“Sellers Coming To Grips With Reality” In Colorado
The Denver Business Journal reports from Colorado. “Homes sales in the metro area fell in 2006, as did the total volume of residential transactions. Perhaps a more telling figure is the percentage of the original listing price that single-family detached homes sold for in December: just 70 percent. That’s a significant drop from November’s 93 percent.”
“Condo sales prices stayed steady at 94 percent, a 5 percent increase over November. ‘It seems that condo owners are more realistic with their pricing,’ said Lance Chayet, principal of Hanover Realty in Lakewood.”
“He believes many sellers of single-family detached homes listed their homes at inflated prices earlier in the year, and by year-end, had to accept the slumping market. ‘They put their homes on the market in April at a [high] price and by October, they were getting fearful that the market was cratering,’ Chayet said.”
“By December, some sellers were so desperate, they took whatever they could get to make a quick sale. ‘Sellers are finally coming to grips with the reality of the market. The market is adjusting and that’s positive,’ Chayet said. ‘In June, July and August, there were a lot of ostriches out there.”
The Rocky Mountain News. “Home sales dropped by $424 million in 2006 from 2005, probably the first time the Denver-area market has ever seen a year-over-year drop in total dollar volume.”
“‘This is the first time we’ve seen a drop since we began tracking the market in 1985, and I think it is very likely it is the only time it has ever happened,’ said independent broker Gary Bauer.”
“The record 19,425 home foreclosures were the chief culprit for keeping a lid on the average price of homes in 2006, Bauer said. ‘I think foreclosures impacted the market more than we expected,’ he said.”
“‘Also, I think early in the year, people were a little too optimistic about what price they could get for their homes, and later in the year, sellers became more educated about what they could really sell them for,’ Bauer said.”
The Denver Post. “‘There is virtually no community not impacted in some manner by foreclosure,’ said (broker) Rob Horton. Even in neighborhoods where foreclosures were few, home-appreciation rates were under pressure.”
“The median single-family home price for 2006 was $249,900, slightly higher than 2005’s median price of $247,000. Median condo and townhome values fell to $157,000 in 2006, down from $160,000 in 2005. Those numbers may be artificially inflated by pricing concessions reached by buyers and sellers, Horton said.”
“Horton focuses on the southeast metro area. He said his business was off nearly 38 percent in 2006, and he isn’t alone. ‘It was a challenging year for nearly every Realtor,’ Horton said.”
“Four people accused of participating in a mortgage fraud conspiracy that stole millions of dollars and left a gated community in Arapahoe County ravaged by foreclosures pleaded guilty in federal court Friday.”
“The participants included Taiwan Lee, who managed to get 100 percent loans for five houses sold at inflated prices - including two he bought while living behind bars in the state prison system.”
“Until the foreclosures began, he owned five houses in the affluent The Villas at Cherry Creek, thanks to distant lenders who put up 100 percent of the inflated sale price on every house.”
“On Friday, U.S. District Judge Edward Nottingham hesitated to accept Lee’s guilty plea after the 25-year-old defendant said he really didn’t understand what he was doing when he signed the loan documents. ‘All I know is I signed my name,’ Lee said. ‘I thought it was legit. I don’t know much about real estate.’”
“On parole and unemployed when he started buying houses, Lee maintained that he did not read or comprehend the mortgage loan documents. He also denied knowing that more than $20,000 placed in a bank account for him came from the excess loan proceeds of a criminal conspiracy. ‘It sounds like to me you don’t think you did anything wrong,’ Nottingham said. ‘I’m guilty,’ Lee said.”
“State Senator Chris Romer has been waiting two years for the mortgage industry to address what he calls the ‘insanity’ of Colorado’s foreclosure crisis. Now, it’s his turn.”
“In the coming weeks, Romer and other members of the General Assembly seem likely to do to the home-loan business what the home-loan business has not done to itself: clamp down on mortgage brokers. The most telling thing Romer heard in last week’s roundtable session between legislators and lenders was this: ‘Third-party mortgage brokers have no fiduciary responsibility.’”
“Those fancy words mean the guy or gal arranging your loan doesn’t have to make sure you can afford the home payments you’re about to incur. He or she doesn’t have to make sure you know what’s in the fine print. With unlicensed third-party mortgage brokers setting up 70 percent of new home loans, said Romer, there is ‘a license for abuse.’”
From Denver Yourhub. “Everyone has seen the headlines, ‘Foreclosures Up, Home Sales Down.’ Homes sold by realtors are down from the previous year. This fact is facing many home owners who have had their houses on the market but still have not sold.”
“One homeowner, Kim Hiebert, had her home on the market for over six months with a commercial real estate agent and did not sell. Having to refinance her home in 2006 to use the equity to attend graduate school has left the amount she owes on her home exactly where homes are selling for in her area. With added closing costs, and real estate commissions, she was not informed of at the refinance, has priced her out of the market.”
“In order to sell her home, Hiebert is now trying a different approach, selling it herself. ‘I cannot afford to pay a selling agent commission as well as a buyer agent commission. I would probably have to bring money to closing that I do not have,’ Hiebert says.”
“She remains positive, ‘I’ll sell it at absolutely the lowest I can. I don’t mind not making a dime at closing, If I can sell it lower, I will. I just need to move closer to work, the snow is killing me,’ Hiebert jokes.”
hey; i have seen some sellers decreased the asking price and then after several months of not being able to sell increased the price again. does anyone know what they are thinking? what’s the deal with that? is that a sign that they are giving up?
I have a theory this is a way to secretly ‘advertise’ they will do an illegal cash back at close to buyers.
All buyers will see the price jumped up again in a declining market. Who would swoop in to ‘make an offer’? The fraudster cash back guy will pay the full price.
Wow!! Who shot JFK
The CIA stupid.
Nick the Wizard
Read posts by Paladin on this blog. There’s a good chance there’s fraud taking place between the people involved. Basically, they “up” the price after taking the property off the market, then sell it to someone who has no intention of keeping the property. The money arrives from the sale, they split the difference between the original price and the “upped” price. Eventually, the property goes into foreclosure and the banks lose. Actually, that not true. I should say the banks then increase their charges to honest customers to recoup their losses. Banks VERY seldom lose.
Wow, colorado finally realizes that MB’s screw there clients. Now it will only take another 2 years for them to find out how; through mortgage fraud with stated income loans, I/O’s, 100% and having a system set up where if a MB talks a client out of a deal because it is too expensive the MB does not eat or pay any bills.
mortgage brokers,
Not sure exactly where you’re going with that one? Did you mean that there’s no place for honest MB’s? When you say they won’t eat or pay any bills do you mean that the “easy money” is now out of the equation? There’s just WAY TOO MANY MB’s as it is. In fact in many cases borrowers can get just as good if not a better deal right from their own bank. We never needed MB’s to begin with.
You do need mortgage brokers. What is the chance that your bank has the loan that is right for you, and that your bank is offering the best deal on that loan. There are 100’s of banks, so the answer is pretty low
What is the chance that your own bank will stick it in your shorts like a MB will?
Got burned on a refi from an MB who WAS a family friend. Second refi through Bof A, and final refi from Downey Savings. Last two researched through the internet. All three fixed 30.
Check your bank or credit union or the internet first, then compare. I know there are several trustworthy and ethical MBs on this blog, and you should probably shop them, too. In general, however, with MBs, it should be caveat emptor.
And what is the chance the MB has the wrong loan for you?
Chanes are that the MB has the right loan for you, but the consumer is focused only on the short term and does not choose it. Either way the MB makes his or her commission not matter which loan you get. But it is a lot easier for the MB to make a killing in commission on a Neg am loan, since the comission is hidden in the note rate which most consumers do not know or even care about. The MB has a huge insentive to convince the client to get a neg am loan (these MB’s will be out of the busienss shortly and are not making it a profession, in the mean time they will have gotten tons of money in checks)
What’s the chance that your mortage broker, like the realtwhore who recommended him, is a slimeball? Probably pretty close to 100%.
“Perhaps a more telling figure is the percentage of the original listing price that single-family detached homes sold for in December: just 70 percent.”
Does that include the incentives ? You know, the cash, vehicles, trips, etc. that gets kicked back to the various players as part of the deal ?
And if CO RE sells at a 30% discount to listing price, which presumably was probably fairly close to the old asking price, will the NAR include those numbers in their month to month numbers ? After all a sale is a sale, right ?
Its very interesting to see that the foreclosures drove the CO price down because other areas of the country are going to be seeing the same thing shortly. And the thing about foreclosures is they force the market price down. Banks aren’t “sticky” about what the foreclosed house sells for… the previous owner will make up the difference !
“The record 19,425 home foreclosures were the chief culprit for keeping a lid on the average price of homes in 2006, Bauer said. ‘I think foreclosures impacted the market more than we expected,’ he said.”
To think, forclosures are still climbing exponentially. There really won’t be enough of them to matter until June… At that point, the national mortgage market will have to change.
So which sub-prime fails next week?
Neil
“So which sub-prime fails next week?”
Apparently most of those MBSes are held by foreign investors. What I want to know is when will THEY get their heads out of the sand and stop buying MBSes altogether. Now that would really force the housing industry to clean up its act.
“including two he bought while living behind bars”
Folks that’s a wrap! How insane has this bubble become when you’ve got convicted cons IN prison doing “the flip thing”?!?
Good for Chris Romer! I wish him all the luck getting to the bottom of a state’s financial crisis! What is it with those folks anyway? I’m not a fan of regulation either but I had NO idea that MB’s (in CO) don’t even have the most common of business ethics! What a sad joke.
“I’m not a fan of regulation either”
Really? How would you feel about living in a country with no police and no laws?
Who has been more critical of MB’s than I have?
“I’m not a fan of regulation either…”
This statement always bugs me. Are people so brainwashed by our corporate controlled media that they do not realize that regulation almost always protects the little guy by providing minimal oversight to high risk areas?
I have nothing against regulation. Sometimes we really need it.
Yes, they are brainwashed. The corollary being, they don’t know it.
I’m actually FOR mortgage fraud! Sheesh.
DinOR
Re: “Not a fan of regulation.” Jeff Skilling of Enron agrees with you and if he were alive, Kenneth Lay would also agree with you and Bernie Ebbers of Wcom agrees with you and the guys who ran Adelphia agree with you and Charles Keating of the Savings and Loan scandal agrees with you. Not enough room on the blog to name all the others who would agree that regulation, “Hinders free enterprise.”
Actually, for those interested in this stuff, log onto Wikipedia and enter: Savings and Loan Scandal. Once you’ve plowed through that which includes information about property booms and busts, enter: Corporate Scandals. Pretty mind blowing stuff.
Yeah, I’m PRO Fraud! Thanks for putting one of the great housing bears of all time in the same company with these scumbags, I appreciate it!
We know you are a bear, but repeating things like not being for regulation hurt everyone and make the fraud all that more possible.
Regulation is your friend. Only the scammers hate it.
Except when the regulators are the scammers — which is most of the time.
Examples???
Joe Momma,
Arghhh! Please RE-READ the article and my original comment. Sheesh, everybody KNOWS that in CO you can get out of prison on Friday and open a MB firm on Monday! How a common sense observation like hoping the state doesn’t go knee jerk and over react got twisted into an “endorsement for fraud”?
How many times do I have to say it? There’s a hell of a lot more here that I find objectionable than just high housing prices! It’s the whole broken realtwhore MLS monopoly, fraud appraisal “back scratch” system that needs overhauling. I wonder about some of you guys from time to time.
What is this? Dumb and dumber? We all know that CO has had lending issues for years! Hard to figure where some of these comments are coming from?
“Good for Chris Romer! I wish him all the luck getting to the bottom of a state’s financial crisis! What is it with those folks anyway? I’m not a fan of regulation either but I had NO idea that MB’s (in CO) don’t even have the most common of business ethics! What a sad joke”
it’s a little late to the party here. the horse left the barn, the barn was raised to build a strip bar. now these regulators want to help all of these “innocent victims”. how careless were these wholesale lenders in buying these liar loans. you could be rest assured that if it were their own money, they might check to see if the house sold for more than the asking price or that hairdressers don’t make $140,000 a year. it wasn’t their money, though, so book the loan, commission the broker, the wholesale rep, the branch manager and the regional vice president, everybody wins. it works until it doesn’t, which is what you’re seeing in the subprime market right now. it will be the industry implosion that will stop this craziness, not some state regulatory board.
Good for Chris Romer! I wish him all the luck getting to the bottom of a state’s financial crisis!
Not so fast. Where was ole Chris two years ago, when the problem was obvious for anyone who cared to see it. Now that it is politically advantagous to scrutinize the MBs, and just about every block in Denver has its own FBs lurching around like something out of SHAWN OF THE DEAD, our fearless politicos can be counted on to spring into (belated) action with some watered-down remedy. Don’t be fooled.
Sammy,
Read the article! This man HAS been trying for the LAST 2 years to bring sanity to the CO lending arena! It’s been the utter lack of regulation in CO that spurred my original comment to begin with! Next thing you know somehow I’ve become lead council for Skilling, Lay et. al? Everybody that chimed in somehow misconstrued my comments out of boredom for their own entertainment. Not cool.
I’m taking your side on this one DinOR. Next thing you know we’ll become one of “those” blog sites where everyone trashes each other all day instead of focusing on the issue.
Can we move on???
Chad,
Thanks, I only hope it isn’t too late. I got drug through the fraud and shenanigans FIRST HAND during the stock market corruption meltdown. Having someone drag my good name through the mud after having suffered for the greed of others is beyond insulting. Sorry. Thanks Chad!
“Those fancy words mean the guy or gal arranging your loan doesn’t have to make sure you can afford the home payments you’re about to incur. He or she doesn’t have to make sure you know what’s in the fine print. With unlicensed third-party mortgage brokers setting up 70 percent of new home loans, said Romer, there is ‘a license for abuse.’”
More like setting up unwitting buyers … for a future foreclosure.
This problem is way older than two years. It’s about time someone noticed, but it’s also too late. I’d be really surprised if the Denver wunderkinds don’t make things even worse for those who tried to be prudent and save up for something they could afford.
“Those fancy words mean the guy or gal arranging your loan doesn’t have to make sure you can afford the home payments you’re about to incur. He or she doesn’t have to make sure you know what’s in the fine print. With unlicensed third-party mortgage brokers setting up 70 percent of new home loans, said Romer, there is ‘a license for abuse.’”
And the NAR is right there with them. They have a so-called “code of ethics”, but we all know how far that goes. It is very very hard for a homeowner to legally prove that an agent didn’t exercise fiduciary prudence…(you know, selling some poor schmuck something way beyond his means, while telling him it’s a “no lose investment”).
And, many times, they are in cahoots with the mortgage broker.
The whole industry is infested and I am sure cleaning it up and changing how real estate deals are conducted will be an election platform for many in 08. And beyond.
Buyer beware - those brokers are not looking out for you but looking out for their own pocket book. Human nature has been consistent through out history. The history of humanity has not been that humane.
Taiwan Lee who bought 5 houses, 2 while in prison, “Didn’t understand,” what he was signing. Couple of years ago, I was in a small store and a latino guy (he had a gardeners truck parked outside) was talking in spanish to the store owner who was also a latino. The store owner was translating the wording on a mortgage application for him. I expect when some of these guys end up in bankruptcy court because of mortgage resets, we will get the, “Your honor, my client speaks very little english and when the conditions of the loan were explained, he just didn’t understand.”
Back in the late 60’s in the UK, an immigration officer told me that sometimes he would go into an Asian restaurant to check for illegals. When he entered, everyone was speaking english. Once he showed his I.D, everyone looked blank and shrugged “No speaka da english,” when he asked a question. Should be funny reading about the ALL the excuses as to why they signed the papers when this mess unwinds. “Your honor, I left my glasses at home and the mortgage broker told me not to worry about the small print and that signing the papers were just a formality.” Or, “You stated your income was $200,000 a year. How do you explain that?” “Um, well, somebody must have added a zero by mistake because it should read $20,000 a year.”
“Enforcement is a good start. But as lawyer Jerry Stevens told the round table, criminal loan fraud is very hard to prove, and if you can get a hearing for a civil case before 2012, count your blessings.”
This reminds me what a joke the laws/enforcement are here in the US. At best they are 5 years behind.
Example two months ago Stuart Wolff from homestore.com (now move.com) was FINALLY sentenced to 15 years in jail for actions he faking revenue and insider trading during the year 2000/2001.
By the time the govt is involved the next bubble/fraud cycle has already run full steam. Are we in Mogadishu? wtf
Crash Landers
Like the man in the Godfather said, “You can steal more money with a briefcase than you can with a gun.”
…”if you can get a hearing for a civil case before 2012, count your blessings.”
Justice delayed is Justice parlayed.
is there no bubble blog dedicated solely to CO? sounds like they’re at ground zero. with all this carnage, i’d expect a magnifying glass on every transaction in Denver.
In the spring of 2005, I would do a post on foreclosures in Colorado and I would get several comments about how there was no bubble in Colorado, etc. I wonder what they say now?
The bubble in CO happened from 1996 to 2001. But for the Fed’s low interest rates, the bubble should have burst and prices should have decreased significantly 5 years ago. The low rates artificially held up bubble prices. Consequently, rising rates starting in June 2004, punished homeowners in Colorado much quicker. That is why CO was the leader in foreclosures. Outlying areas of Denver have been dead for one and a half to two years. The rest of the state is beginning to follow.
Colorado had big price hikes in ‘94 and ‘00. The last few years have been positively stagnant while the coasts just boomed. How do you convince your wife you’re in a bubble when prices go up 4% per year?
Do we have a boatload of bad debt in CO? - You bet! People over bought, reifed and HELOCed themselves into insolvency. Is that a bubble or financial suicide?
Same poison, different symptoms.
Colorado never had double, or triple, digit appreciation year after year like happened in California and other bubble areas. There was never any plethora of flippers here, either. We may have had appreciation in the 1990s, but what happened then could not be characterized as a bubble, like California.
No flippers? Hilltop area has close to 80 houses for sale that flippers have remodeled to McMansions going for $1 - 2 million. I’m just licking my chops waiting.
Are you one of those ’60s hippie fossils living up in Manitou Springs, firing up the bong before you post? No bubble in CO? B.S.! True, the rate of increase wasn’t what they had in CA, but then again, median wages here are pitiful, so people still paid way more than they could prudently afford, using creative financing. Also, the place is lousy with California Equity Locusts who landed out here, overpaid for houses, then talked all their CA buddies into doing the same thing. There are a tremendous number of flipper-owned houses out here, and a disporportionate number are owned by Californians (I myself am renting from a CA-based “investor.”) Trust me, what CO has seen since 2000 definitely fits the criteria of “bubble.”
In the spring of 2005, I would do a post on foreclosures in Colorado and I would get several comments about how there was no bubble in Colorado, etc.
Brother Ben, I know the feeling. I didn’t buy when I got here in 2004, because, while Colorado Springs was relatively affordable compared to a lot of places, prices had run up too far, too fast, and sellers were disgustingly smug and greedy. Of course, EVERYONE we met or knew would kind of purse their lips when we told them we were renting, like, our sort of people just don’t DO that sort of thing. All of my wive’s friends, in particular, were unanimous that I was wrong, that prices would only go up, everyone wants to live here, blah blah blah.
You wonder what they’re saying now, Ben? Wonder no more. While many or most still have a faint hope in the NAR-promised Spring Miracle Revival - thanks in large part to the NAR hacks who “cover” the local real estate market for the Gazette - many of our friends and acquaintances have recently come around to the view that we were far-sighted, and smart, to hold off on buying. There’s a growing undercurrent of pessimism and an unreal amount of people here who are already underwater on the houses, thanks to overpaying or HELOCs. The denial is still strong, but dissipating by the week.
i have family in larimer county and go there about once a year
a lot of building going on there, this year they are going to put up close to 1000 homes in loveland by the new Centera mall. Douglas and Weld counties are also building like there is no tomorrow.
i live in larimer county (fort collins) and the home building has only recently slowed. Get this, according to IRES, New home sales are down 43.66% in the second half of 2006 vs. the same period in 2005. there are a ton of empty spec homes on the market and most of the national builders have moved out. the ones still here are reducing prices by 25% or so to move remaining inventory. my friends in the title business tell me foreclosures will be a huge problem again in 2007, primarily due to liar/toxic loans. unsophisticated sellers and small builders can’t see (or don’t want to see) the big picture and are holding out for their wishing prices. we still have a lot of local banks willing to lend to small builders to build specs and buy lot inventory. gotta make the numbers! there’s going to be a lot more OREO property in 2007 and 2008 because the cash is running out and product is not moving.
no need to have another blog, ben covers it quite well from arizona, imho.
“The record 19,425 home foreclosures were the chief culprit for keeping a lid on the average price of homes in 2006, Bauer said. ‘I think foreclosures impacted the market more than we expected,’ he said.”
This is a crock. As far as I know, the average price of homes has been stagnant for several years nearly everywhere in the metro area. In my area, a nice, covenant-controlled sub-divisions in the mountains west of Golden, there has been zip appreciation, or depreciation since at least 2001.
One house in my neighborhood sat on the market for over a year. It’s on 2 acres and is around 3,000 sq. ft. Initial asking price was $550,000. Eventually reduced in increments to $450,000. Finally sold for $398,000.
There’s a house next door to me on 1 acre, 1900 sq. ft. kind of shabby and dark inside, no view, old kitchen (1978) sold in five weeks for asking price of $398,000.
Another house has been on the market for about a year, is on 1+ acres, but is only about 5 years old. 2800 sq. ft. Appraised for $465,000. Put on the market for $410,000. Still on market. Price reduced about 2 months ago to $398,000.
Another house been listed for over a year. On about 1+ acre, log home built in 1978, 1700 sq. ft. Owner had it listed for $310,000, reduced to $298,000, but sat for ages. Now is REO. Bank wanted $279,000, now bank will take $250,000.
Losing 100,000 high paying jobs in the tech bust is the chief culprit for the economic ills of the Denver residential real estate market. Foreclosures are a natural consequence of this, but not the chief culprit.
I disagree..Colorado is one of the few places in the USA that a convicted felon can be a MB.
Colorado is also famous for penny stock scams…I lost a few bucks with “Blind em & Rob em” Blinder & Robinson.
Oh my. I’m thinking we’ll be seeing a lot more of this. Everywhere.
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Suspicious fire causes $700,000 in damage
05:34 AM CST on Monday, January 8, 2007
By BRANDON FORMBY / The Dallas Morning News
Frisco fire officials are investigating a suspicious fire that destroyed a vacant house on Saturday night in the first block of Riva Ridge, which is in Stonebriar Estates just north of State Highway 121 between Legacy Drive and Dallas Parkway.
Officials estimate the damage at $700,000. The house had been vacant for years. Firefighters responded to the single-story home about a year ago to extinguish a suspicious fire in a bedroom, officials said. No one was injured in Saturday’s blaze.
The home’s owners could not be located.
This was happening in Omaha through last year. Was happening about once every 5 days or so. I suspect it might pick up again soon.
“This is the first time we’ve seen a drop since we began tracking the market in 1985, and I think it is very likely it is the only time it has ever happened,’ said “independent” broker Gary Bauer.”
Why does Gary say this? Because it’s impossible to disprove.
“…The most telling thing Romer heard in last week’s roundtable session between legislators and lenders was this: ‘Third-party mortgage brokers have no fiduciary responsibility.’”
Don’t you just love it when the politicians and lending industry have a nice sit down and pin the ‘problem’ on the other guy? The lending industry was gobbling up all these ‘independent unlicensed mortgage broker originated loans’ while the politicians looked the other way.
Suddenly, now that the runny stuff is everywhere, it is the mortgage broker’s fault. If the industry did not buy independent mortgage broker orininated loans, the brokers would be out of business in a heart beat. In addition, if the politicians were really looking out for its residents, they could have clamped down on independent brokers a long time ago.
An update:
‘From Denver Yourhub. “Everyone has seen the headlines, ‘Foreclosures Up, Home Sales Down.’ Homes sold by realtors are down from the previous year. This fact is facing many home owners who have had their houses on the market but still have not sold.’
‘One homeowner, Kim Hiebert, had her home on the market for over six months with a commercial real estate agent and did not sell. Having to refinance her home in 2006 to use the equity to attend graduate school has left the amount she owes on her home exactly where homes are selling for in her area. With added closing costs, and real estate commissions, she was not informed of at the refinance, has priced her out of the market.’
‘In order to sell her home, Hiebert is now trying a different approach, selling it herself. ‘I cannot afford to pay a selling agent commission as well as a buyer agent commission. I would probably have to bring money to closing that I do not have,’ Hiebert says.’
‘She remains positive, ‘I’ll sell it at absolutely the lowest I can. I don’t mind not making a dime at closing, If I can sell it lower, I will. I just need to move closer to work, the snow is killing me,’ Hiebert jokes.’
“Having to refinance her home in 2006 to use the equity to attend graduate school…”
The education from this debacle will trump anything that possibly could be learned in grad school.
No kidding. I love the “having to” part. That’s right, there was no way she could, you know, just save up her money for a few years and maybe attend a graduate program at a public university at a much lower cost, or anything stupid like that. She just had to “liberate” equity to attend a graduate program she could not truly afford.
Oh, and I also loved the “was not informed” about commissions and closing costs part. Did she really think mortgage brokers, appraisers, RE & escrow agents work pro bono? Was this information really NOT disclosed to her in countless RESPA and other legal documents? Or was she just too lazy and dazzled by “always goes up” dollar signs not to be bothered to read them?
Right on, that grad school excuse is a bunch of hooey. I’m wrapping up mine this year at a public university, and because I kept my grades up they even provided me with merit tuition awards for about a third of the cost. Sure, it isn’t the greatest school on earth by far, but since when does getting an education mandate a refi? It’s a joke, people like this only tell that sob story to make their conspicuous consumption seem less indulgent. Besides, study after study suggests that the law of diminishing returns applies to higher education as well since jobs require more targeted training instead of simply more education.
No kidding. I love the “having to” part. That’s right, there was no way she could, you know, just save up her money for a few years and maybe attend a graduate program at a public university at a much lower cost, or anything stupid like that. She just had to “liberate” equity to attend a graduate school she could not truly afford.
Oh, and I also loved the “was not informed” about commissions and closing costs part. Did she really think mortgage brokers, appraisers, RE & escrow agents work pro bono? Was this information really NOT disclosed to her in countless RESPA and other legal documents? Or was she just too lazy and dazzled by “always goes up” dollar signs not to be bothered to read them?
Exactly! I say the same thing almost every other day. Ben’s coverage of the housing bubble is very broad. His blog is a real-time business case study laboratory. Reading it beats the heck out of reading stale case studies.
In addition, the housing bubble easily spans all dimensions — political, legal, economical, social, geograhpical, cultural, and so on. So, this is as real as it gets. If you don’t learn here, you are simply wasting time in grad school.
“I just need to move closer to work, the snow is killing me,’ Hiebert jokes.’”
Should read: snow “job” is killing me.
“I don’t mind not making a dime at closing, If I can sell it lower, I will”
Really? So what happens when market forces determine the sales price is substantially LOWER than the payoff? Then what? It’s becoming increasingly obvious that’s where the market is headed. So, Ms. Hiebert might no longer be in a joking mood. The snow might not be the only thing killing her…
“I don’t mind not making a dime at closing, If I can sell it lower, I will”
She took all her paper profits out to pay for grad school. So even if she sells at here current loan amount, she still made a fat profit. These people are so twisted they don’t even realize it.
If the resale price is more than your original purchase price, you sold it for more than you bought it for. You made money on it, even though you pissed away every cent of your gain, while you were living in it. There’s no excuse for your stupidity, or redemption.
Sub-prime lending has to be outlawed .The low down sub-prime loans have messed up the whole real estate market . People engaging in sub-prime loans should put 30% down so the regular appraisals aren’t messed up buy this demand for loans from the unqualified . Appraisasl are no longer something the financial systems can trust as being stable .
In past lending cycles a sub-prime borrowers or one who did not want to prove their income had to put at least 25 % down and pay higher points and rates if they wanted to get into the market . Those requirements limited the sub-prime borrowers from messing up the greater markets comps . Again speculators had to put more down and pay higher rates and fees . Prior prudent lending would limit this sort of real estate activity that any reasonable person would consider higher risk . In recent years because of the change in lending this sort of risky real estate activity has become such a high percentage its scary ,and it ruined the market .
Well put and exactly correct. Lets see and RE speculator try to do the same things with a stock on margin loan…not a chance in hell…
Thats exactly why people used real estate as the vehicle for this. The sad part is that subprime buyers rarely if ever care about anything other than monthly payments. Not even future monthly payments just todays
“Sub-prime lending has to be outlawed.”
Not sure. My guess is that if Fan and Fred stopped subsidizing subprime with their nonexistent implicit guarantee, the invisible hand of the free market would quickly dispense with the problem. Just a hunch.
GS would a legal “test” of that “shadow” guarantee be a tipping point?
You’re right. Before we outlaw subprime, let’s do an experiment and shut Fannie and Freddie down. Let’s try life without these to drunken losers spending borrowed money backed by a rich uncle.
I think we must all agree that most subprime borrowers are far less educated in finance than most of us on this blog. How about requiring something like a three-hour course on RE financing before anyone can sign for a subprime loan? I would be happy to be one of the instructors -
BTW, isn’t the NAR Ethics course something like three hours?
I say just put fannie and freddie out on their own.
Huh? Fanny and Freddie buy mostly ‘conforming’ mortgages which are much more conservative than the toxic crap we’re reading about now.
Is is almost all private sector banks etc who are responsible for the insane subprime loans.
If Fan and Fred’s standards were everybody’s standards we’d be better off.
Dr Chaos is right. Especially since 2004, it seems F&F have been relatively conservative.
Although we still cannot determine exactly who is buying the MBSs (and who the counterparties are on the CDSs), I’m guessing a lot of it is hedge funds and other institutional traders — as well as FCBs, pension funds, etc. Lots of blame to go around here, but F&F have always had their particular programs (some have been recently loosened).
Subprime is the problem.
The crooks use the sub-prime loans ,the unqualified use the sub-prime loans , the speculators use the sub-prime loans . Do we really need this sector of the population screwing up the entire system ?
Scr-w sub-prime loans and go bad to hard money loans/25% to 30% down loans the way it use to be for the unloanable . You can’t stop the creep loan agents from fraud and playing with the loan packages on the sub-prime loans with the creep appraisers ,so get rid of these loans .
Go back to PMI insurance on any thing less than a 20% down loan so real buyers can get in on low down payments by paying PMI insurance so the system can be protected .Keep the VA and FHA low down with the insurance and make the people qualify . Stop the low down/ no qualifying cr-p that was based on real estate going up ,not on people being end user buyers . This will not hurt regular people who want to buy a home in the future ,but the market has to correct from this sub-prime lending that pushed the market up at least 30 to 40% higher ,or more in some areas ,than it should of gone .
Sure you keep adjustable or IO loans ,but you make it so the people have to qualify for such a loan . Just like a fixed rate if they put a lower down payment they have to have insurance ,which means they have to qualify .
Even if some sub-prime outfits fall by the wayside you always got fly-by-nights that will spring up . No, the sub-prime lending failed because it goes against the time tested merits of needing to earn a loan .
So what if people have to pay a little PMI insurance for 3 to 5 years ,its better than the whole system crashing with a bunch of creeps getting loans .
I can’t help it if the builder overbuilt expecting to put every stupid investor into 3 properties with the real estate hype that was going on with all their sub-prime horsesh-t . The subprime loans created the mania and the overbuilding and it was just wrong . You watch ,the borrowers are just stating to submit lawsuits blaming the creep lenders for their greedy speculation .
Low down sub-prime lending that is passed off to the secondary market will never work … never work ….NEVER …..
Well said, Wiz!!!
Not many signs of the bust here in western Colorado. Energy and homebuilding is booming with the resultant newcomers putting a great deal of pressure on the local housing market. It will be interesting to see what happens when this extractive cycle runs its course…