ‘If you are a builder or a broker, it will feel like a deep depression,’ he said. ‘But the rest of us will hardly notice.’”
————————————————————————–
Another great affirmation for not attending UCLA Business School. How can this dolt come out and say this with University approval?
Acually, he left out after ‘the rest of us’ the most important words - ‘…the rest of us with tenured positions at a major university will hardly notice’. That’s not an ivory tower, it must be bullet-proof.
Boy, do you ever have that right. The arrogance of some these academics is unbelievable, and tenure is at the root of most of it.
I am quite sure Leamer has been tenured for some time. But the chest thumping accompanied by highly dubious soft-landing predictions is very irritating, especially given how bearish Leamer was early on before anyone else even noticed a bubble inflating (I am thinking back in 2002 or so…).
No kidding, people always say academics are “liberals” - but history has plenty examples of academics becoming the most dangerous foot soldiers of the establishment. This guy’s a hack - smug and secure - and stroking someone for more grant money.
If he says (right or wrong) that a national recession is unlikely then under that assumption, “the rest of us” refers to more than the academic community.
The university doesn’t give “approval” for these types of things. Thus, the beauty of academe.
“How can this dolt come out and say this with University approval?”
He gets approval because of all the research grants that come in from the REIC when he says “real estate always goes up”…
UCLA Anderson School MBA is $100,000, if you get in.
Yikes
Folks, I need some advice. I’ve been reading daily and occasionally posting for the past 6-9 months so I’m familiar with most everyone’s opinion that the market is on the precipice and about to topple. As was discussed on one of the posts the other day, my wife is pressuring me greatly to get my good friend (who, um, is a real estate agent) to help us buy in West LA. We’re first-time buyers so realistically we are looking at a condo. We make a bit over $100K per year total. Of course everything we see is $500K+ for some crummy conversion that reeks of death and has community laundry facilities. I have bought time for the past year by saying the market drop is coming, the market drop is coming–just have patience! But I’m not really seeing much of that in our area (West L.A., Westwood, Palms/Mar Vista, etc.) People must still be buying because the prices are just nuts. My realtor-friend ran the numbers for us (he’s also a mortgage broker, hold the applause please) and the best we can come up with is about a $3500 monthly payment, sans HOA dues. Of course he is recommending an Option ARM payment plan. And of COURSE he told me last night over dinner that L.A. is simply different than anywhere else and that the prices here will always go up and we need to buy before we are priced out forever (I’m beginning to think that you get passed the Kool-Aid the minute you get your RE license).
So the upshot is, I’m at wit’s end here. We all know that when the woman wants to nest, the man better do what he can to help feather it. Anyone else in this situation? If so, how are you handling it? For the record, I wear the pants in the family. This issue scares me though. I just don’t want to be locked in to something that, as nearly everyone on this blog seems to agree, will be worth a good 25% less by (a year from now? two years from now?)
P.S. Last Sunday, when we were looking, a real estate agent actually handed us a photocopy of an article from that week’s LA Times that said the market would rebound in ‘07. I could smell the desperation!
You know whole “sell and rent” thing? You can do that with women too.
Start with showing her the data out there. Shiller’s infamous graph charting his “real home price index” over time is a good start (this coming from a respected economist who correctly predicted the stock market decline early this decade). irrationalexuberance.com if you don’t know what I’m talking about.
Make sure you listen to her feelings and don’t try to shoot her arguments down. Bottom line: tell her you don’t want to be stuck with the feeling like you’re upside down in a mortgage, which may jeopardize both of your futures.
Promise her that you’ll keep a close eye on market conditions (there’s so many blogs like HBB to make this easy), and when the time is right, BUY!!! As long as it’s not a forever situation, she may understand.
Good luck.
Don’t buy now!!!!!!!!!!!!!!!!!!She will ruin you financially as my ex tried to do and now she is 50K under water on a condo in sacramento. Talk some sense into her and get counseling if needed.
Here’s my serious answer: A good friend recently moved to Laguna Beach and is renting an ocean-view house for I think $2400. Let me repeat: Ocean. View. House.
I’m not saying you should move all the way to Laguna — you shouldn’t unless it makes the commute easier. I’m saying find something on Craigslist or whatever that rents for $1000 or so less than her shitbox condo and ask her where she’d rather live.
Haven’t posted before but have followed for years.
I couldn’t resist the Laguna Beach with the Ocean View for $2400.
My wife and I are in Laguna Beach and are renting a lovely ocean view house for $2,600. That includes all utilities but electricity.
There’s no AC here — not necessary.
Electric bill is less than $100 a month.
We’re just collecting dividends on the $400k I made on the selling our place in Newport Beach in ‘02 after buying in ‘98.
That place has doubled again but is now on the downturn.
DO NOT BUY A PLACE NOW…
DO NOT BUY A PLACE in West Los Angeles anytime soon.
DO NOT DO IT. You know too much and, when it turns out you were right all along, it will literally cost you 15 years and will torment you forever — cause it is crystal clear that you know what is coming.
Oh, and this friend of mine? He’s a commercial RE loan officer for a living. That is, someone who’s does math on stuff like this every day.
(And don’t tell me he’s part of the problem. On the commercial side the math HAS to work out.)
I think it’s simple, then. If they guy’s commercial, then have him do the arithmetic.
Put it in terms of you two as CoupleCorp LLC who need an operational base. Run the spreadsheets on leasing at market versus equivalent property purchase, compute return on equity, etc. Make sure to include equivalent investment returns if cashflow saved by leasing is invested as well.
Run out the #’s for 15-30 years depending on various assumptions.
I agree, RENT !
I agree, RENT !
CVB - I feel you pain. My wife and I moved to the SF Bay Area for a new job, and she’s pressuring me to buy when, considering the prices, it makes more sense to rent and see. I would show your wife and friend what happened with the last RE bubble in LA - that op-ed by Ben Stein is an eye opener. Good luck and try to delay into next year - you can at least argue that you won’t get any tax benefits from buying this year, so might as wait until 2007.
Time to bring your wife here to this blog and have her do some reading. And if she doesn’t agree, have her post about wanting to buy and have some of the people here educate her.
or flog her.
Been there. Here’s what I did. (SF Bay area)
I created a spread sheet in excel, to track our net worth for many years ahead. It was wired to our pay, inflation and all the junk you could think of. The rent vs buy results were really brutal.
All that exercise did was make my wife doubt the kool-aid a little, still not completely convinced it was a bubble. What really convinced her was when a family close to us (2 earner mortgage) lost one(his) job. They had to rent out their house and rent a condo. The lady always used to needle my wife - “why are you not buying, why are you not buying”. She used to roll her eyes when we said we could not afford one. She is so chastened now.
But please rent a nice place - life will pass by before you know it. Do not postpone living, till you buy a house. For half of that $4000 you would spend on living in a condo, you should be able to rent a better place, and that would put things to rest for a while.
Try a little compromise. Agree that you’ll keep looking, but that she has to read this blog for at least a couple of weeks. Let her get a taste for what the bloggers are saying. Her need to nest is likely strong, but that nesting instinct is based upon her need for security. Buying an overpriced condo that you don’t really want and can’t really afford, and either being stuck in it (because you’re underwater) or having it foreclosed on (because the option ARM resets) doesn’t really satisfy that need for permanency that she’s looking for. Reading the blog just may get her to realize that buying now is a bad idea, and that by waiting she can actually get what she really wants.
But, hey, I’m just an unmarried guy, so take that advice with a grain of salt, since I may have no idea what I’m talking about (and usually don’t when it comes to women).
If you go ahead and buy now, while fully cognizant of the peril, then you deserve everything that comes of it. Don’t be the greater fool. It isn’t just about you either. Coddling your wife here will do both of you a great disservice. Far less stressful situations have been known to break marriages. Be a hero. Suck it up and do anything and everything to stall her.
I’d wait another 1-2 years. In the meantime, you could 1) rent a nice place, and 2) take the money you would have been paying on a mortgage, and sock it away - in a “home fund” account.
I may be biased. I’m FROM the Bay Area (moved to Portland) - my wife pressured me to a large extent. I relented. Today? We’re not married. My second (and final) wife has excellent financial sense.
Just think of the places you’ll be able to buy in a year or two (much nicer) and what you can rent in the meantime!
Remember - realtors may be your friends (I have one) but they ARE used-house SALES PEOPLE.
Good luck!!! Hang tough!
Tell her this…”Honey, owning a house would be great. Having our own nest is my dream, too. I love you. By the way, if you keep on pressuring me to buy, we are getting divorced.”
Ask your wife if she understands what “foreclosure” means.
Then find a paper or pull up http://www.foreclosure.com and walk her through it. Keep track of them and ask her whens a better time to buy; when forclosures are low and shrinking or high and rising?
Ask her why she thinks people are losing their homes when a) employment is high b) rates are low c) home prices “never go down in LA”…..
Now if she doesn’t get the logic, go to some open houses…any open house and just look around. See any other buyers? Why might that be? Ask her how she’d feel if she were in the sellers shoes? No one coming around to buy? Maybe a recessions going on….maybe mortgages are too hard to get…..
If that doesn’t work….take any money you have left after you buy and buy puts on housing sensitive stocks. At least what you gain there may insulate some of the damage done on the other side of your “investment” portfolio.
I should have said “when’s a better time to buy; when forclosures are high but shrinking or low but rising rapidly?
Simple, I know but for heaven sakes RENT and rent a nice place. I’ve been where you are MANY years ago, you are setting your course for the future. Tell her you are ahead of the curve and when the dust settels (and it will) you’ll be far ahead of the crowd. We only go around once… Do NOT buy!
100K$ of depreciation pays an awful lot of rent ! Never mind the interest on a mortgage as well.
Okay - from a female…
If your wife is open to this argument, simply point out the cost difference between buying and renting. Obviously most of it should be saved, but get her to imagine some things she could do with the money instead of buying an apartment. Travel, nice clothes, actual retirement etc.
If it’s she wants it “any” price, point out how many hours extra a week she has to work to “own”. Would she like the freedom to not have to work those hours? Putting it in terms of life hours tends to be more convincing and less than abstract dollar figures…
Another thought - leave future predictions about housing prices out of it and point out to her that condos by their nature have a limited appeal. Assume the best case that you the can pricewise and point out how long whatever your looking at has been on the market. (I’m assuming that what you really want is a SFH at some point.) Leases are much easier to break - point out how stuck you’d be in something you didn’t want if the current market times stay the same or get worse. It will be sooo much easier to buy the house you really want by saving the cash and being free simply to buy because you’re not stuck selling.
What I’m suggesting basically, is that do you best to give her some reason to stop fantasicing that her biggest dream is to buy RE right now other than just the dry numbers. Give her something in the now *and* the future that’s a better alternative. And do your best figure out to stop hanging with your realtor friend. It would definitely be easier to convince her to wait if you are not going to open houses each weekend.
CVB-
Patience, Patience, Patience. Why would you pay $3,500.00+H.O.A. a mo to live in Palms, West LA, in a condo financed with an Option Arm. Tell your wife to wait for the 2Q 2007 when everybody figures out that no relief is coming and start dropping prices like there’s no tomorrow. Make a deal with her if the prices aren’t dropping by the second quarter. You’ll buy what she wants. The only people buying right now english is not their first language or their brain dead.
I wear the pants too, but after 34 years of marriage they’ve gotten pretty damn short.
Like most here, bring her to this blog and read it every day for two weeks (a second to an above idea). I’ve got a son in Hollywood and he’s dealing with the same problem. DO NOT BUY! 1. This housing market is so rotten, and that rot is so completely pervasive that it is literally blinding those that should know what must happen - an absolute crash.
2. RE agents are used car salesmen with better teeth - they just look better when they lie.
3. Give it 3 years - rent - and saving your coin like madmen. You will be a true winner, basically the bear side of someone who bought in 1998. Good Luck!
Huh! It’s my husband that wanted to buy and I’m the one telling him to wait, but I handle the finances, so maybe that’s why. You need to do some figures with her, what would happen if you bought and houses dropped 5%, 10%, 20%, how much money would you loose. How much more could you buy for the house or even how much more house could you buy if you wait and the prices drop. When the ARM loan resets at a higher rate - what will the payments be? Much higher than your current rent? Can you both realistically afford it. How much spending on eating out, holidays and clothes will you have to cut back on to afford the mortgage. Also you have property taxes to add on, plus upkeep for the house, HOA etc.
Then you have a lot more people in dogdy loans having to sell in the next two years after their ARM resets - just think of all those houses you’ll be able to choose from if you can at least wait another 6 months - hopefully by then the market will be in even more trouble and your case for waiting will be much easier.
Mind you I’m the kind of gal that waits until everything goes on sale before I buy - I don’t like giving money away!
Thank you all for the well, mostly, great advice. I probably should have mentioned that I’m late 30s and she is early 40s (both got married late), we have been renting for four years now and she is just really tired of it–and wants a cat. If we were mid-20s I would have no problem demanding that we wait a few years for the what-seems-to-be-inevitable drop in the market.
The crazy thing is we could have bought when we got married in 2003 if it weren’t for an ex-girlfriend of mine who uh, had a wee problem with money and ran up tens of thousands of dollars on my credit cards behind my back in the mid-90s, pretty much bankrupting me for seven years in the process.
Anywho, you all are great and I will get her to read the supportive letters. We’ll see how long I can play the delay game!
This comment sheds more light to your question. It really is not about her and the house. It seems that you are attracted to a certain type of a lady. One that needs to get her way regardless of the cost. You need to have a talk with yourself. Why are you doing this. Why are you letting all these women get the best of you. If you think bankrupty is bad, try buying anything right now and see what you’ll be saying in the future. If you are worried about your marriage it will be on the rocks after you get in this bind, because if she is this unreasonable now wait till she wants to know why you can’t fix your financial problems and get a better job. In short, listen your intuition, this is not the time to pacify wife. Having your own house is not all that it is cracked up to be… Also making a foolish decision at your age is not the same as making it when you are 20, you don’t have the rebound that 20 year old has.
I second Say What’s opinion. Sounds like judgement in women isn’t your strong point. An unreasonable, pig-headed spouse isn’t someone you want to go through life with. You need to very patiently and methodically lay out your case to her. If she refuses, then just say, flat out, sorry, but we’re not buying right now, period. If you want to make that mistake, make it with someone else. Maybe you can find a rental more to her liking, but don’t let yourself be buffaloed by someone who is illogical.
I third Say What’s opinion that was spot on a good post.
Move to a nicer apartment — one which allows pets. Put the home purchase on hold, but don’t put your life on hold.
I rent a condo in Playa del Rey. 2 BR and the owner allows cats (I have 2). Beautifully remodeled with hardwood floors and granite counters, just up the bluff from the beach. I pay $2400 a month and get 2 garage parking spots. The same place in the same complex is going for $550,000. Why buy when you can rent for 2/3’s the price? Find a nice place with a private owner who will not care if you paint the walls or have pets (they are out there, believe me.) If she does not get it, you guys are going to have a lot of problems.
I agree with SS and SW.
At her age if she isn’t with the program, you need to seriously consider whether you should go forward (in your marriage). I know it sounds harsh, but you need to be spoken to straight, not sugar-coated.
And Palms. I haven’t been to that part of L.A. in a few years, but last I checked, it was crap. I am familiar with L.A., my grandparents owned many a four-plex on Crenshaw and I attended USC. I also worked in downtown L.A. for a few years. I wouldn’t pay over $300,000 for much int he way of a condo in L.A. unless in a superior neighborhood further Westside like B.H., Brentwood, Bel Aire or the beach. But in Palms you are surrounded by the ghetto. Not good investment, especially with times getting tough for the working class.
And as for your “friend”, if he were on your side in life, he would council you on not buying right now. He is probably clsoe to starving and needs something to “close”. I dont know for sure, but if I were in mortgage or residential r.e. right now, I would probably be considering other options were I him.
You don’t know me, so take what I say with a grain of salt, but you really do need to think your whole life through - maybe take a vacation by yourself somewhere secluded like the mountains and just think for a while.
Rent a house. If the condo costs $500K now…figure $150K to $200K in 2009. Ask her what would she like to do with the other $300K?
Oh come on, you lot. His ex definitely qualifies as a hose beast, but all we really know about his wife is that she’s a little older than he is and wants a house and a cat. That’s hardly a corporal offense. Let’s not read too far into things on scanty evidence, and in any case he came here for advice on housing not the Love Connection.
CVB, if your wife insists on getting her way….(to hell with you and your financial future together)…..tell her to buy the house in HER name and make sure you sign a quitclaim deed. I’m a female who has purchased 2 homes by myself, and currently rent.
When she is boo-hooing about how much of a money pit her “house” is, lovingly remind her that it’s what she wanted, so deal with it. If she cannot purchase it on her own, remind her of the golden rule………he/she who has the gold makes the rules.
This is no time to cave in to unreasonable demands.
Let her pout. She’ll eventually get over it. If she doesn’t
get with the program, then you’ll know what kind of person you really have on your hands. You have my sympathy!
Why can’t she have a cat? I rent and I have 3 dogs, 1 cat, and 8 birds! I just gave my landlord a $1K pet deposit and no problem. I live in a 2 bedroom duplex with a huge unfenced yard…I bought fending at Home Depot for $1K and everything is working out great (for the pets). If your wife is a cat lover and can’t have a cat no wonder she is pressuring you for the house.
Welcome to my world. But you can make a nice home in a rental just as easy as buying.
Just think -You’re in the ninth inning, the bases are loaded, your team is down by one run, All you need is a base hit man. DON”T STRIKE OUT DUDE!!
If you have waited this far (like myself - since 2000) - your almost there man. Just hold on. My wife didn’t believe until three months ago when she saw “price reduced” all over the adds. Now she has some hope.
More like, you just need to draw a walk, and Rick Ankiel is pitching.
Man, I’m a woman and I feel for you. I don’t know what to say except that if you put your foot down, she won’t leave, no matter what she says. She may cut you off for a few months but that’s not as bad as being tethered to some flying turd now, is it?
lol
Make sure everything is in her name — and make sure your name is not on anything — if it is her idea then she should own up to the responsibiltiy.
No need to worry because your wife needs your John Handcock to get the loan .
Tell your wife that you don’t want to be a victim of a cheerleading real estate cult . Your wife needs to be de-programed .
It doesn’t sound like you like this condo anyway . Also, tell your wife you would rather save more money to buy something better and just wait for the fire sales .In marriage both parties have to be game for such a big purchase .Your wife is being selfish not considering that you need to be OK with the purchase also .
Your wife has realtors breathing down her neck with the chants ,so get rid of those people who are brainwashing her with the old 2007 rebound surge theory .
Unless your wife is willing to read counter-data to the real estate sales chants ,you got to take control and just say no regardless of what she puts you through as a result .
“No need to worry because your wife needs your John Handcock to get the loan ”
Not any more Wiz. I have an ancedote but it’s a little to close to home.
I just said NO with my wife, and got flamed throughly for it. “Its a home, not an investment!!!” Another tactic I am trying now is to say ‘pay down the credit cards, build up a down payment and get a better house for the same amount of money.’ This works because house prices are going down and are likely to do so for a while.
Don’t give in, hold your ground, she’ll be glad after the market corrects. If your right (we all know you are) and you buy, you’ll be stuck in that ugly thing for a decade.
I have experience in this, but on the selling side. If I had done what I thought was right, I’d be renting in the OC rather than moving back to AZ where my house never sold.
Central Valley Boy. First, let us take a look at this statement. “For the record, I wear the pants in the family.” Before you do anything else quit deluding yourself that you have any power in the marriage. But thanks for making every married guy on this board laugh tonight. I wish you the best.
Yeah, I’m glad somebody saw that was tongue-firmly-in-cheek.
Also for the record, the wife is *not* a harpie, like some people have insinuated.
Oh, and txchick you rock! I always love your commentary.
I’m a wife, and I’m having to hold back my husband from buying!
CVB - get yourself a login to Westside Rentals and find yourself a nice cat-friendly place for a year or two. The other half and I have been renting in West LA and the Valley since we moved here in 2000. Its a little harder to find pet-friendly property, but we’ve lived in three places in the last 6 years, and never had a problem with finding places for us and the 2 cats.
Personally, I think the prices in Westside are insane at the moment - as much as I like Santa Monica, I can’t get my head around paying over half a million dollars for a very ordinary house on a small lot.
Do the ‘jam tomorrow’ argument - point out that, as nice as the condo sounds at the moment, if prices continue downwards (and how can they not in the Westside, seeing as they’re at nosebleed heights now) then you’ll be able to afford a house for the same money next year. So ‘condo now, or house later’?
Make a deal with her - as someone already suggested - rent a place for a year, and if the housing market in Westside hasn’t shifted downward dramatically in the intervening 12 months, then go looking for condos to buy. It makes a nice compromise - you haven’t poo-poo’d her need to nest and haven’t ruled out ever buying, and you’re not locked in to a condo you neither want or like.
CVB,
The fact that you’re asking this question after having read this blog for months tells me you don’t really wear the pants. Have you seen the Suzanne commercial? Don’t be that quivering, spineless, wimpering, simpering, fat fool of a husband who acquiesces to his wife’s desire because it’s easier than telling her “No”. $100k in LA isn’t much money, certainly not enough to buy a place and give you a cushion in case things go wrong. Do not let your wife pressure you into making the worst financial decision of your life. This is a precedent setter for your marriage, if you’re not firm with her now, you may as well hand those pants over because you won’t be wearing them anymore. Tell her that you want a place as badly as she does, but now is not the time to buy. You are the educated partner in regards to the housing bubble, it’s your duty for the long-term health of your marriage to make sure that a risky financial decision isn’t made. You have to be the responsible one here.
99.9% of those who’s interests lie in a bubble continuing (like your realtor “friend”) will always tell you that, “It can only go up,” or “You cannot lose,” or “This time it isn’t a bubble,” or “Now is the best time to buy.” They have a whole bag full of sound bites. Most should be put in a place where they belong. The toilet.
Several hundred years of bubble history tells a much, much different story. Read this next part carefully several times and show it to your lady.
ALL BUBBLES BURST. Stock bubbles, property bubbles. Land bubbles and soap bubbles. They all burst. The bigger the bubble - the bigger the “pop” when it finally bursts and this current bubble is very, very big. One of the biggest - if not THE biggest. The only difference is, some bubbles take longer to deflate than others. It depends on the panic factor.
If you want to to buy a home, wait AT LEAST until the end of 2007 or early 2008 if only for one reason. There are going to be a lot of empty properties on the market as the financially stretched borrowers bail out.
Also, very important, you should bear in mind that where property is concerned, condo’s are the most prone to big drops when a property bubble tanks. (See my example at the bottom of this post.) Like 50% + drop in value. However, if you want to pay $500,000 now for something which will, in all probability, bottom out around $300,000 in 2 years or less - go ahead.
BTW, you can tell your realtor friend from me he’s either young and never been through a bubble bursting, inexperienced or full of sh*t.
EXAMPLE: During the last property bubble, the person who bought the condo next to mine in West Hollywood, paid $320,000. He was a screen writer. The bubble burst and he saw he was paying the mortgage on a $320,000 condo which was only worth $220,000 and the value was still dropping. He walked away and went bankrupt. The condo was empty for months and months, then was sold by the lender for $180,000.
OK, I’m sure your wife is a nice women ,but so many women are really responding to the spin on being priced out forever BS.
No big hurry to buy , especially now .
Here’s what you do. Get your broker buddy to just show you condo rentals in the area you are interested in buying. Make sure he plays it up that he is showing you the ones for sale. If you find one that sets your wife on fire then you are in business. Simply have your buddy draw up fake closing papers and sign a side lease with the owner. Make sure you have an agreement with the owner to only talk with you if he calls concerning the rental. Take all the extra money you would be spending on the purchase and save it in a secret bank account. In a couple of years she will either think you are the tits for having great foresight or will divorce your ass for being a conniving prick. If the former, you can go out and actually buy a new house with the increased downpayment you now have as well as from collapsed RE prices. If she divorces your ass then you have some extra money hidden to set yourself up after the divorce. A win-win in my book. Hope this helps!
you cannot afford $3500/mo on $100k unless you have no car, never ever dine out, and never save anything.
I have just gone through a very similar situation. We had owned a home already when we both got job offers in South Florida. So my task was to convince my (wonderful) wife that not only were we going to sell our lovely abode, but that we were also going to move into a cheap rental to wait things out.
What I pointed out was that we could afford something that in all likelyhood we would hate soon thereafter. Condos are not good places to have a family. The square footage we could afford if we were to buy would commit us to years of crampt living. We would have to consistently search at the bottom of the housing spectrum for homes, when what we really wanted was something at the middle. In short, anything we would buy would just be settling for what we could afford. We wouldn’t be buying anything that we actually wanted.
So, in the mean time, we are saving a lot of money, and I take the family out on short vacations all the time - Disney, beach, NASA, beach, Miami, beach, Gulf, beach. It’s a great way to live, really. We have the cash left over, after all.
We just moved (back) to Miami after a couple of years in NYC.
In our family it is my wife who is convinced that Miami RE is going to crash hard in the coming year or two.
I am not so sure, actually - the sales are still strong, the prices in desirable neighbourhoods are barely budging from early-2006 peak; and the coming inflation may well stop any price adjustment. And yes - there are plenty of foreigners who think that owning a Miami condo is better than owning a pile of paper dollars. One cannot fault their reasoning.
I am waiting to see which way the inventory is going to go in the spring. If it goes down from the current levels, I will seriously consider buying something in Q2-Q3 2007. I have about 600k stashed after my stint on Wall St, and though it does not buy anything nice here, it will still buy something livable in a (somewhat) decent area.
I believe that the coming years are going to be highly inflationary, and this changes the calculation quite a bit.
Sir:
I am posting this late (Friday Dec 8th), but hopefully you will come
back to this topic to re-read.
I would suggest as a compromise that you and your wife enter
into a lease-option-to-buy agreement. If you can negotiate
a 2-3 year lease a apply the rent to the purchase price, it
might be an effective way to satisfy your wife and hedge
the particular market you are in.
I am not an expert on the mechanics / gotcha’s of lease option
agreements, but perhaps others with expertise in this area
could comment
Thanks, I did see your comment and I’ll look into it. I’m actually quite touched at the number of people who wrote in, even those who offered dubious advice or mischaracterizations. At the very least it shows how passionate people here on this blog are about this subject.
I would also try finding another third party (to counterbalance your realtor) who agrees the market is crashing and can cite details and history on why this is a bad time to buy.
I agree with all the talk of compromising. I think come spring you will see some real adjustments in MSM bubble talk - as inventories rise to staggering heights, foreclosures boom and prices fall even more rapidly. If you can get into a (very nice) condo that allows cats for one year you may see that she changes her mind about buying. Finding a place that rents with pets is not that hard (and as a cat owner my entire adult life two cats were easy - however, now I have added four dogs to that it is much harder!)
I would question how much of a “friend” your realtor buddy is. He sounds very self serving. Personally, I never seek my friend’s business - I don’t want to lose them over any of a million things that can happen in business. I have a realtor friend too. One that been in the business for many, many years. Like always, she has been putting about half her money away for the lean years. And she knows the next few years are going to be lean. He either knows it and is willing to screw a friend or doesn’t know it in which case he is too incompetent to have your business.
““Many models say that a recession in the next 12 months is a virtual certainty,” though Leamer’s Anderson Forecast report, ‘Models or Minds?’ states that ‘this time, unlike every other time, the problems in housing will stay in housing.’”
———————————————————–
“Unlike every other time”? WTF? The four most expensive words in the English language are “It’s different this time.” OK, Ed, explain why it’s different this time. Why do you even do your models if you’re just going to ignore them and say whatever the hell you want? Man, this kind of crap pisses me off. And from my alma mater, too. They were one of the first ones to be bearish, and now they’re pollyana. I just don’t get it.
Maybe they’re trying to sell their property, no?
They lost Thornberg, hence the change in posture.
I still cannot believe the report says that. Right now, I’m hitting my thumb with a hammer and everytime it has hurt. But I think the next time, unlike every other time, it won’t. Aaarrrrrrgghhhh. Wrong again.
LOL - good one JimmyB — Definition of insanity - Keep doing the same thing over and over and expect different results.
” Aaarrrrrrgghhhh. Wrong again. ”
LMAO !
Um, yeah. Tell that to the two Nobel-prize winning economists at Long Term Capital Management (LTCM) who developed a “complex mathmatical model” to guide their investment strategies. Didn’t work out so well for them — the collapse of the LTCM in 1998 almost brought down the whole global financial system.
Payback time……….?
Lenders feeling pain as more homeowners default in U.S.
‘Sky may be falling’
http://www.canada.com/nationalpost/financialpost/story.html?id=fdc9f361-c83f-457a-9367-53ba4c4bd253&k=76762
HSBC underestimated borrowers’ ability to repay mortgage loans in the U.S., Douglas Flint, its finance director, said yesterday in a conference call with analysts.
Um, that sounds like they “misunderestimated”!
The thing about models is that Joe Six Pack doesn’t know anything about models. All he knows is his job, bills and his mortgage. So when his ARM adjusts up and he doesn’t have enough money for the mortgage payment and he has 27 more years to go, he doesn’t care about the model.
My model says it’s a B-29 from World War II that is capable of flight up to 40,000 feet, at speeds of up to 350 mph.
The ancient Greek model said that the sun was Apollo driving his chariot across the sky.
I don’t like it when people claim that their models predict anything unless they also tell me what kind of model it is, what its historic correlation and accuracy is and has been, and what assumptions and parameters it uses.
Otherwise, I’m sticking to the B-29.
Whenever I try to study a model really hard, the pages end up getting stuck together.
Yeah, I hate those Victoria’s Secret ads too.
LOL
I think people are catching on ! The homebuilders got hit today.
“Toll Brothers Inc. and Ryland Group Inc. dropped the most in almost two months after Credit Suisse Group downgraded the housing industry. Home Depot Inc. had its biggest loss since October. The world’s largest home-improvement retailer said 19 years of stock-options backdating caused it to underreport expenses by $200 million.”
http://www.bloomberg.com/apps/news?pid=20601084&sid=aP42qh3xrb4M&refer=stocks
Add Ivy Zelman to the list of credible sources along with Robert Shiller and Roubini. She understands the problems facing HBs as well as most.
19 years of stock-options backdating?
Man, these guys were waaay ahead of the curve on this scam.
Are there any estimates of how much the Home Depot embezzlers stole from their stock holders by the options backdating scam? My father-in-law is a share holder and an attorney; I will have to check with him about how he feels about having all this money stolen from the company he co-owns by top management…
Just when GS is having a day off.
It’s called torment by voir dire…
Interesting theory in a free newsletter i read: As foreigners and others attempt to rid selves of increasingly worthless dollars, they will buy up RE in prime areas of U.S. even though they know it’s still overpriced.
Thinking being that RE is at leaast a tangible hedge?
I think the Japanese tried that in the late 80s, early 90s with Rockefeller Center and Pebble Beach golf course……didn’t work out so hot.
Bill Gross thinks the long bond is going below 3%. We got a long way to go before furriners stop underwriting our way of life.
But that newsletter ignores an issue I have been thinking about for a long time.
Myth 1: The housing market can crash but not impact the overall economy.
Myth 2: The U.S. economy can crash but not impact the overall world economy.
They are both pure bullshiit in my opinion. Something tells me that if the entire world economy is suffering a meltdown Hans, Nigel & Wang won’t be worrying about which condo to buy in Fort Lauderdale. They will be worrying about how to keep their economy from melting down or getting the tanks out to quell demonstrations.
Here is a great article about the inner workings of a mortgage co !
The founder has to sell his house because he is being sued !
“Within days of shutting its doors, Merit’s execs were in the home-loan business again.
Nelson, Andrews and Yeager broke with Greenlaw to form Elite Real Estate Group in Kirkland.”
Its worse than the boiler room stock scam artists of the 1930s !
http://seattletimes.nwsource.com/html/businesstechnology/2003459108_merit03.html
‘this time, unlike every other time, the problems in housing will stay in housing.’
I’d agree to the extend that the problem will stay in housing and every other industry that touches housing, which is the bulk of the economy.
Does anyone find it funny that regulators are now clamping down on commercial real estate lending ? Did they learn a lesson with private RE ?
http://www.usatoday.com/money/industries/banking/2006-12-06-regulators-commercial-lending_x.htm
And its really interesting that they are investigating the municipal bond market for bid rigging. Like there is no fraud in the mortgage market !
http://www.bloomberg.com/apps/news?pid=20601103&sid=awq77C8cUwZA&refer=us
I’m wondering about Los Angele’s West side - Brentwood, Beverly Hills, West LA. Are they immune to the bubble bursting as I saw in an article earlier this week on CNN.com? It was about gentrification and how that made certain areas immune from the housing bubble. What do you think?
Yeah, west LA is special, and different. Everyone wants to live there.
Especially O.J. Simpson!
CNN calls Boston a “Bullet proof” RE investment. Enough said…..
If the MSM tells enough similar lies about enough markets whose local bubbles are collapsing, maybe all the lies will turn out to be good predictions? Why I cannot say…
Any area that’s had ridiculous appreciation in the past few years, without equivalent appreciation in wages or rents, is vulnerable. And that sure enough includes West L.A.
BWAHAHAHAHAHAHA!!!! ahem, sorry… BWAHAHAHAHAHAHA!!!!!
Okay, yesterday I was pissed at one of the stories Ben posted. Now I am just flabbergasted. Where, oh where, do we even begin?
First, if you are just going to toss the models aside even though they have always worked, why bother with them? Obviouly, we have truly reached the point where all the REIC wants are cheerleaders.
Second, the article from Canada is scary. If there is $2Trillion about to rest, we are in a world of hurt next year, esp. if the world’s 3rd largest bank is reporting trouble.
Third, who effin buys a second home, no less, from a sleabag at a flea market. These people brought home $6,600 a month (very nice by the way) and paid $2,200 a month (the person who sold them that mortgage understood fundamentals). Well as they say, a fool and his money…
Fourth, any yahoo that does not think next year is going to be serious recession is in for a wake up call. Oh, many folks will still use the Visa for their groceries and hope for a windfall later to pay it off. However, the Queen Mary ’round the world cruises and Corvette dealerships ARE NOT going to be as fortunate as the grocery. The HELOCs WILL (UNDERLINE THAT WORD) going to dry up and quick!
Fifth, I cannot believe how many of these subprime scumbags are dying. It seems like one, sometimes, two a day are folding the tents up.
And lastly, I am just so disgusted by all the crap that everyone in the media or the REIC or Wall Street kep feeding us. It goes beyond simple cheerleading. Funny, today I was at a meeting with someone discussed deferred comp and the person was showing us this nice graph and all. It was so hard to bite my tongue and not ask, so, how much of this money is in hedge funds, derivatives, or flat out junk mortgages, let alone do any of you really think I will see that $10/week grow to millions of dollars? Of course, I kept my place, I didn’t want to upset everyone’s million-dollar retirement plans.
Indeed…MANY people I know used IO loans for homes here in the BA. The comment about RE being sold at flea markets is understated. The last time I went to one, there was roughly 22 at one flea market, 10 at the other- all hispanic, and all selling homes in the choicest ghetto areas. Pretty sad.
Indeed- I see no way that the BA can possibly maintain anything close to a healthy housing market for the next foreseeable future. Simply too many people ‘bought’ with loans that work only if values go up signifigantly… which they haven’t for a year. It’ll certainly be interesting. Florida and Denver are falling, which seems dramatic enough, but California might be having some rather interesting fireworks of it’s own.
Most flea markets I’ve been to feature mass-produced, poorly made, unnecessary crap I wouldn’t buy at any price, sold by sleazy, bottom-feeding urchins. Exactly how does this differ from RE right now?
This is the funniest true comment I have read yet!
You’re welcome. I do try.
Real Estate prices will drop quite a bit in the next several years. The unnecessary crap will probably cost the same
California leads the nation in many ways. The whole mania about real estate and flipping started here after the dot-com bubble popped. It spread throughout the country, bounced like a wave off a wall, and is coming back now. Hopefully it builds momentum on the way.
Has UCLA Anderson Forecast changed sponsors or management or something? They used to be quite bearish, but the last year or so it’s all soft landing? Even as the data gets worse and worse.
Thornberg left.
Here’s a partial list of their contributors and sponsors. See a pattern?
Citigroup - Salomon Smith Barney & Citibank
First Pacific Advisors Inc.
PricewaterhouseCoopers Foundation
Roth Capital Partners, LLC
Arden Realty LP
Bank of America
KeyBank National Association
Apollo Real Estate Advisors, L. P.
CMS Bond Edge
Deutsche Bank
Dimensional Fund Advisors Inc.
Fidelity National Title Company
First Property Realty Corporation
Goldman Sachs Group Inc.
J. P. Morgan Chase
KPMG LLP
Barclays Global Investors N.A.
Capital Group International Inc.
CB Richard Ellis Inc.
Chicago Title & Trust Company
Countrywide Home Loans Inc.
East West Bancorp, Inc.
Eastdil Realty Inc.
Merrill Lynch
Moody’s Corporation
Morgan Stanley
Pacific Investment Management Company
Suntrust Bank
Union Bank of California Foundation
Union Bank of Switzerland
Wells Fargo Bank
Western Asset Management Company
Arden Realty, Inc.
Automobile Club of Southern California
Bank of the West
Catellus Development Corporation
Washington Mutual Foundation
“After they agreed to buy another house in Salida in December 2005 for about $500,000, they learned that the new mortgage would be $4,200 a month.”
That sounds about right for a 500K mortgage with taxes etc. where was this guy’s confusion? Oh wait, the sales guy said…
While back in CA to visit, had the radio on and hearing nothing but bull shills on RE (it has already bottomed out), great time to buy for 1st time buyers (lots of inventory to pick from), low rates, lots of refis, etc. The sleazebags Mark Tice (HMS Capital) and Wesley Hogland (Lennox Financial) are still pimping their ‘biggest no brainer” toxic loan garbage heavily on the radio. If I didn’t know better, I would think that Los Angeles is the real estate garden spot (although I know it is a hellhole).
But most folks are working and can simply make their monthly mortgage payments. If the slowing economy turned into a large number of layoffs, then folks could be forced to sell and move to an apartment or a cardboard box on the side of the road. But until then, folks will live their lives no matter what is happening to the day to day value of their real estate.
“But most folks are working and can simply make their monthly mortgage payments.”
Ahahahahhaahahaha…your joking right??? The Trillion dollar train is coming and people will NOT BE ABLE TO MAKE THEIR PAYMENTS!!!!
Way too many folks are one missed paycheck, one trip to the emergency room, one cracked manifold, or one busted water heater away from missing their next mortgage payment. They’re indentured servants of the REIC, and they’re going to get wised up the hard way.
How about this rosy outlook:
http://www.financialsense.com/fsu/editorials/willie/2006/1207.html
A steady, relentless, and nearly perpetual force pushing the USDollar down in the next two years will be the housing bear market. Most economists seem woefully inept and insufferably weighed down by optimism, as they issue silly pronouncements couched as analysis but teeming with nothing but hope and badly disguised promotion. As policy shifts toward relieving the pressure exerted from the housing decline, slightly lower interest rates will matter little. Closely behind comes the Weimar-like push on monetary expansion, an accelerated effort to inflate. Housing will not respond much at all, but our world reserve currency will from severe debasement, as its exchange rate tumbles into the basement of shame. The USDollar will undergo major damage while gold and silver make new highs. The most painful twist will be the rise in energy costs (crude oil, natural gas, diesel, gasoline, heating oil) mainly from the US$ effect, despite somewhat lower domestic demand as the USEconomy slows. China & India will chug along.
This is important…esp wrt energy. In fact, at some point, the Russians, Arabs, South Americans, etc… say, “No more green pieces of paper…pay with Euros, Rubles or gold…”. Then it’s 10 gallons / month per person rationed at $50 gallon or worse. Under $50K or $20K income gets a price break or something. Black market price - $200 per gallon. Whatever.
What happens to the Inland Empire, Ft Collins, Alpharetta, Danbury, Loundon Co, Va., etc… then?
It’s already happening…Iran trades with non-US countries so will be trading in Euros’, Rubles, gold.Already countries are lowing dollar holdings. Analogous to the frog slowly being heated in a pot of water.While most people here are aware of the housing bust,it seems readers here need to look at what may lay ahead for the dollar. You may want to have alittle PM’s as that paper may be worth less very soon..Did you see Paulson country hopping last week? He wasn’t doing that because he’s a social butterfly….
http://tinyurl.com/yzn3cv
Land prices are going to take a tremendous hit in the years to come as the bubble deflates.
Dude, they aren’t making anymore of it. They aren’t making anymore 8 track tapes or episodes of Punky Brewster, though, either.
Damn shame. Punky literally changed TV. A trendsetter and icon.
Damn shame. Punky literally changed TV. A trendsetter and icon.
Nothing funnier than a girl who wears two different shoes.
You’re spot on about that. i’m seeing a lot of previously untouchable stuff come onto the market small and large.
Nathan — I am with you, dude. Are you posting from Chicago?
Licking my chops…
Chapman sees slower job growth, lower house prices
n its annual economic forecast for Orange County, Chapman predicts a drop in construction, financial jobs.
http://tinyurl.com/v6ups
Why haven’t we heard anything lately from those Chapman professors who came up with their own new model for determining buy v. rent? Have they realized yet how wrong their assumptions were?
I think Chapman’s forecasts have been more wrong than right…
you are referring to Pomona College professors with their paper rationalizing their over-priced purchase.
Significant difference.
CSUF indicator predicts reduced economic activity in region
Southern California Leading Economic Indicator declines for the third time in four quarters.
The Orange County Register
Southern California could experience reduced economic activity over the next three to six months, according to a model developed by a Cal State Fullerton economist.
Adrian Fleissig’s Southern California Leading Economic Indicator decreased by 0.09 percent in the third quarter of 2006 compared with the second quarter. It’s the third time in four quarters that the indicator has declined.
Civilian employment in the six-county Southern California region fell by 0.13 percent in the third quarter, Fleissig wrote. The indicator covers Orange, Los Angeles, San Bernardino, Riverside, Ventura and Imperial counties.
“Southern California could experience reduced economic activity over the next three to six months, according to a model developed by a Cal State Fullerton economist.”
You think.
“Southern California Leading Economic Indicator declines for the third time in four quarters.”
The SDSU Leading Economic Indicators for San Diego have been trending down in recent months as well. These must all be anomalies, because the Anderson School Forecast people would not lie (would they???).
‘this time, unlike every other time, the problems in housing will stay in housing.’
Perhaps I should invite some of these “economists” over for a freindly game of Jenga to demonstrate reality in a form their simple little minds can understand.
http://en.wikipedia.org/wiki/Jenga
O.C. auto sales continue slide, down 4.2%
http://tinyurl.com/v9tjx
Funny, wasn’t it FORD who noted its truck sales are driven by contractors… naa… what happens in housing stays in housing. Not.
It sure wasn’t Toyota.
I had lunch in the shadow of Elevation Chandler , AZ. That thing is going to stay unfinished for a long time I think.
Bakersfield, CA — 35,586 lots for development on 14,929 acres, and of these, 3875 lots have been developed on 1974 acres.
Explain?
http://bakersfieldbubble.blogspot.com
can you believe the activity on the blog tonight? Ben’s snowball is beginning to gather momentum. We need to get Ben on CNBC - anybody got any pull with Maria?
They would never have someone as knowledgeable or bearish as Ben on. You have to be a mega funds manager or a Wall Street player to be on, unfortunately.
If Ben got on, people would hear the truth for once ! Can’t have that !
I have said it for a while that I felt the correction would go faster than past corrections . With some major subprime lenders
folding up today this soon in the RE cycle is a tell tale sign of more to come .
Scary stuff I was thinking we were going to make it through to the second quarter before the cards started falling.
“Does anyone find it funny that regulators are now clamping down on commercial real estate lending ? Did they learn a lesson with private RE ?
http://www.usatoday.com/money/industries/banking/2006-12-06-regulators-commercial-lending_x.htm”
Who was it that had an article on the regulators coming in and putting the brakes on commercial lending activity? This was an article that was written and posted about a year ago, very well written, that told about the credit end game brought on by regulators knocking on banks’ doors and doing something similar to what this article is describing. I know I have it printed somewhere, but if anyone has a saved link to the article, I would be appreciative if you’d post it.
I’ll bet you’re talking about this:
http://www.safehaven.com/article-4759.htm
The Fed Officially Kicks Off the Next Recession
by Robert McHugh
That’s it…thanks!
“A national recession is also unlikely, UCLA Anderson Forecast director Edward Leamer said. ‘If you are a builder or a broker, it will feel like a deep depression,’ he said. ‘But the rest of us will hardly notice.’”
“Many models say that a recession in the next 12 months is a virtual certainty,” though Leamer’s Anderson Forecast report, ‘Models or Minds?’ states that ‘this time, unlike every other time, the problems in housing will stay in housing.’
This time is different = the most expensive phrase in the English language (von Mises)
‘The Union Tribune. “‘The only debate you hear among economists right now is whether next year’s slowdown will be modest or severe,’ said Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto. ‘The UCLA people have it right in saying that the depth of the slowdown depends on how weak the housing market gets.’”’
So what Levy is saying (in secret code) is that the depth of the slowdown will be severe, as Leamer said ‘If you are a builder or a broker, it will feel like a deep depression.’
P.S. Maybe if the builders drink enough, it will feel more like dancing on the bottom than a deep depression…
“‘Depending on the timing and the severity, this budget crunch could be the second half of the double whammy that turns a California housing slowdown into a housing recession,’ he (Ryan Ratcliff) said.”
Way to go way out on a limb, Ryan…
“‘We have always been the anti-bubble, pro-soufflé proponents all along,’ Snaith said.”
I have been anti-bubble all along — can’t wait for it to end so that homes are once again affordable for middle America.
But aren’t soufflés prone to collapse?
Robert’s Way Too Complicated Mortgage & Housing Worksheet:
1. How much do you make? $_ _,_ _ _.00
2. How much do you really make? $_ _,_ _ _.00
3. Is the difference between 1 & 2 greater than 10%? [y/n]
3a. If yes; forget it, rent.
3b. If no proceed to step 4.
4. Multiply #2 by 3.5 (4.0 in California). @2×3.5= $_ _ _,_ _ _.00
4a. This is the most home you can afford.
5. Is the median in your area 50% more than #4? [y/n]
5a. If yes; forget it, rent.
5b. If no proceed.
6. Pay off at least one car.
7. Pay off ccards and student loans.
8. Collect 3yrs of tax and employment records.
Congratulations you can now apply for a 30 year fixed rate conventional mortgage.
9. Any interst or questions about other types of mortgages? [y/n]
9a. If yes; forget it, rent.
9b. If no; continue.
10. Shop for the lowest fees and rates.
11. Go house hunting with your prequal letter in hand. Be careful to keep the sellers agents from smearing the document with drool.
12. Is there any doubt whatsoever in your mind that the sellers agent is not your friend? [y/n]
12a. If yes; bend over and pray they at least use vaseline.
12b. If no; continue.
Congratulations, you are a homeowner.
test
the man who arranged the deals doesn’t have a real estate license….‘He didn’t care about us,’ she said. ‘He only cared about his commission.’
I dunno, he sounds like a Realtor to me.
lol
FLASH
Per the Loan Officers forum or blog; the next Company to go down is:
“We also heard Sebring Capital has closed. We also heard MLN may be in the same boat.”
http://www.mlnusa.com/default.aspx
Oh dear……..
http://www.thestandard.com.hk/news_detail.asp?pp_cat=22&art_id=33646&sid=11244948&con_type=1
“The Chinese central bank also said it saw a chance that Asian and oil- producing countries would adjust their foreign currency reserve portfolios”
UGH!
The Fat Lady is warming up.
China *is* the fat lady.
Gotta get these stories out into the bright light of easy viewing, luvs. It doesn’t sound like China has quite agreed to the helicopter drop plan just yet…
“China sounds alarm on falling greenback
Friday, December 08, 2006
China’s central bank issued a warning Thursday about the risks of dollar weakness, piling fresh pressure on the US currency after a steep drop over the past few weeks.
The warning was contained in the full version of the central bank’s 2006 financial stability report, which it posted on its Web site.
“If external capital stops flowing into the United States, a significant drop in the US dollar may occur with consumption and investment shrinking, interest rates rising and financial markets experiencing turbulence - endangering global financial and economic stability,” the report said.
The central bank, holder of the world’s largest foreign currency reserves, said more capital will flow into China as the US dollar weakens and fund managers dump dollar-denominated assets.”
Is tomorrow going to be a black Friday ?
Its official. US sub prime loans are in trouble.
http://biz.yahoo.com/ft/061207/fto120720062004177556.html?.v=1
Lots of MBS downgrades here.
http://www.reiresearch.com/public/2219.cfm
Funny these never make the regular news.
Right — it would confuse and scare the sheeple, ya know…
‘Fifth Third Bank has announced they are selling $11.4 billion in securities (all or almost all MBS, mostly short collateralized mortgage obligations, we suspect) before year-end 2006 and [is] taking a loss of approximately $500 million. This is the next move in the bank de-levering arena,’ said Alec Crawford, head of agency MBS strategy at RBS Greenwich Capital in a Nov. 21 report.
‘Banks bought a lot of MBS over the past few years, and now some of them are realizing they don’t have the retail deposits to support such a large securities portfolio. With cheap (transaction) deposit growth slowing at the banks, some have no option but to sell their securities and take a loss, otherwise, suffer through large negative net interest margins,’ he said.
WOW !
http://www.reiresearch.com/public/2294.cfm
I remember when I first began auditing banks they all held federal notes for investments and then in 2002 the MBS started showing up, by 2004 their portfolio’s were loaded with MBS. I mean it increased their bottom line 100% with the additional interest income. Banks owning MBS was better than loaning money to FICO guy 750 plus, better to buy MBS with loans backed by FICO guy 580, no docs, stated income. Now I bet they start shedding these things fast. By the way that is depository money they are using to invest with.
‘How bad is 2006 subprime collateral is a question I think most of you have an opinion on already,’ said Mr. Zimmerman. ‘We were a bit surprised at the magnitude and speed at which this vintage year deteriorated.’
Mr. Liu pointed out at the conference that the industry is seeing ‘a steady increase of delinquencies and that rate has been accelerating over the past two to three months.’ Not only have there been higher delinquencies but also the delinquency numbers have been showing up earlier in 2006 than they had been in 2005. ‘2006 is tapped to be the worst vintage ever,’ he said.
Foreclosures have also risen. And the foreclosures, like the delinquency rates, are also happening at earlier dates.
This, Mr. Liu believes, is due in part to the housing market slowing down. ‘California and New England used to have the strongest housing market, always outperforming everywhere else. Well, things have changed. California and Massachusetts … now under perform the national average,’ he said. He added that the Rust Belt is still the area to avoid the most, with Detroit and Minneapolis being two of worst MSAs in terms of delinquencies. But now, even Sacramento is pretty high (though still not as high as Rust Belt).
Another factor is due not just to the slowing housing market, but also to underwriting practices. Since the profitability for originators for a subprime loan is in decline, the industry has seen some relaxing of underwriting standards.
http://www.reiresearch.com/public/2294.cfm
Ameriquest/Argent is just one of a dozen or so subprime firms that are actively being marketed by their owners. Option One Mortgage of California also is for sale and two broker/dealers are said to be looking at it.
In May, Ameriquest - faced with declining production and a changing retail landscape - closed its entire retail branch network (229 offices), slashing 3,800 jobs in the process.
At the time ACC said four ‘regional production centers’ and a call center operation would replace the branches. The company typically does not release production figures to the public. However, earlier this year ACC provided NMN with retail origination figures for certain years, showing that Ameriquest funded $19.5 billion in 2004 and $17.9 billion in 2005.
In the first quarter of this year, Ameriquest funded just $2.5 billion through the retail channel, before closing the operation.
Argent, a wholesale lender that table funds through loan brokers, originated $43 billion in 2005, according to the Federal Reserve’s Home Mortgage Disclosure Act database. Production figures for Argent in 2006 were not available.
Two years ago, ACC’s mortgage operations (Ameriquest/Argent) reportedly earned $1 billion pretax, a figure the company never disputed. Mr. Arnall had hoped to take the franchise public at one point, but ran into trouble when several states began investigating Ameriquest’s origination practices.
http://www.reiresearch.com/public/2382.cfm
When Paulson gets over there, here’s my guess on how the meeting will go:
Paulson: How can we convince you to keep taking our currency?
China: Quit pressuring us to unhook ours.
Paulson: Ok, no problem.
China: Fine. Let’s get some lunch.
“China: Quit pressuring us to unhook ours.”
But it’s done been unhooked since July 2005. And now the Chinese are buying up black gold … Texas tea. I think they have more to talk about than you think they do.
I really have to stop listening to CNN throughout the day. All day I have been listening to this schmuck president squirm about whether or not the U.S. needs to leave Iraq. Then listen to the Lou Dobb’s town hall special about the middle class and job exports and now to see this about China. Something that has been batted around and dissected on this blog for months. Priorities are fucked this nation as a whole has dropped the ball.
WTF… is going on in this country.
ITS OFFICIAL ! US Sub Prime Loans In Trouble.
http://biz.yahoo.com/ft/061207/fto120720062004177556.html?.v=1
Here is an article from April 2006 talking about the ABX. I think things have changed since then ! More ABX stuff can be found here:
http://www.markit.com/marketing/credit_index_annexes.php
http://www.globalsecuritisation.com/06_intro/023_027.htm
“The ABX index, which measures the risk of owning bonds backed by home-loans to people with poor credit, rose 30 percent since Aug. 9 to the highest since January. There are more than $500 billion of such notes outstanding.
The increase in the index shows traders expect mortgage delinquencies and foreclosures to increase at a time when the number of homes for sale as measured by the National Association of Realtors is at a 13-year high. The percentage of home-loan payments more than 60 days delinquent rose to 7.23 percent in July from 5.9 percent a year earlier, the fastest rate of increase since 1998, Moody’s Investors Service said Oct. 17
http://www.bloomberg.com/apps/news?pid=20601103&sid=adbsVAhN68TM&refer=us
If it takes “owning” a home to make you happy there just might be something wrong at the core… You have each other; you have your health. Enjoy the time you get and be thankful for what you’ve got.
I just sold our 3500 square foot house in May -much to my wife’s chagrin. We rent a 900 square foot condo. We have each other. Life is great.
Bryan,
Your philosophy runs counter to my church’s “Prosperity Gospel”, which preaches “you are what you own”. Are you some kind of a prosperity-hating Marxist/terrorist or something?
Its Official. US Sub prime loans are in trouble.
http://biz.yahoo.com/ft/061207/fto120720062004177556.html?.v=1
And rumor has it that Ameriquest and Nation Star MBSes got downgraded.
http://forum.brokeroutpost.com/loans/forum/2/74351.htm
I would be curious to hear from any realtors/lenders that will post on what’s going on in the trenches,or what they have heard is going on . Is money getting tight? Have deals fallen out because of appraisals not hitting ? Have any buyers been turned down on loans that they would of got just 6 months ago ?
Business is way off Wiz, had a gent call me earlier in the week wanting to hang his shingle with me. He hasn’t sold a house all year and his loan production is way off close to nil. He’s going to shut down his shop.
mrincomestream — For all the flack I have occasionally thrown your way, I sincerely appreciate your candor.
So what do you make of Leamer’s benign California outlook? Does it look any different from the trenches than from the safety of the inner sanctum of the Ivory Tower?
“”His conclusion: “The models say ‘recession’; the mind says ‘no way.’ I’m going with the mind.”"
He better have the doc increase his dosage of Ritalin and take another look at the models.
Brokers and Builders are going to take it in the shorts especially the new meat. The writing is already on the wall there has been for sometime that’s a blind mans call.
As far his “the rest of us should be alright” comment. He’s sugar coating it if my on street and in office phone conversations are any indication. There’s a lot of stress in folks dialog now. Owners and renters.
Just watched the Scott Rivera Real Estate show on TV and he said “the phones have stopped ringing. No one is buying”
WOW!! As soon as the video of the show is up - I will post. This major candor from a very Bullish guy!
Here’s what I know. I’m a part part time realtor (mainly a stay-at-home mom). I’ve sold four houses this year because the sellers were realistic. I’ve lost four other listings because the sellers wouldn’t look at the big picture, and the houses just sat and sat..no showings…no nothing, despite my best efforts to market them at embarassingly high prices. Two expired and they are (all together now) “waiting until spring.”
The other two listed with other realtors after our contract expired (and are still sitting on the market.)
I personally know of three investors or FB’s who are at least $30,000 in the hole right now. One is thinking about walking away from their investment property - they will be taking a $50,000 loss if they sell at their current price, but they can afford it and don’t really want to ruin their credit. But, even at $50,000 less than what they paid, not one showing in three months.
That is what is really going to hurt ,the people who are between a rock and a hard spot . Bad situation for these people .
I have *no* pity for greedy people who wanted to be amateur Donald Trumps and tried to “retire early” at other’s expense by leveraging themselves to the hilt in the flipper game. They took a huge risk with eyes wide open and lost –because they failed to do even a minimal amount of back-of-the-envelope calculations or investigate the markets they were “investing” in.
Let them burn, baby! No federal bailouts either –I should not have to pay for other people’s greed and stupidity.
The only people I have *some* sympathy for are young families who bought a grossly overpriced place to actually live in (quaint use for a house, no?) based on REIC lies and FUD. Even so, “ignorance of the (economic) law and history is no excuse” and caveat emptor –always. Extreme financial pain is often an effective and necessary teacher. When people make 5 or 6-figure mistakes, they tend to remember the lesson.
Argent took a full week to fund a loan this week. Everyday they would add a bogus condition. Stalling big time. I wouldn’t be suprised if Argent is sold fast or fails. Earlier this week we had a purchase transaction fail due to no funding coming through (fully approved and we were released to record the transaction) from Ownit Mortgage. We now know why. We also have had an unusual number of purchase transactions fail over the past 6 weeks for one reason or another. We are losing revenue and as a small business I’m starting to tighten my seat belt a little firmer.
We are an escrow firm in Washington State.
You know sometimes we forget about how escrow companies start to lose income when real estate goes into a slump .In a bad market escrow officers do twice the amount of work per deal for less ,more drop-outs etc.
Mrincomestream where are you ? I gave mrincomestream flack also GS but I think he is a truth seeker rather than a cult follower and I have actually grown to like him along with his candor and humor .
I would never tell him that however .
Ah come on Wiz……….It’s Xmas……..Mrincomestream is a true asset to this blog…………no B/shit with him. Now once we all get to like Gekko, what a family it will be……
Bah… flattery will get you no where
OK , I’m back to giving you flack .
LOL, gee thanks.
DEPRESSION IN ‘07. As Gary Watts would say… “It’s in the bag!”.
WTF is going on:
Encore is out of business? http://forum.brokeroutpost.com/loans/forum/2/77503.htm
“And another one bites the dust (allegedly). At this rate there’s not going to be too many subprime lenders left”
Wow, another one !
My guess is that the MBS buyers saw the light and stopped buying and now everything is backing up ! If this makes the mainstream media tomorrow, it will be black Friday !
I wonder how many more are on the verge ? The investment community must be pulling the rug out from underneath them. I’ll forecast that mortgage loans are going to be MUCH harder to get in the near future. Look out below !
Gotta ask, what’s the name of the local high school team?
Some sort of food product?
I got Manteca’d somehow and this comment was supposed to be up in the thread near the begining…
Don’t know what happened~
http://forum.brokeroutpost.com/loans/forum/2/77339.htm
Just got this in an e-mail. Anyone else heard of these?
Own It - CLOSED
Sebring - CLOSED
Maribella - CLOSED
MLN - Lost it’s only investor today, scrambling to replace them.
D1 - needs a 580+ for any stated Loans
People’s Choice - 660+ needed for FTHB to 100%, and many other programs changed for the worse.
On MLN:
Last night, their national director of Wholesale (Paul
Impaggilazzo) resigned his position with MLN last night.
He left his managers with a message that is being relayed
to his AE’s today.
1. For the foreseeable future, we are only going to pay
you 25% of all the commissions you earn and defer the rest
back into the company operating fund as we try to raise
capital to stay afloat - Unfortunately, at this moment, we
cannot afford to pay you the full commission you earn.
2. Our exclusive sale agreement with RFC has been
terminated - we have nobody to sell our loans too.
3. We are heading to Wall Street immediately and beg
anyone we can to offer us warehouse lines of credit so we
can continue funding loans.
The wheels are coming off…
Big time.
This just HAS to be one of the weekend topics this week.
Too bad this is happening on a Thursday night. Only one day left this week to hear the news. Monday will be interesting for sure.
Dude, Monday please by noon tomorrow the housing industry will have a whole new perspective. I’m interested to see what it does to the market as a whole HB’s downgraded after hours. China hinting at dropping the dollar. Tomorrow will be interesting.
China probably holds a good portion of the MBSes ! First they will drop in value because of the currency and then because the bond market sells them off ! What a mess ! I knew this was going to happen ! I’ve been watching this situation build for a long time, asking lots of questions that nobody could answer. It didn’t make sense !
Wow , can they take away commissions earned ? I wonder how many $ worth of loans they are holding ?
That’s an interesting list of culprits. They were true bottomfeeders fog mirror have loan.
Yes these are the chop shops of the mtg arena, however, many are owned by big banks.
Can you confirm any of these?
No, don’t use any of them. I have a different set of bottom feeders. They are still standing. However, I am approved with People’s Choice. Couldn’t even tell you the AE. I’m mostly small cap commercial do very little residential stuff just enough to know whats going on.
What’s curious about this mass closing is the timing and the fact they are going down like domino’s. Makes you wonder what’s being said in the backroom when the cigar smoke goes up.
[quote]What’s curious about this mass closing is the timing and the fact they are going down like domino’s. Makes you wonder what’s being said in the backroom when the cigar smoke goes up.[/quote]
There was an article earlier that stated the credit default swap rates increased dramatically lately. These shops or the people that finance these shops probably need to purchase swaps to cover their exposure. What probably happened is that it became too expensive to do sub prime and the sub prime funding for these shops dried up all at once !
Google “ABX index mortgage” and start reading.
Maybe it is the nontraditional mortgage guidance kicking in at the state level?
There it IS ! I knew this would happen sooner or later. The MBS market must have failed ! All the fraudulent paper work and kickbacks and incentives and giving money out to anyone that could breathe finally caught up with the industry !
House prices are going to fall like a rock if mortgages tighten up !
Wow , the posters here have been predicting the demise of the sub-prime lenders for months and now that it’s actually happening it sort of points to the next stage in the cycle that will happen .
There are over 320 posts tonight so far . I think everybody knows that the party can’t keep going without the sub-prime lenders .
[quote]Wow , the posters here have been predicting the demise of the sub-prime lenders for months and now that it’s actually happening it sort of points to the next stage in the cycle that will happen .[/quote]
It wasn’t hard to predict ! Something somewhere in the money chain had to give ! I mean the mortgage companies were giving anyone that could breath money to buy nearly whatever house they wanted. And at the other end of the transaction were the MBS buyers who had expectations of healthy returns and solid assets backing their bond. So there was a disconnect somewhere ! Sooner or later it had to crumble.
I wonder what is going to happen tomorrow. It could be interesting.
See, most manias don’t stop until the credit stops. What we have seen thus far is nothing compared to what we will see when people can’t get sub prime mortgages.
Oh yea, with all the 2/28, 3/27, IO’s, Option Arms out there compounded with the fact values have dropped. Housing industry is FUBAR with no subprime lending.
Housing industry is FUBAR with no subprime lending.
It is better off in the long run without it. Getting rid of all the toxic loans is the best thing for everyone.
Well, it won’t be good for the people that can’t live without a toxic loan. And there will be a lot of those people. If you thought the market was slow before, just wait.
“”House prices are going to fall like a rock if mortgages tighten up !”"
Understatement, by 2Q 2007 you’re going to be saying, bubble? what bubble? Sure I’ll take the Playboy Mansion for 50 grand.
OK… question of the day/night… I wonder how many of those economists that were predicting a soft landing considered that the mortgage industry would fail is some manner, like being unable to offer sub prime loans ! RE has lived on sub primes for ages now !
I wonder how many of those economists ignored the documentation fraud and kickbacks and incentives and 100 LTVs and IOs and ARMS and Subs and the fact that the MBSes were bound to get hit hard at some point and said to themselves that this market is like the others that have come before it ?
This market is totally different. It is much larger and has a lot more negative factors.
Does this list remind you of the mid to late 90’s?
http://bakersfieldbubble.blogspot.com
310 comments. Is that a record?
Ben’s going to have to upgrade his software to split up large threads soon, I reckon. (And maybe we can get an edit function as well :))
I know my browser sometimes struggles with anything over about 150 posts.
Sub-prime is imploding. People I think were “through the looking glass”. Did I say that right? Now if Ameriquest would admit their in hot water, we could call this the “DAY SUB-PRIME STOOD STILL”.
I think I am funny.
Here is the whole rumor list. At this point most of these are just rumors.
Encore, Argent, Sebring, MLN, Ownit, Ameriquest and Dallas (It that the same as D1 ?)
D1 and People’s Choice are tightening.
Also Fieldstone, Helvetica and Maribella
Have I missed any ?
“Marbella Salas said she’s afraid that others are getting questionable real estate deals with Singh and the company, adding that he still was set up at the flea market as recently as a few weeks ago. ‘He didn’t care about us,’ she said. ‘He only cared about his commission.’”
I’m sorry….am I supposed to shed a tear for the “Salas” family? Looks like greed got the better of them…tough s7$t I say.
Wow!! 354 posts!
That’s a bunch of disgruntled renters!
I am sure a fair number of the 354 posts are flippers desperately seeking greater fools to buy their alligator-infested dumps!
Read the first snippet. the economies are in for a soft landing. Housing is f~(ked. OH BTW - we keep hearing - demand is soft, sales are soft, prices are soft - how much more soft do you want. Its is “soft” landing.
Like I said, prices ran up 200% and now from the peak the “soft landing” with just a 75% decline in price “is in the bag”.
Remember that, a 75% price decline “is in the bag” with this “soft landing” and we are seeing on going proof of that, just like we are seeing on going proof of the success of the “war against evil” in Iraq and afganisthan and the on going “capture of Bin Laden”.
Cool.
Cow_tipping.
This post makes 377! ALL HAIL BEN!!!!