“People Are Getting Their ARMs Broken”
WILX reports from Michigan. “If you’re looking to buy a home, now’s the time to do so. There are more than 4,100 homes on the market in the greater Lansing area. ‘I think the decline that we’ve seen is not going to occur,’ said Tomie Raines Realty President Debbie D’Valentine.”
“It can’t get much worse after the Lansing area witnessed a 20 percent drop in sales last year. More than 7,000 were sold in 2005 compared to just 5,600 in 2006.”
“While sales volume may have fallen, prices did not. The constant prices haven’t helped those like Deborah Frederick who’s currently paying two mortgages. ‘It’s going to get old very fast,’ she said.”
“Frederick and her husband put their Lansing home on the market last June to buy a condo. More than 6 months later, it’s still unsold. ‘I was just really shocked the first time we had an open house,’ she said. ‘I thought a lot of people would show up and there wasn’t.’”
The Detroit News from Michigan. “In a sign of just how low Metro Detroit’s economy has fallen, one of the nation’s largest home foreclosure auction specialists will hold its biggest single-city sale Saturday. More than 300 Detroit homes, all of them repossessed by mortgage lenders, will be sold in a two-day auction. The homes are valued at $5,000 to $300,000.”
“Detroit agent Kimberly Simpson said the popularity of risky adjustable rate mortgages is the primary cause for the foreclosures. ‘People are getting their ARMs broken,’ she said. ‘That’s the major part of it. It’s killing the market.’”
“In November, Detroit had the nation’s second highest foreclosure rate, with 3,333 properties. It’s a grim picture Simpson doesn’t expect to change soon. ‘It’s going to be a buyer’s market for a very long time,’ she said. ‘I don’t see it getting any better.’”
The Star Tribune from Minnesota. “Last year was the worst in almost a decade for Twin Cities-area home builders and developers. The rising number of unsold homes built during 2005 forced builders to dramatically slash the number of homes they could build during 2006, said Betty Hardle of Residential Research in Minneapolis.”
“‘In 2005, most builders should have been slowing down and only building sold houses, but quite a few didn’t,’ Hardle said.”
“During 2006, builders were issued 7,325 permits to build 12,644 new units. The market clearly is in the midst of a long-awaited correction after peaking in 2003, the year a record 19,000 units were built. Nearly half of those new units were condominiums and townhouses.”
“When interest rates started rising in early 2004, demand drooped, leaving builders and developers with deep inventories of unsold homes. They now include a glut of new condominiums in Minneapolis, which last year issued enough permits for more than twice as many units as Woodbury.”
“In the Twin Cities, builders and developers are scaling back or abandoning plans for new projects. Brighton Development, for example, passed on its plans for a condominium project in the Mississippi River Mill District. And during the coming year, it’s likely that at least a couple of announced downtown condo projects may be scaled back or scrapped as the market absorbs inventory, said Tom Melchior, multi-family real estate analyst.”
“Colleen Carey, president of the Cornerstone Group in Edina, said she, too, has embraced a much more conservative approach. The company has canceled plans for two metro-area condominium projects (and) has reduced the size of the company’s staff.”
“‘I believe that now is a time for planning our next move, rather than executing it,’ Carey said. ‘I think this is a part of a cycle and it will pick up; no one knows the magic moment when things will take off again.’”
The Pioneer Press from Minnesota. “Developers have dropped their plans for a downtown St. Paul indoor farmers’ market topped with condos because of the housing slowdown. Now, a former city official is stepping in with his own proposal.”
“Brian Sweeney plans to ask the city’s Housing and Redevelopment Authority on Wednesday for development rights and the land to build a five-story building that will feature four floors of condos.”
“Despite the glut of condos for sale, Sweeney believes he can make a go of the $13.5 million project by offering smaller units at prices between $159,000 to $259,000. ‘We want to be very sensitive to this softer market and at the same time move this forward,’ Sweeney said.”
“Developers Michael Lander and George Sherman started to feel uncomfortable last year putting up more condos when they still have other units for sale, Lander said. The decision by Lander and Sherman to walk away from the project comes amid a slowing housing market. Twin Cities home sales fell 23 percent in November from a year earlier in the 13-county metro area and median selling prices had slipped slightly as well.”
The Journal Sentinel from Wisconsin, “The city of Milwaukee’s torrid home-building pace slackened in 2006 but not as dramatically as that of its outstate neighbors. The Milwaukee Department of City Development reported Friday that volume is 22% below that of 2005, but it beats the 36% plunge in statewide home building.”
“Milwaukee Mayor Tom Barrett said, 2006 culminated a seven-year, $830.9 million downtown residential construction boom that sets the stage for job growth. ‘It’s the city’s renaissance,’ Barrett said. ‘All you have to do is look at our skyline, at the number of cranes and booms out there. People are interested in staying in or moving to the city. Now, companies are saying, ‘We want to be in the city because more of our employees live here.’”
“‘There’s plenty of activity, and I’m excited about what’s still coming,’ said Bruce Johnson, president of the Metropolitan Builders Association of Greater Milwaukee. ‘You hear this skepticism once in a while, along the lines of, ‘Where are all these people coming from?’ Well, maybe they don’t appreciate how many baby boomers are becoming empty-nesters and moving into condos here.’”
“City Development Commissioner Rocky Marcoux sums up the city’s housing fortunes as ‘fabulous.’ Years ago, he said, ‘all the stories were about how the metro area was doing better, and the city was the exception. Now, metro statistics about the downturn don’t apply to us.’”
From GM Today in Wisconsin. “While the real estate market has been in the midst of some great upheavals in the coastal areas of the nation, local industry sources say the housing market in Ozaukee County has been somewhat more stable.”
“‘There has been quite a bit of appreciation in the last few years, and we’re probably just getting back to an even keel,’ said Marie Kaysen, president of the Ozaukee Realtor’s Association.”
“As for the influx of homes on the market, Kaysen points to a number of reasons. One factor is the change in employment from some of the larger businesses in the area. Another is the uprise in residential subdivisions, many of which are just getting off the ground. ‘The Midwest has weathered changes in housing before, and the real estate market is just going through one of its cycles,’ Kaysen added.”
“Mike Ruzicka, president of the Greater Milwaukee Association of Realtors, said while home sales really peaked in 2005, he predicts sales to go back on the rise. ‘Because (the market in) 2005 was flooded, the prices became flat in 2006 in comparison,’ Ruzicka said. ‘A lot of home sellers didn’t want the appreciation on their home to come down, so they put their homes on the market.’”
“‘Perhaps they won’t be at the levels of 2003-04 when all the stars were lined up with low interest rates and good demographics,’ said Matt Moroney, executive director of the Metropolitan Builders Association. ‘Speculative (building) results in extra inventory. A lot of homes were built when the interest rate was 5.25 percent. Then when it edged up to 6.5 percent, things slowed down.’”
“‘There clearly was a real estate slowdown that started in the last quarter of 2005, but most of the slowdown has been in the speculative market,’ said Jeff Larson, president of Grafton State Bank.”
ignore what you see ?
realtors are dopes
Lansing area. ‘I think the decline that we’ve seen is not going to occur,’
‘I think the decline that we’ve seen is not going to occur,’ said Tomie Raines Realty President Debbie D’Valentine.”
Break it down:
Debbie is predicting that something she’s acknowledged has happened, is not going to occur!
Does this have something to do with quantum physics?
It’s the new logic they teach at the downtown Detroit community college:
A drop in sales is a decline.
Sales have dropped.
I think that the decline we have seen is not going to occur.
I’m my own grandpa.
…and if the universe doesn’t care that our peverted friend Frye here is his own grandfather, who are we to judge?
Love Futurama…
Take that, causality!
Absolutely correct logic.
The decline we have seen has already occurred.
The decline we will see has not yet occurred.
Sorry, you can’t fault that logic.
In other news, yesterday will not be happening again tomorrow.
Er, I think it’s something to do with String Theory.
Saddam had a problem the other day on the net with a large string around the neck. I hope the same thing for these people. Tell them. “Go string yourself.”
http://www.marketoracle.co.uk/Article204.html
Quantum Finance - as complex as theoretical physics, based on the fact that “energy is not continuous but comes in small and discrete units,” as one definition puts it. “The movement of these particles is inherently random. It is physically impossible to know both the position and the momentum of a particle at the same time…[and] the atomic world is nothing like the world we live in.
God bless America
and Canada too …
By the way, wise-guy, I’m only 44 north.
Lansing area. ‘I think the decline that we’ve seen is not going to occur,’
That currently holds the title to “the dumbest thing I have ever heard”. I don’t expect it to be out-dumbed anytime soon.
This is classic…..agree it can’t get dumber than that.
I wonder if DL will use it in his next economic forecast for NAR?
That brings up a question I’ve often wondered about. The NAR makes economic forecasts about the housing market. Has anyone ever seen what these forecasts are based on. I mean, there are drivers to the housing market that should be identified. For example, LAY indicated that interest rates and foreclosures are factors. Actually, foreclosures are themself driven by factors. There should be models that describe all of these inputs and they should be tweakable in these models, if in fact, the NAR economists actually use them.
Could “denial” be defined any better than by a statement such as this?
In other words “What’s happening isn’t going to happen”
Tomorrow’s Realtor denial: “What happened never happened.”
It sounds like the reporter did not quote her entire sentence. She probably said ‘I think the decline that we’ve seen is not going to occur this year’ or ‘I think the decline that we’ve seen is not going to occur forever’. Lazy reporting. They pull this stunt all the time. Funny how they can make anyone sound retarded by taking quotes out of context.
Or those might have been the actual words that she uttered. However they’re so obviously nonsensical that they should have sparked a follow-up to figure out what she MEANT to say. If somebody was following me around recording everything that I said, they’d find a dozen times when I misspoke and said something stupid. I’m concerned when somebody MEANT something stupid.
I agree, I bet it was taken out of context. Perhaps the previous sentence talked about declines in a neighboring town. So she was saying, in essence: “Yes, there were declines the town over, but I don’t think we’ll see them here. Because, you see, IT’S DIFFERENT HERE.” Still an idiotic sentiment, but I’m wagering her logic skills are better than nil.
tend to agree with this. How about “the drop that we’ve seen is not going to recur.” The quote is too stupid even for realtor ™ speak.
Flat - I just spent 14 minutes in RealtorSpeak (TM) class (to get my continuing ed for the year). I’ll clarify it.
Because the decline has already happened, how could it possibly occur again? The decline we have seen to date is past. On the other hand, the decline we have not seen has an equal chance of producing either huge appreciation for sellers, or a big opportunity for both or either the buyer or the seller. In other words, it’s a great time to be a buyer or seller.
Does that help?
THEY ARE SOO CRAZY THAT I WOULD BREAK ALSO THEIR TWO LEGS!
A GOOD KNEECAPPING WOULD TO THE TRICK FOR THESE CRAZIES. YOU ARE SOO CRAZY !!!!! LOONIE BIN AMERICA.
NEW YORK, Jan 10 (Reuters) - U.S. mortgage applications skyrocketed during the first week of 2007 as interest rates fell for the first time in five weeks, lending support to the view that the housing market is stabilizing, an industry trade group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity jumped 16.6 percent to 671.1 for the week ended Jan. 5.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.13 percent, down 0.09 percentage point from the previous week. Interest rates were above year-ago levels of 6.08 percent.
The MBA’s seasonally adjusted purchase index soared 16.2 percent to 472.8, its highest since the week ended Jan. 20, 2006 when it reached 473.7. The index was also above its year-ago level of 457.4.
Reuters Pictures
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from the last 24 hours.
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The purchase index is considered a timely gauge of U.S. home sales. The group’s seasonally adjusted index of refinancing applications surged 17.3 percent to 1,923.8.
flat what do you against dopes?
Dopes are fun to watch.
It make life enjoyable specially when you read all this.
everyone wants to move to michigan right? with their stellar local economy and wonderul cities.
don’t forget the booming us auto market as well
I have traveled to almost evry city in the country for work and if I was making a list of crappy places Detroit would be #1. What a shthole. about 30% of the houses in downtown detroit are abandoned or boarded up.
If you watch “animal cops Detroit” on the animal planet channel you’ve seen all you need to of Detroit.
Well. Detroit is the future of the US staring at you.
My wife was telling me about a story she heard regarding a moving company (united van lines I believe). Anyways they said most of their michigan business was moving things out of state. Hopefully I can talk to the wife into leaving michigan once our oldest is out of high school in a year and a half.
To China ?
Speaking of which …. which has a better chance of working?
Ford Motor Company’s restructuring plan, titled: “The Way Forward”
The Iraq Study Group (aka Baker/Hamilton Commission) Report: “Iraq: The Way Forward”
Iraq. At least they have a viable industry (oil) to carry them forward once all the sectarian bloodletting is played out.
BOOM! at FORD!
BOOM! at GM!
The only thing booming there is the DEBT DEBT DEBT !!!!!!
United Van Lines (a moving company) just published their annual survey of inbound versus outbound shipping.
Michigan and North Dakota were both tied for #1 in the percentage of outbound shipments. About 2 people leave Michigan for every one that moves in.
http://www.unitedvanlines.com/united-newsroom/press-releases/2007/documents/2006-united-migration-study-04-07A.pdf
That giant sucking sound you hear is the fleeing of the People’s Paradise of Blue States for Red.
The hole the whole either blue or red will be sucked in.
banco popular wholesale- ceasing operations, seems like one a day lately.
POPULAR like in popular delusions.
Another subprime blow up
http://www.bloomberg.com/apps/news?pid=20601086&sid=a7mNwCBjpvk4&refer=latin_america
“Late payments on sub-prime loans in the U.S. rose during the third quarter to 12.56 percent of the total, the most since the first quarter of 2003, the U.S. Mortgage Bankers Association said.”
So much for the false New Era theory that subprime loans are less risky than they used to be.
The first quarter of 2003 GDP was just beginning to rise.
So what this means is that late payments now, with the economy supposedly in “goldilocks” mode, are HIGHER than the last time the economy was pretty much dragging bottom.
How is it possible this is NOT a seriously bad development?
GS You find some great data and make sense of it for me all the time - great appreciated by the way - and I love your take on this subprime mortgage stuff. But explain this quote from todays article: “While sales volume may have fallen, prices did not.” In the face of bloated mls listings, lower sales, tighter lending, subrprime mortgage failures, more forclosures, and even mortgage company failures, prices are not coming down much at all. Why? What will it take for prices to more reasonably match houses?
They may have dropped already if you can dig past deceptive median sale price figures. Consider that if sales on the bottom end of the market deteriorate faster than sales at the upper end, the median sale price would go up, even if individually prices were going down.
Imagine an earthen dam which impounds a reservoir. After a few days of steady rains, the dam is soaked through and weakened, and water has piled up to the top and just begun to spill over. For the moment, not much more water than usual is flowing to the downstream side of the dam. However, if the earthen dam starts to significantly erode due to the water spilling over the top, the flow will suddenly quicken, leading to more erosion, leading to more quickening of the flow, and… voila! — the earthen-dam version of the sandpile effect ensues:
http://sd.water.usgs.gov/projects/1972flood/photos.html
The recent collapse of several major subprime lenders is analogous to the erosion at the top of the dam. Subprime loans don’t pencil out when the risks are not hidden by rapid price appreciation, and most reports I have seen lately on home prices suggest they are flat or falling in parts of the US where homes are extant. Without subprime loans to maintain the gulf between incomes and home prices, the current level of affordability has no equilibrium support, and barring some unforeseen deus ex machina, will give away like the earthen dam in my analogy.
Thanks GS. The analogy helped and your explanation answers the question. Your patience is greatly appreciated.
Alan Grenspan talked about that. That farrrrrt was astonished by all the innovations going on in the subprime racket.
Federal Reserve farrrrrrt.
I wonder how much of this is due to the Florida/Miami condo market.
I would imagine this is spread throughout the Country…wherever they have been written.
That’s great.
Unfortunately, here comes another one with more FREE MONEY.
Just introduced TODAY!
When will it end??
http://www.rismedia.com/wp/2007-01-07/california-company-announces-no-mortgage-payment-for-12-months/
“has just released a patent pending mortgage program that allows homeowners to defer anywhere from 3 to 36 months of their mortgage payments. The new program is called 12 Month Deferral or 12MoDef. What’s more, this new product can be applied to ANY type of refinancing loan.”
OK, so no money down, no closing costs, and no payments for 1 - 3 years, all with no need for income verification and no need for resident status.
It’s easier to buy several houses than it is to buy a TV. Talk about spiking the punch bowl.
This spiking is different, though, because the loans are debt time bombs in the guise of free money. So far, I have not seen any subprime lending program which is forgivable. Let me know when these are introduced — that is the day I will buy a McMansion.
Somehow DefCon5 seems more appropriate.
Free money ? Can I have some ? Just call me
1-800-you-are-soo-dumb. OR call 1-800-FED.
And now we see why E-Loan (parent = Banco Popular) has been offering %5.50 savings accounts, just like Amboy! Good thing my savings is FDIC insured. These sorts of blowups make me nervous.
You remind me of the S&L (Missouri Savings) where I had a high-than-market-rate 5-year CD parked in the late 1980s. Sure enough, they blew up, but the FDIC (bless their hearts) made good on both interest and principle payments…
Just print some more money at the FED. Hey let’s face it! It’s a great system! Thank God that you have the stupid Japaneese and the stupid Chineese. In reality the FDIC is assured by the rest of the stupid world outside of the US. You have just one great!! gimmick going on !! The Bunny just keeps going on and on and on.
“People are getting their ARMs broken” is my nomination for quote of the week…and it may, in time, come to symbolize the real estate reversal of fortune.
That said, these articles are getting stale. RE Industry types and their like minded brethren (newspaper ad men, city boosters, and the like) pump their fists and put a good face on a market that in no uncertain terms is “trending down”. The other camp, small but growing, seems to be of eeyores and those in the know who say that houses are overpriced, land overbuilt, and the lot of unfortunate owners in the process of a haircut. The particulars of the quotes change, but the basic idea does not…
The real problem will come when the boosters and RE folks throw in the towel and cry uncle. I recall reading late last year an article mentioning that stocks are bought and sold everyday. The article mentioned that someone must be losing and someone must be winning in this zero sum transaction (bare with us I know it is more complicated than that). The problem in markets is when all agree on a direction…there is no one to “lose” on a transaction. If all in the market for a home feel it is a bad time to buy a huge section of our economy would come to a stop.
When “everyone” agrees on a direction, doesn’t that virtually guarantee an asset category will go in the opposite direction?
If “everyone” comes to own “x”, who’s left to buy “x”? Once everyone agrees on something, once there is “certainty” achieved (on something like an asset’s value which is forever uncertain, forever dynamic) isn’t what’s really “certain” is that it can’t continue much further in that direction (absent a major, UNEXPECTED, fundamental “boost” to that direction)?
Isn’t this exactly what happened in real estate over 2001-2005?
“Everyone” came to believe the myth that “real estate never declines” (among many other RE myths). Naturally, “everyone” got in. Furthermore, not only did everyone get in but some (like the woman who bought 20+ properties) got in like the world was coming to an end.
What, other than the bubble popping, could have happened absent a jolt of hyperinflation or wages somehow tripling out of the blue? With no bidders left, with no more cash to be borrowed (much less savings invested), where was the new money going to come from to bid prices higher?
This is what kills naive, uneducated and greedy investors. Like everyone, they crave “certainty” with their investments but what they ignore, don’t understand or just don’t know is that “certainty” NEVER exists in any asset category. Seeking “certainty” in something who’s nature is to be continously “uncertain” is the definition of foolishness. It’s just like seeking perfection. It may (or seem to) occur that somethings, sometimes, are “perfect” but that perfection only lasts a few moments.
So while seeking perfection may be an admirable and productive way to operate in many things, EXPECTING perfection (certainty) in an investment couldn’t be a more dangerous way to invest.
‘People are getting their ARMs broken,’
Was that expression first coined here?
I believe I’ve heard this for mortgage broke ads on the radio here in SoCal…
“mortgage broke ads”
What an ironic typo.
Q. What does a mortgage broker do?
A. Makes mortgage loans that will help his clients go broke.
He breaks ARMS.
Movin’ to Milwaukee!!
Yeah, I don’t know about the number of times people told me they were movin’ to Milwaukee.
Literally.
Yeah, how many “empty-nesters” need a condo in downtown Milwaukee anyway? For what, for their kids to crash at after getting blotto at Summerfest? The all-knowing, all-seeing Chicago Tribune ran a story this past summer suggesting the latest craze was for FIBs to have “urban” retreat along the banks of the Milwaukee River - good luck with hanging onto that dream. They’re counting on that exact same group to buy out Trump’s tower along the Chicago River.
I personally know of six busloads of Baby Boomers who roam around the country seeking a housing market to settle in, and consequently, “prop up”. So far they have nixed: Naples, FL; Bitterroot, MT; everywhere in AZ; and, Las Vegas, NV.
I’m going to hip them to Milwuakee. Milwuakee may just be the answer to their prayers.
Your post conjures up images and thoughts that warp the mind….
Shea Homes says they’re coming to Nipomo!
the last person was the “BIG RAGU” if i remember correctly
Too freakin funny….if that show was set in Milwukee, how come they all had NY accents???
2 years ago, out of college, my cousin was offered a high level marketing job for Harley Davidson in Milwaukee. They offered a top salary and 2 YEARS of free rent & utilities up to $1200 per month. How many places are so horrible they actually pay you to live there? She went to Neiman Marcus in Dallas instead.
“‘There’s plenty of activity, and I’m excited about what’s still coming,’ said Bruce Johnson, president of the Metropolitan Builders Association of Greater Milwaukee. ‘You hear this skepticism once in a while, along the lines of, ‘Where are all these people coming from?’ Well, maybe they don’t appreciate how many baby boomers are becoming empty-nesters and moving into condos here.’”
Note from So Cal - We will also send them our illegals.
i thought the illegals and the baby-boomer were coming to Florida. I’m sure we have as much available housing as Milwaukee. Delusions and Dreams…is that the sign of a mania??
I’m pretty sure the boomers were retiring to Arizona. It’s funny, all these states chasing after the same set of boomers. Question is, how many of those boomers can really afford to move? And when they arrive, their mortgage will be so high they won’t be able to buy anything except health care.
There are enough illegals for all!
boomers are not moving into condos in downtown urban areas. they are moving closer to their kids and grandchildren.
my parents just moved into a rental home (FB) right across the street from me. they weren’t thrilled with the home itself but “love love love to be so close to the kids - then can come for dinner and sleep over any time they want”
as a nice added feature my dad is semi-invalid and so we can reciprocate by looking after him when Mom wants to go out or goes off to her work as a nurse in a nursing home.
Mina
boomers are not moving into condos in downtown urban areas. they are moving closer to their kids and grandchildren.
somehow family dynamics escaped the condo developers’ worksheets when they were conjuring up unit demand and sales projections.
A lot of boomers don’t have kids and grandkids.
And consequently will never be empty-nesters. The irony!!!
Other disagree, but I think a lot of baby boomers are going to be looking for smaller city condos. Once the kids are gone, a lot of parents want something to do and they don’t want to have all the responsiblity that comes with owning a big house (like the lawns, cleaning it, etc.) I think there is a bigger demand for inner city condos than people imagine. It’s great to live in a place where you don’t have to drive to everything.
Ok, fess up. How many condo investments do you “own?”
I think there is a bigger demand for inner city condos than people imagine.
The condo developers in Philadelphia were counting on a big demand for their product, but in this market, it never materialized. HBBers posting from Chicago and even NYC describe an overbuilt condo market, with more on the way.
To your point about boomers not wanting house maintenance, that is correct. Their need to free themselves of too much housework is being satisfied by living in 55+ communities, where the yard work, snow plowing, etc. is done for the residents. Again, only reporting what’s happening in my area.
Do you live in an area where the supply of condos is not meeting the demand?
p.s. I agree that it’s great to live in a place where you don’t have to drive to everything. That’s probably the only thing I miss about making the switch from city to country (now ‘burbs).
I live in Los Angeles. I don’t own any condos because they are still too expensive. Los Angeles is probably one of the few places that doesn’t have a glut of downtown condos because not many people really wanted to live downtown a few years ago. Now though, it’s become the hip/happening place and lots of new condos are going up, and they are selling really fast too.
I’m an older single baby boomer and I love the idea of living downtown and not having to drive everywhere. This is LA, you know? Driving can be the pits out here, unless you really enjoy living your life on the freeway.
Now though, it’s become the hip/happening place and lots of new condos are going up, and they are selling really fast too.
BWAHAHAHAHAHAH!!! Stop! HAHAHAHA!!! Stop! You’re killing me!!!
Also, if NYC has a condo glut, I’m sure it’s only due to the high prices. A lot of people would give their eyeteeth to live in NYC — it’s just too expensive. If the USA ever does have a serious recession/depression, I can see those low priced condos being snatched up in a hurry.
I think a lot of investors made a huge mistake thinking that baby boomers were going to want to retire in 5 bedroom mansions with 4 baths and a million dollar+ pricetag. Most people want to start downsizing somewhere along the way. The only thing that has kept a lot of older people in large houses in California is Prop 13.
“It’s great to live in a place where you don’t have to drive to everything.”
I’ve lived in a city apartment for six years with no car, and it’s not what it’s cracked up to be. You have to be very energetic (mentally and physically) to take advantage of the “vibrancy of the city.” It might work for the enthusiastic yuppies, but I just don’t see hordes of 70-year-old baby boomers doing it.
Watching the seniors take the CTA to the grocery store is depressing - especially in winter.
Besides, everyone buying condos in Chicago nowadays is bringing their cars in tow. The only people going carless are renters from NYC or Europe. All the Midwestern migrants expect to drive everywhere - even the beach.
The theory of seniors happily living in expensive urban condos is just that, a theory. In 20 years it is doubtful that too many boomers will be happy lugging their folding shopping carts onto the bus.
Its going to be interesting when more foreclosures start in the Realtor ™ and brokerage businesses due to the drop in revenue.
I’m not buying until the thought of bidding against someone putting 0% or 5% down is in the past.
Neil
You might never be buying then because that’s not going away.
Right, TX. That’s all the more reason to rent and buy at the bottom. Credit is going to be tighter, so there will be fewer folks able to get the 95% loans. Plus, buying without contingency will make your a better buyer.
If someone is bidding against you, move on. Chances that it’s either the agent playing games or you are bidding against someone with a bigger box of stupid.
Depends on the price range…
Enough defaults will make them unpalatable. I have no problem with a 5% down on a VHA or even a conforming loan. But on a Jumbo?!?
0% down will disapear. The bond market just isn’t going to find them desirable anymore.
Neil
The thing about putting money down in this market is that if you do say, 100k down on a 500k home and then the house goes down to 400k value, your 100k is gone. If the bank wants to let me borrow all the money then, that makes more sense if i am a buyer now. At least that way i can walk with my 100k (theoretically) if housing tanks
Good point. I’d rather pay the debt-forgiveness/1099 tax on $100k than lose the entire thing. Maybe the old 20%-down lending paradigm really is history.
Even so, I won’t enter the market until virtually all the stated-income neg-am borrowers are gone. Stupid money will beat out smart money EVERY TIME –there’s no point in even trying until the Casey Serins are history. Nor am I going to try to “win” any bidding wars –unless it’s a Dutch auction (bidding the price DOWN).
You might never be buying then because that’s not going away.
Beg to differ. What goes round comes round. Risk mitigation!
Why would I want to put any money down on a depreciating asset? I can earn more on the money in the market!
Hell, with a depreciating asset, you could earn more by spending.
‘I think the decline that we’ve seen is not going to occur,’
What a bunch of BS. Don’t you get tired of this cheerleading. Mind, you it’s hard to blame them in a way. I read a stat somewhere that in fact 50% of Americans are more-or-less debt free. Keep in mind that many people paid off their house, did not buy speculative housing, stayed away for refi, and pay their credit card bills every month. As long as they have some source of income, they can at least try to adjust to an adverse economy. However the other 50% have been going crazy borrowing money. As their world falls apart, it is going to drag others down too, including the RE people. Human nature would tell you that if you are leveraged to the hilt it’s impossible to say - “I am screwed.”
As a resident of Michigan, I will vouch for the crap-tacular state of our economy, and the general despair of the people in it. As a side note - Detroit was more of a s**t-hole 5 years ago, and would be better still if not for that crook of a mayor and the collapse of the Big 3. In any case - I moved out of the city proper 2yrs ago, and I rent a nice house in the suburbs…
Considered buying but prices were ridiculous. Reading the stuff at the top about the 2 markets I considered, Detroit and Lansing, I am not at all surprised. The irony now is, my Landlord owns a lot of real estate in the area and I suspect tried his hand at “flipping”… and I think he blew it. Had someone show up at my house last week with a forclosure notice; apparently the mortgage co. thinks he lives there? Isnt that sort of … deceptive on his part?
In any case - I am content to rent for another year at least. I figure by 2008 I will be ready to shop and the prices should be attractive. As Ford and GM continue cutting jobs by the thousand, I bet a lot more folks relocate far away from here… going to be some deals to be had for sure.
Believe it or not Michigan foreclosures could have been much worse if there would have been more market velocity in 2004/2005 and even more sub-prime loans out there. That said, the Detroit suburbs (some nice ones) are hurting due the influx of Detroit residents in the past few years using sub-primes to escape the Detroit school system. A realtor told me back in mid 2005 he didn’t see a stabilization until 2010. It took a real idiot to try flipping in the Metro Detroit area in the past three years.
Good luck on getting your damage deposit back, you’ll be standing in line BEHIND the banks trying to get a piece of your Landlord. Start looking for a new place to rent, you’re likely to lose this one soon.
If my wife makes me stay in Michigan we will most likely buy in 08. Almost bought at the end of 05 but luckily I found this blog! Even in my price range (150 -225) I would of lost 10-20% already.
I remember reading about Detroit wanting to close 50 schools? Detroit will never hit that magic 1 million population again.
At the end of 2004 the house next door to my old house sold for about $25K less than its purchase price in 2001 - house was the same - in fact some minor improvements. Guesstimate now is it would be at least down another $50K if on the market. Some houses in my area are down to late 90’s prices. If (when) a recession hits the bubbliest markets (CA,FL,LV,AZ), on top of the bursting bubble, it will cause alot of blood on the streets.
Those of us that grew up in this area knew that it wouldn’t back in 1970. After the riots in the late ’60’s, anyone that could move out of the city did. I grew up in Ann Arbor, 45 miles away, and NEVER set foot in the city until 1986.
Those of us that grew up in this area knew that it wouldn’t back in 1970. After the riots in the late ’60’s, anyone that could move out of the city did. I grew up in Ann Arbor, 45 miles away, and NEVER set foot in the city until 1986.
“Detroit agent Kimberly Simpson said the popularity of risky adjustable rate mortgages is the primary cause for the foreclosures. ‘People are getting their ARMs broken,’ she said. ‘That’s the major part of it. It’s killing the market.’”
I hope this lady finds a new job soon because the NAR won’t tolerate truth tellers such as herself wearing a Realtor name plate.
Maybe the Detroit ASPCA is looking for more “animal police”? Chasing down a starving pit bull has to be more rewarding than trying to sell shacks to sub-prime borrowers.
Comment from Minyanville re mortgage app numbers
“I took a quick look at the 16.6% weekly change in mortgage applications and expected a sharp rebound in homies. Nyet! Nada. No bounce. Why, you ask? Well, heck, I asked even if you didn’t.
I look at Year over Year numbers as more meaningful than what happened this week compared to Christmas week (who wants to apply for a mortgage that week?).
Check out what I found. Year over year stats revealed the following:
Overall index = +12%
Contributions from purchases = 0. Yep O.
Refis = +28.5%
Fixed rate = +24.4%
ARMS = -19.9%
What do I get from this? Homies are in trouble. If there are cancellations and no change in purchases year over year in terms of mortgage apps and prices fall and inventory explodes . . . .it’s not a pretty picture.
“a five-story building that will feature four floors of condos.”
The very word “condo” makes me cringe. I thought condos were an undesireable but necessary stepping stone, a consolation prize for making financial headway but not enough for SFH, a place you moved out of as soon as you saved up a better down payment. But now they are almost as expensive as SFH (condo fees are astronomical!) Are people truly asking for condos, or are the builder just offering nothing else? (and “luxury” condos — triple cringe…)
The thing with condos is that there is much more equivalent rental housing available, so the rent/buy comparison is much easier to make. Since at current prices renting comes out way ahead…
Could all these condos be a sort of “white flag”, a sign that folks are throwing in the towel - acknowledging in effect that their wages and lack of economic viability will never allow them to own soil? Perhaps on the lower rungs, but how do we explain the “luxury” market?
BTW, here on the near north side of Chicago, the luxury towers are sprouting like weeds. A new tower at Oak & Dearborn has units from $1.5m to $2.2m - how does someone justify shelling that out for no dirt? Am I just missing something? Is the future of our big cities really that bright?
I just can’t seem to shake the images of Fritz Lang’s Metropolis.
Unreal. I was just out in Chicago for the holidays. The condo boom there has a few legs left.
For example, a relative just sold his shop to a developer that is going to put up a bunch of units (>20) by the Irving Park Brown line. The deal had just closed.
My only comment was “cash that check quick!”
Up until the housing boom, I always looked at a “Condo” as where really old people lived. Or at least those 50plus. Now it is hip. Don’t get it. Especially with people with young kids, then I really don’t get it. I think maybe they want to be cool and hip and say “LOOK AT ME! LOOK AT ME! LOOK AT ME EVERYBODY! I LIVE IN THE CITY” but at the same time the Condo provides security that they won’t get in a SFH in the city.
Yes, from my experience in the REIC I can tell you that urban condos were marketed as…”Lifestyle Choices”.
I’d love to own a condo downtown. I don’t like driving that much and I love the idea of just being able to walk to a lot of places. The security is also a factor. I also like the idea of no lawn to mow, etc. There are people out there who prefer condos to SFHs.
Absouloutely, especially in NYC. But many of us believe that the number condos being built is MUCH larger than the number of people who prefer them to SFHs.
Condo my ego. Condo my ego. The baby boomers make the fashion. Soo all the baby boomers retiring want their little condos and influence the rest of the stupid crowd.
“More than 300 Detroit homes, all of them repossessed by mortgage lenders, will be sold in a two-day auction. The homes are valued at $5,000 to $300,000.”
Anyone have a picture of that $5,000 dream home?
How bad is it when you cant make the payments on that mortgage and sadly for many people in other parts of the country 5K is the monthly.
Downtown bordered by crack houses with no window.
“While sales volume may have fallen, prices did not.”
Why does no one get the real problem? As everyone in the real estate industry likes to point out, sales volume fell WITHOUT job losses, something that has never happened before, so what was the problem? How about “prices got too high”? How can anyone expect a rebound in sales volume without a price correction?
How can anyone expect a rebound in sales volume without a price correction?
Only if the mortgage lending industry finds new and exciting ways for us to take on more debt.
Oh, but wait! These guys are going out of business one or two a week. Well, I guess they can spend their new found free time thinking of new ways to fleece the broad masses of the people (BMP).
Only if the mortgage lending industry finds new and exciting ways for us to take on more debt.
This is no joke. 40-50 year loans. Look at the auto industry. Prices had gotten so ridiculous that financers simply created 6 and 7 year loans. There are simply too many new homeowners out there right now that for prices to drop upwards of 40% will have a devistating effect on the nations economy. I bought my first home in 1991 and sold in 98. It was a rough decade but pales in comparison to what fallout this could produce. Sometime I chuckle at Neil’s doom and gloom comments but he may this Blogs truest visionary!
during the boom in japan (late 80’s), a 60 year 2 generation mortgage was introduced. waiting for that product to come to the states…
60-year mortgages? That’s for panty-waists. Try 100-year mortgages. Lots of Japanese took these on –and their grandchildren may still be feeding them 80 years from now.
“Only if the mortgage lending industry finds new and exciting ways for us to take on more debt.”
Done and done.
As diogenes posted:
http://tinyurl.com/yluh3c
California Company Announces ‘No Mortgage Payment for 12 Months’
RISMEDIA, Jan. 8, 2007-How does “No Mortgage Payment for One Year” sound? Mortgage Payment Deferral, Inc., in Roseville, California has just released a patent pending mortgage program that allows homeowners to defer anywhere from 3 to 36 months of their mortgage payments. The new program is called 12 Month Deferral or 12MoDef. What’s more, this new product can be applied to ANY type of refinancing loan.”
GS, a new way to spike the punch bowl, albeit with antifreeze. But hey, any port in a storm.
Think about it. You walk into a video store, you see 8-Minute Abs sittin’ there, there’s 7-Minute Abs right beside it. Which one are you gonna pick, man?
That’s right. That’s — that’s good. That’s good. Unless, of course, somebody comes up with 6-Minute Abs. Then you’re in trouble, huh?
[Hitchhiker convulses]
Hitchhiker: No! No, no, not 6! I said 7. Nobody’s comin’ up with 6. Who works out in 6 minutes? You won’t even get your heart goin, not even a mouse on a wheel.
7’s the key number here. Think about it. 7-Elevens. 7 doors. 7, man, that’s the number. 7 chipmunks twirlin’ on a branch, eatin’ lots of sunflowers on my uncle’s ranch. You know that old children’s tale from the sea. It’s like you’re dreamin’ about Gorgonzola cheese when it’s clearly Brie time, baby. Step into my office.
Why?
I think “People getting broken by ARMS” is more like it.
Does a 20% drop in sales from the prior year really spell disaster? Wasn’t 2005 a record year for sales nationwide. What about past data? How would the 2006 sales figures compare to those? I see 2005 was 7,000 and 2006 just 5,600 units but what about 2004,03,02…? I’m sure 2006 sales numbers would have to equal one of those past years at some point, and be way ahead of years prior to that. I’m no cheerleader by anyway shape or form, I’m just trying to get a handle on what sales numbers really mean. To me it’s like saying “I have made a comfortable living selling these widgets for 25 years, but last year I sold twice as many and made a fortune. Now this year I’m back making my comfortable living.”
I’m ready to be edumencated.
During those years every job category related to realestate grew exponetially. Volume decline = lots of job losses (No gas for the jet ski).
More like saying “business was OK until 5 years ago…then things really took off. The last 2 years have been insane! Then this year things went back to just OK. I’m a little worried because of the suddeness of the drop…what happened?”
I sent the following email to the reporter at WILX:
In a story on the WILX website you said: “If you’re looking to buy a home, now’s the time to do so.”
If you’re going to be a reporter, I believe it’s important for you to research a story rather than simply repeating whatever you’re fed by an industry. The next time a real-estate agent gives you a self-serving opinion, maybe you should check out the wealth of information easily accessible on the web:
http://thehousingbubbleblog.com/
http://en.wikipedia.org/wiki/United_States_housing_bubble
Hey FB Sally sitting with your belongings on the curb “Who broke your ARM?”
My Broker of course
That would be an ARM-Broker, no doubt.
So much for the “People in flyover country will be safe idea.” Looks like the midwest is getting hammered too, despite “missing out” on fllipper magnet double digit appreciation on the coasts.