“More Houses For Sale And Fewer Houses Selling”
The Hartford Courant reports from Connecticut. “On one thing almost everyone agrees: The real estate market in Greater Hartford has slowed compared to a year ago, with more houses listed for sale and fewer houses selling. Homeowners in Portland listed their property for sale last June, asking $524,900 for the 3,600-square-foot house.”
“June turned to summer and summer to fall. Now, with winter here, the price of the well-kept home has dropped to $449,000 and the owners, who purchased the house in 2004 for $435,000, will probably lose money on their purchase. The owners did not want to be identified.”
“‘I’m as frustrated as they are,” said Tom Abbate, a real estate agent in Middletown, who has the listing for the house. ‘The owner said to me, ‘Should I come down more?’ Coming down $10,000 isn’t going to make a bit of difference. There hasn’t been a house sold in Portland in this price range in the past few months.’”
“‘In the $400,000 to $500,000 price range in my market, it’s a very limited market. There simple aren’t any buyers out there in that price range,’ he said.”
“Middletown and surrounding towns, such as Portland, Cromwell and East Haddam, have all felt a slowdown in the mid- and upper-level price ranges, basically anything $400,000 and above. And there are more houses for sale in that price range than a year ago.”
“‘I’m hitting my head against the wall,’ Abbate said of the lack of interested buyers. ‘It’s not that this house is not worth that money. It is. And I’ve got several others just like it. It’s just that there’s no buyers out there.’”
“When the owners of a contemporary house in Simsbury decided to downsize, they put their house on the market with a listing price of $378,000. The house sat on the market all summer and through the fall. The price dropped, three times, until it is now listed at $354,900.”
“‘I don’t understand the market at all,’ said the home’s owner, who asked not to be named. ‘It changed so fast. It was slow in the summer, it perked up in the fall, and now it is really slow. There’s no reason for this to be happening.’”
The Boston Globe. “Sovereign Bancorp. said yesterday it will cut 800 jobs, 77 of them locally, and close most of its wholesale mortgage operation in an effort to slash costs by $100 million annually.”
“In a statement, CEO Joseph Campanelli said it was a ‘difficult decision’ to cut so many jobs during the holiday season.”
The Record from New Jersey. “David Moro and his wife stretched their budget to the limit when they bought their center-hall colonial in 2003. They took out an interest-only loan. Moro dreads that day.”
“‘What’s getting me a little squirrelly is seeing interest rates go up,’ said Moro. ‘The reality is when I went into this mortgage, I didn’t fully understand it. I’m not going to be able to make the payments.’ Moro would like to refinance to a fixed-rate loan, but can’t find one with monthly payments he can afford.”
“For many home buyers, including the Moros, these mortgages were the only way to afford a house in recent years, as prices skyrocketed from 2000 to 2005. In addition, option adjustable-rate mortgages let buyers vary their monthly payments, in some cases, paying so little that the mortgage actually grows, rather than being nibbled away over time by monthly payments. These are called negative amortization loans.”
“‘That’s a scary product,’ said Mary Johnson, at the Consumer Credit Counseling Service of New Jersey. ‘You can be losing equity on the home while you’re making your monthly mortgage payment.’”
“‘They come to us when they’re two, three, four, six months behind in mortgage payments,’ Johnson said. Many of these homeowners borrowed more than they can really afford; others have seen their monthly payments readjust to unaffordable levels. Some are paying half of their income for shelter.”
“‘We don’t have an easy solution for people in this situation,’ Johnson said. Some people are so determined to keep their homes they take on second jobs, she added.”
“Much of the fallout from the boom in exotic mortgages hasn’t hit yet. Many people took out these loans in 2004 and 2005, locking in the low rates for three to five years, or longer. But looking ahead, mortgage professionals, borrowers and regulators are worried.”
“Mortgage consultant Alex Giassa said he has a client who chose an option ARM, but can’t pay all the interest every month. So it is being added to the body of the loan. ‘Her mortgage balance has increased by almost $20,000,’ Giassa said.”
‘It’s not that this house is not worth that money. It is. And I’ve got several others just like it. It’s just that there’s no buyers out there.’”
Sorry, it’s the buyers who determine worth, not you mister realtor.
“‘I don’t understand the market at all,’ said the home’s owner, who asked not to be named. ‘It changed so fast. It was slow in the summer, it perked up in the fall, and now it is really slow. There’s no reason for this to be happening.’”
Let’s review Mr. Homeowner… from Ben’s articles…
“There simple aren’t any buyers out there in that price range,’ he said.”
“What’s getting me a little squirrelly is seeing interest rates go up,” said Moro
Sovereign Bancorp. said yesterday it will cut 800 jobs, 77 of them locally.
They took out an interest-only loan. Moro dreads that day.
“That’s a scary product”, said Mary Johnson
“They come to us when they’re two, three, four, six months behind in mortgage payments.”
“Her mortgage balance has increased by almost $20,000″
“It’s just that there’s no buyers out there.”
OK, Mr Homeowner, do you understand now?
it perked up in the fall? wow, I missed that
I’ve got to agree with that (slightly.) I personally saw a higher percentage of pendings and not just do to the seasonal inventory falling off. And now things are VERY SLOW again and inventory is still very high. I consider this last Fall just one of several dead-cat bounces down the reverse property ladder. The upcoming Spring will be a complete bloodbath and capitulation will happen with many sellers. Then we will see yet another dead-cat bounce next Fall followed by even more hemorrhaging as the down-cycle continues. At least this has been the pattern no far.
Translation: A few more looky-loos and grazers showed up to graze on free finger foods.
“… it is really slow. There’s no reason for this to be happening.’”
We’re going to be hearing a lot of this in the coming years!
This is the panic call of the FB’s !!
Had a local realtor in this area (No. Washington state) say that he thought prices would really start dropping next spring.
Bingo!! Buyers dictate, they always have, they just did not realize they were the one’s causing price increases the last 5 years. Now they’ve sobered up & are taking prices back down. On the way up no one was saying the REIC propoganda machine was to blame, but now that its going down the REIC is saying the MSM is causing it with all their “negative” stories. Wrong answer, just Buyer’s demanding realistic prices for once.
Yes but sellers control inventory AND GOVT indirectly.
Did you know in CA that NO ONE can or does downsize. It seems odd to me when I read that from other states. Reason being in CA if you sell 4000 st foot house and buy 1000 sq foot house your property tax goes UP, maybe double thanks to prop 13 locking in tax rate at long ago purchase price. Again everything backwards in CA. I hope global warming turns CA into AZ so its too hot for me and I move.
Prop 13 is a key reason that I do not understand CA buyers who buy at a mania peak. Property taxes are locked in at a low rate forever if you have the patience to buy in a price trough, which happens once a decade or so on average (although this time is, admittedly, different
)
True. I have friends here in California who would have liked to move up to a better neighborhood long ago, and they do have a lot of equity in their current home. They didn’t do it because they felt they could not afford the increase in taxes. Maybe now they will think about it.
The tax break was enjoyed while in the 4000sf house.
People in other states had thier taxes increased when they didn’t even sell!
I stay with Prop 13, thank you very much.
Tinfoil, you just don’t understand property tax in California. First people can and do downsize all the time. There’s even a one time tax break for senior to transfer their existing tax basis one time to ENCOURAGE the practice. Second taxes have nothing to do with sq footage or even market value but two things only, purchase price and length of ownership. Ask anyone of the millions who were forced out of their homes due to rising taxes if this is such a bad system.
Oh, and global warming would turn most of California more pleasant as SoCal would get more rain and the BA more sun.
Yep, but remember Prop 60 doesn’t apply if you move to a different county. Now Prop 90 was going to fix that but both the county you move from and the county you move to have to agree to its application and that simply has not happened except in a few instances.
“Tinfoil, you just don’t understand property tax in California.”
Robert Cote, you don’t have what they call “Da social skills.”
Does every #!!@*!! regional thread have to be hijacked with posts about California?
Ask anyone of the millions who were forced out of their homes due to rising taxes if this is such a bad system.
Do you have any source on these ‘millions’? That would mean close to 20% of the population of home owners in California forced from their homes?
I think people always forget that they can vote to lower taxes.
Mr realator is not determining value, he is posturing for his customer. He is identifying with the seller’s frustration and sharing in the cursing of a cruel fate, even as he gently coaxes a further reduction.
The realator is not married to a high price. The realator is married to a deal. Any deal is better than none.
Realtors like quick deals at any price. A couple of $10k price difference doesn’t make that much difference to thier commision.
On a $300,000 sale, a realtor makes or loses an extra $150 on each $10,000 assuming a 3% commission and kicking back 50% to the broker’s agency. That’s minimal incentive for a seller or buyer’s agent to get your best price. But it is a major incentive to spend as little time with you as possible and just close the deal.
“…It’s just that there’s no buyers out there.”
Told you guys. Like the auto industry did in 2001-2004 using low interest rates to sell cars, the REIC sucked up a whole bunch of future buyers during 2003-2005 using the same tactic. As a result, there are fewer buyers today than the industry anticipated. What a bunch of incredulous (some clueless) market cannibalizing morons.
Add more adjectives…you on a roll mrktMaven!
Add more adjectives…you’re on a roll mrktMaven!
“‘I’m hitting my head against the wall,’ Abbate said of the lack of interested buyers. ‘It’s not that this house is not worth that money. It is. And I’ve got several others just like it. It’s just that there’s no buyers out there.’”
Translation: “This house is not worth the money.”
So we’re full circle back to “pre-bubble” wisdom. A home is only worth want someone else is willing to pay for it. Hence if there are no buyers the home is in theory worthless. Of course for the owner who also does not want the home the value of the home is negative!! S/he is still having to make payments on something they do not want & is worthless to them in reality!!
Would it be fair to say that at least 25% of those who bought houses between 2003 and the end of 2006 cannot afford their homes. is the percentage higher? And when I mean afford, they make regular paytments to a fixed mortgage, no more than 40% of gross income.
“Would it be fair to say that at least 25% of those who bought houses between 2003 and the end of 2006 cannot afford their homes.”
If I had to take a wild guess, I’d probably go with that number. It is weighted heavier in the later years, of course. And “afford” is subjective. I think it certainly would apply to the old notion of “comfortably afford,” but it doesn’t mean this many are going to face foreclosure rather than a lot of unhappy years ruing their retrospectively poor decision.
Finnman - “Would it be fair to say that at least 25% of those who bought houses between 2003 and the end of 2006 cannot afford their homes.”
I’d guess that may well pan out, with the weighting obviously toward those who bought in 2005-6. And we have to deal with the subjective nature of “afford.” I’d include in that the people who will keep their homes and be miserable about it, not just those who will be foreclosed or forced to sell at a loss.
“For many home buyers, including the Moros, these mortgages were the only way to afford a house in recent years, as prices skyrocketed from 2000 to 2005.:
The way to afforded the house was not to buy what you couldn’t afford and then prices wouldn’t be at the levels they are today. Dah.
Yep, and the quote you cited fits right in with the argument of many here that: There is no huge demand - almost everyone who wanted to buy has already bought a home.
Being realistic I have to say there needs to be more widespread pain and suffering reported on a national basis to put the final knife into investors who want to get into the market when prices drop.
Also, we NEED and end to the Flip this House type of shows on TV.
“Also, we NEED and end to the Flip this House type of shows on TV.”
I have seen sentiments similar to this frequently posted on this board. Why do we need to end those shows? If you watch Flip that House or Property Ladder you will see that it is usually a disastrous project that nearly leads to a fight or a divorce. Sometimes it works in the end, sometimes it doesn’t.
I am a huge fan of the Sopranos. Watching that show doesn’t make me want to become a mob boss. It doesn’t matter what you put on TV. If viewers are idiots they are going to do idiotic things.
I’m afraid I must agree with NYCityBoy. Pander to the masses and give them the shoes they want. Let every wanna be Trump fix up a dump. At some time they will have to sell that property.
My biggest cause is to bring back the down payment. Flips? They’ll flop.
Has anyone else noticed how much inventory in their area was artificially removed from the market due to flipping? Well… now those flips are coming back on the market… and the people who sold have moved to another area a long time ago.
Neil
“Has anyone else noticed how much inventory in their area was artificially removed from the market due to flipping?”
Yes — we rent one of those homes which were artificially removed from inventory
“Also, we NEED and end to the Flip this House type of shows on TV.”
The market will take care of that, as nobody will be interested in this type of show once everyone is talking about what a stupid, risky thing it is to buy individual residential homes for investment purposes.
Ever since watching Sponge Bob Square Pants I’ve just had to hve a Crabbypatty.
with jellyfish jelly
The reason we need an end to these shows is simple: There are so many morons out there in TV Land that are STILL encouraged by these types of actions.
These shows will end themselves when more and more flippers lose everything trying to roll the dice one more time. It’s economic Darwinism.
“In addition, federal regulators have tightened lending requirements for interest-only and option loans. On Sept. 29, the Federal Reserve and other federal regulators issued new guidelines requiring lenders to better explain the risks of unconventional loans”.
So now they say: If you sign this paper, Moron, we will foreclose on your house in 12 months.
‘What’s getting me a little squirrelly is seeing interest rates go up,’ said Moro. ‘The reality is when I went into this mortgage, I didn’t fully understand it. I’m not going to be able to make the payments.
I just don’t understand how people can say they didn’t understand their mortgages. The concepts behind all of these so-called “creative” mortgages are simple. Are people really this stupid or just lazy, or just trying to take the blame off of themselves?
Just trying to lay off the blame. He knew, and we know that he knew. He was just another FB doing anything he could - even mortgaging his family’s future to get on the RE gravy train. I have zero sympathy.
‘We don’t have an easy solution for people in this situation,’ Johnson said. Some people are so determined to keep their homes they take on second jobs, she added.”
Dukes, what a gravy train it turned out to be. It looks to me like the quote above is the very definition of self-imposed slavery. What kind of fool puts owning a home over their quality of life? With or without people’s sympathy, they are hosed.
“What kind of fool puts owning a home over their quality of life?”
Because owning a certain type (big) of home is equated with a good quality of life. Then there’s that pesky detail on how to pay for it! Dammmm It!
Not to mention all the slick sales types telling you you can afford the house, real estate always goes up, they’re running out of land, main stream media showing pictures of houses and dollar bills, people with smiling faces, etc!
You gotta admit, it’s easy to get sucked in.
Also I think the FB’s didn’t think interest rates would go up as high as they did on these loan . It’s hard for me to believe that someone would not understand a margin plus a spread equals =effective interest rate. The FB’s believed that they could refinance or sell no doubt based on how these loans were sold . Some people just were not told the truth by the mortgage scum ,but let that be a lesson on trusting some salespeople .
The mortgage industry is going to be forced into even more disclosures ,perhaps worst case examples of how the loan works that borrowers have to sign before the loan will be issued .
But for many of the FB’s it’s a little to late and the gamble didn’t pay off.
excuse me …a index plus a spread equals the effective interest rate .
“Also I think the FB’s didn’t think interest rates would go up as high as they did on these loan”.
A friend bought in Bronxville, wealthy community outside NYC.
She works at Morgan Stanley and researched her options–sold herself on an adjustable ARM because “everybody moves in 5 years”, even while fixed rates were at all time low. Friend who made his fortune in co-oping buildings in Manhattan tried to talk her into fixed, but no go. In 2004, first time buyers knew everything, 5 year ARM was the way to go, and Greenspan was cheering them on. Common sense vanished from the market.
Frogs in a pot of water
Getting pretty warm in here
Someone just put the lid on
David Moro is the poster boy for the fb’s lining up with a whole range of excuses. However, most are not lazy or stupid. They are GREEDY. They think they are onto a winner and will greatly increase their financial worth in just a few weeks or a few months instead of a lifetime. Visions of early retirement and travel to exotic places take shape as the realtorwhores feed their illusions and tell them, “Now is a great time to buy and prices can only go up.” Just like the investors who piled into stocks in that “bubble n’ burst,” but then it was that other class of hype-merchants, stock brokers, feeding them the fantasy scenarios.
In a country which coined the mantra, “There is no such thing as a free lunch,” when the crap hits the fan the people who have heard that saying all their lives try to wriggle out by using the old excuses. The current one being, “I didn’t understand how the loan worked.” Well, Mr. Moro and thousands more like him are about to find out that the old, “There’s no free lunch,” saying they’ve heard repeated hundreds of times in the past, is dead on the money.
No sympathy. None. Zip. Zero.
“‘What’s getting me a little squirrelly is seeing interest rates go up,’ said Moro.”
Right — everyone knows interest rates don’t go up and down when you borrow using adjustable rate mortgages. This explains Moro’s surprised and unprepared reaction to upward interest rate adjustments. It seems like the whole world is working against this innocent FB but himself, (sarcasm off).
I hate sounding like an SOB this early in the day but some of these shoulder shrugging incredulous FBs really tick me off. How can FBs claim they are unprepared for ARM resets and get away with it? It is spelled out in the name of the product. Gimme a friggin break!
“How can FBs claim they are unprepared for ARM resets and get away with it? It is spelled out in the name of the product.”
I would love to know how many of these ARMed and dangerous FBs had no clue about how an adjustable rate mortgage works; I would guess it is over 50%.
A friend of mine (divorced) recently took out money from her house to “invest”. That meant she refinanced her loan to a more flexible type. I tried to dissuade her, but at the time I was not reading these blogs and could not convince her. However, she did tell me that the broker emphasized that she would have to save every month the money that she was not paying toward her mortgage. This was a few months ago. I dread calling her to see how things are going.
“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
http://en.wikipedia.org/wiki/Upton_Sinclair
I think most folks believed their Realtor’s price forecast: “Real estate always goes up.” In that case, who cares what happens to your interest rate, as you can always use cashout ATM financing of your equity gains to make higher payments. And besides that, the lender presumably wouldn’t make a loan the borrower couldn’t afford; that would be like shooting one’s self in the foot…
remember when people thought that their mortgage could only go up 2% and they thought that was the payment going up that much and not the interest rate?
“When the owners of a contemporary house in Simsbury decided to downsize, they put their house on the market with a listing price of $378,000. The house sat on the market all summer and through the fall. The price dropped, three times, until it is now listed at $354,900.”
“‘I don’t understand the market at all,’ said the home’s owner, who asked not to be named. ‘It changed so fast. It was slow in the summer, it perked up in the fall, and now it is really slow. There’s no reason for this to be happening.’”
What was the reason for the preceding runup? If you don’t know who the patsy is, it’s you.
$378,000. The house sat on the market all summer and through the fall. The price dropped, three times, until it is now listed at $354,900.”
Another sad exmaple of people trying to make small cuts to chase the buyers. If you have to sell, it seems to me you’d want to be below market vaule to move the property. Especially in this market!
““‘I don’t understand the market at all,…”
Exactly!!! And you will pay the price (sooner or later) for your ingnorance.
“people trying to make small cuts”
That’s exactly what I thought. People who were content with a 20% annual increase can’t deal with the possibility of a 20% cut.
Death by 1,000 cuts
Here is what these “homeowners” don’t understand:
A. Prices can go down
B. Interest rates can go up
C. Refis are not automatic
D. History (the 70’s, the 30’s, etc)
That’s just it. How can you be older that 10 and not understand that prices can and do go down. These people behave like they’ve been living on some deserted Pacific island. If a realtor tells you that interest rates are at an all-time low, doesn’t that by itself tell you that they are likely to go back up. No knowledge of history needed. Basically, what happened to common sense?
“Basically, what happened to common sense? ”
In a word, “euphoria”. When people fall in love with someone or something (especially an idea) their minds close around that “special” notion. I believe reading that “infatuation” lasts about a year so one should not get married (or engaged) until that “blind” period wears off.
Home ownership has always been associated with status. Today its reached mythical proportions. Its hard to buck a notion so widely accepted and so closely aligned with people’s self worth.
The higher and faster prices rose, the greater reinforcement of the “myth” and the more extreme the myth’s meaning had for some people. They’d do anything to get THE home and simply lost perspective the moment that “opportunity” arrived.
Its human nature. The same processes that help people focus to great PRODUCTIVE ends can have just the same “power” going in the opposite direction. The more personal the achievement of a goal, the more you’re willing to either overlook (potential bad consequences) or consider (accepting clearly bad choices).
Nothing happened to common sense. It was just overwhelmed by emotion (greed) and “conventional” wisdom. As people sober up, there’ll be lots of common sense around.
Yeah, I just have a hard time relating to being driven by emotions to the point that reason is thrown out the window. I really am insulated (work with a bunch of conservative engineers/scientists in the Midwest) from people who are willing to ignore facts and history, so from an outsider’s perspective it’s baffling.
“Home ownership has always been associated with status. Today its reached mythical proportions. Its hard to buck a notion so widely accepted and so closely aligned with people’s self worth.”
Not only status was involved with the bubble price blowout. It is awfully hard to sit on your hands and keep renting while your homeowner neighbors are funding new Escalades and exotic vacations with their perpetually large home equity gains.
Interest rates are still very low for a 30 year fixed rate mortgage. Yahoo finance says that the average 30 year is under 5.75%. Now with rates this low sales should be booming - so something is very wrong with the market. That something is price. I don’t see how people do not understand that for every $10,000 in price increase x number of buyers can no longer afford to buy. And with the many tens of thousands that house prices have risen how many buyers have been eliminated from the buyers pool? My guess is tens of thousands.
2004- when you get to 2003 pricing you’re in a recession and all those exotic morts are kaput
Idiots. I just can’t understand how people can be so stupid. I remember (two years ago) a bidding war over a colonial in MA and how the mob was determined to buy at any cost. Thanks Greenspan for f(*#(king up our economy. I just hope we don’t have a severe recession and that the Fed has some kind of back up plan.
Confucius says: A wise man learns more from a fool than does a fool from a wise man.
We need a serious recession and the pain that it brings to wipe out the excesses and the spend free mindset of the American public.
The Fed’s back up plan will be to print our way out of this, that is the case for the metals going forward. It will happen.
“We need a serious recession and the pain that it brings to wipe out the excesses and the spend free mindset of the American public.”
EXACTLY. And it WILL happen, eventually, one way or another. It can be put off for a while, with tricks and jiggering the system, but only for so long. And the more it is put off, the more painful when the piper is finally paid.
Speaking of pipers, does anyone have a link to a story about China announcing they will be dumping trillions of dollars next week? It was a random statement I read on a political blog, with no particular article to back it up. I googled, and didn’t see anything about a specific announcement.
“It was a random statement I read on a political blog, with no particular article to back it up.”
If this is the only evidence, let’s let it drop. No need to perpetuate rumors…
Published December 15, 2006 7:27 PM EST
*** BREAKING NEWS ***
CHINA TO DUMP ONE TRILLION IN U.S. RESERVES!!!!
Tells visiting Bush administration officials they will not sit back and lose their shirts as U.S. Dollar collapses; they are getting out fast and large!!!!!!
http://www.halturnershow.com/ChinaToDumpUSDollars.html
It’s sensationalist bunk, nothing more.
Thanks for the link, newport. Well, I guess we’ll just have to see what happens tomorrow. If true, tomorrow should be an interesting day. I know that Paulson did in fact go to China, but that’s why Paulson’s the Treasury Sec, his job being to handle the falling dollar. Also interesting that in that article, it seems a OPEC could have China over a “barrel”, pun intended. So perhaps there was an intention to dump dollars that was checked. Global economy, ain’t it grand?
I hope and don’t hope your right. I have spent some of my meager income in silver/gold and Goldcorp stock so those would do well. But if we experience a severe recession/inflation we all lose our jobs. I think we are still many years away from some sorta dollar collapse. We bloggers do not have the power of central banks and politicians. They will keep the credit system going as long as possible. I don’t even think Asia cares about the dollar, as long as it creates jobs for the idle, poor masses. They are not stupid, they know the dolalr will go down slowly but surely. the rumors of the china central bank buying gold won’t happen either. We need them but they need us also.
‘It’s not that this house is not worth that money. It is. And I’ve got several others just like it. It’s just that there’s no buyers out there.’”
Obvisously, local incomes can’t support those prices. Looks like buyers are coming to their senses, and aren’t willing to put their heads in a noose to rescue those people, that overpaid.
A lot of people are going to find out that their “Can’t miss real estate investment” is an illiquid noose around their neck, choking the life out of them every month .
I like to think my gold and silver is worth 3 times as much. But its worth what it’s worth and I can’t change that. I can’t understand anybody saying something is worth more than anybody’s willing to pay. This guy needs a reality check, or atleast a class on common sense. I know my gibson les paul guitar is worth 20000 but nobody wants to buy it!(sarcasm) How frustrating is that?
A friend of mine just put a rare piece of glassware on ebay. He thought he’d get at least a grand for it, but only got half that. It is true, he should have gotten at least a grand. Book value on it is like $1500. A few years ago, he would have gotten book, maybe even more. Sign of the times.
[Sovereign Bancorp. said yesterday it will cut 800 jobs, 77 of them locally, from its workforce of almost 9,000 and close most of its wholesale mortgage operation in an effort to slash costs by $100 million annually.]
Thanks for the note on Sovereign bank. I used to trade their stock many years ago. I liked the bank better than the majors that were gobbling each other up and there was always the hope that SOV would get bought out by a bank in Ireland.
It seems that they’ve hit the downside of the mortgage business and that they’ve replaced management that spent the past several years growing with management that’s focused on operations. And maybe prepare themselves for a sale.
It has got to take guts for a bank to close most of their mortgage operations but it seems that they are willing to
take drastic moves when it appears to be the right thing to
do.
Isn’t there more to the Sovereign story than just real estate loans? I believe they gave the CEO the heave-ho a couple of months ago. It was in relation to some deal he had made without Board approval. They bought Independence Community Bank here in New York and New Jersey this summer. I think that might have been considered a mistake. I would like to think this news is due to the housing implosion but it may have other roots.
You just have to love their need for GREED as we sit back and watch them BLEED..Absolutely No Sympathy for them HERE !
Went through West Hartford CT a month ago, fantastic number of “For Sale” Signs in this comfortable suburb.
Some relatives just closed on a vacation property by the water in RI. Tried to talk them out of it but they’d sold another property and wanted to avoid the taxes so they “needed” to buy. The seller came down some 20% but then, upon inspection, there were MAJOR problems with the septic system (undisclosed by the seller). Long story short, at the close of this near million dollar property come to find the sellers hadn’t paid their mortgage for SIX MONTHS.
My relatives can afford the hit they’re going to take on this but the septic and closing issues really opened their eyes. Stories like these are going to grow and travel fast and will be unstoppable because of web access. My bet is February is going to show leakage in the damn holding back supply and holding up prices. By March supply will flood in and what few, qualified, buyers remain will be even more reluctant to commit to leveraging themselves to a now obviously sinking asset.
“By March supply will flood in and what few, qualified, buyers remain will be even more reluctant to commit to leveraging themselves to a now obviously sinking asset.”
Jag –
Don’t you think the Fed will try to shore up the sinking RE market? After all, your scenario sounds a great deal like deflation, which is the Fed’s mortal fear.
I think the Fed is going to wait. I think any reasonable economist knows that the fundamentals of the real estate market are beyond the reach of a simple, rate cut, cure. They’d have to cut rates back to 2003 levels just to stem the bleeding….I doubt that will happen as that would just perpetuate the vicious cycle that’s begun.
The Fed, as all too many have pointed out, is in a bind with the weakness in the dollar. I think they have to address that and inflation (whatever there might be left), first.
They weren’t able to stem the tide in 1990 and Japan’s history indicates they weren’t able to stem the decline in real estate there either through rate cuts. So might as well let the market adjust, however severely, and get it over with.
Anyone know what the market is like in Danbury, CT?
“June turned to summer and summer to fall. Now, with winter here, the price of the well-kept home has dropped to $449,000 and the owners, who purchased the house in 2004 for $435,000, will probably lose money on their purchase. The owners did not want to be identified.”
$449,000 - $435,000 = $14,000, which looks like a capital gain to my bleary eyes. Besides that, assuming they were owner-occupants, they did not have to “throw money away” on rent while they lived in this home. One would have to also subtract all the other costs of owning a home (principle amortization, mortgage interest, taxes, insurance, home improvements and maintenance, to name most of them) to get the real cost of living there.
The good news is that it appears there is little reason for investors to buy homes any more in this market, so we can expect prices to continue adjusting in the direction of affordability to families who need homes to live in, not for speculation.
I left off an important cost, which was whatever share of closing costs (including 6% to Realtors) the owners had to pay when the home was purchased and will have to pay when it is sold.
Have they sold yet?
I think the $449,000 is just the asking price.
They purchased the house in 2004. Note the expectation to make money in a relatively short time.
To be fair, you can’t include principal amortization as a cost, since this is just swapping cash for equity. You do need to have the cash in the first place though!
“Middletown and surrounding towns, such as Portland, Cromwell and East Haddam, have all felt a slowdown in the mid- and upper-level price ranges, basically anything $400,000 and above. And there are more houses for sale in that price range than a year ago.”
It sounds as though they may have run out of buyers who want to try and catch a falling knife.
there is no reason that anything in these towns is >400k. Most of the neighborhoods are icky
I bet the real estate industry was just tickled pink about how prices were climbing and money was loose .It was a dream come true for that industry .
Because real estate is tied to a loan and a tax base usually it’s not a normal sale , It’s a “conditional “sale . When prices are driven to higher levels than can be justified by the local economy than it affects not only the new buyer but the entire community ,the secondary market ,bank profit margins ,the tax base of the community etc. Lending can’t be irresponsible like it has been because of this . It’s not the same as selling/buying a TV and the Lenders failed in their duty .I’m sure alot of borrowers felt that if the lenders/appraisers are giving this loan ,it must be OK .”When the whole world is losing their head you can’t lose yours “.
Nice post, Wizard, with a reminder of a line from a great poem (”If” by Rudyard Kipling):
If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
http://www.everypoet.com/archive/poetry/Rudyard_Kipling/kipling_if.htm
Thanks Stucco for stating the author and exact quote that I forgot .My father use to throw my version at me while I was growing up .
The music has stopped and now we are beginning to find out who the greatest fools are. Let them rot.
‘I don’t understand the market at all….There’s no reason for this to be happening.’
So many stupid people thinking they were geniuses; how could it end any way but badly.
I found this on a personal finance website. Younger guy asked advice on his plan to buy a $600k house in CA, then sell his old place. The Realtor was claiming that there were several offers already. The blogger got lots of good feedback about the bubble, including a link to this website. Later he announced that he decided not to do it, and posted this:
Another one becomes aware. Keep spreading the word, folks.
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