Bits Bucket And Craigslist Finds For January 26, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Here is another item on the Plunge Protection Team:
“…rigging—or ‘regulation,’ if you prefer to be polite—of the currency markets, and specifically gold, by the central banks.
“And we don’t have to speculate on what they’re doing, because they’ve confessed in several ways.”
The above quote is from a fresh article from GATA. For anyone who seriously would like to understand the PPT, feel free to send me a request at fedreality@comcast.net and I will send you the article(at no charge,of course).
lots of stuff.
dow vs gold
tremors on the door / subprime
Can’t pay? Won’t pay…watch the credit default swaps
like this one from ecuador
…..credit-default swaps, which insure the buyer against non-payment, traded as low as 270 basis points (hundredths of a percentage point) in August; they are now at 1,350 basis points.!!!!!!!
http://immobilienblasen.blogspot.com/
What’s new? Another mega bubble imploding?
The 317$ trillion derivative market racket will be very interesting to watch. Good point jmf.
the best part is this.
Standard & Poor’s, a rating agency, said Ecuador had “one of the weakest payment cultures” of the 113 countries it monitors.
even with the poorest/weakest “payment culture” the swaps went down to only 270 basis points.
desperate for yieled…….
I think this S&P ‘rating’ has more to do with political issues than economic reality. Ecuador is regarded as the Switzerland of South America, money is pouring into the country from everywhere. Unlike all those companies that are over their ears in crappy mortgages and get a S&P AA/AAA rating, they don’t live from the housing bubble. RE loans hardly exist in Ecuador compared to US and Europe. Their new government wants to introduce a new currency, instead of the current one that is tied to the US dollar. I think THAT (plus the leftwing signature of the new government) is the problem.
Is “PIMP-CO” buying ?
HIGHER INTEREST RATES MEAN TROUBLE AHEAD
by Peter Schiff
Euro Pacific Capital
January 26, 2007
When I last commented on the bond market (December 5th’s What’s really going on with bonds), bond prices were inexplicably rallying, sending yields on ten year Treasury bonds to 4.4%. At the time, Wall Street was offering a variety of half-baked explanations as to why the market had moved beyond the cause and effect stimuli that had ruled for generations. My advice to investors was simply to sell into the rally and ask questions later. Since then, bonds have reversed course, with ten year treasury yields hitting 4.9% (a five-month high). Just as Wall Street’s explanation for falling rates was way off base then, so too is their explanation for rising rates now.
The consensus asserts that yields have turned around because new “evidence” of a bottom in the housing markets will keep the economy from tipping into recession, which in turn will diminish the likelihood of a Fed rate cut. The problem with this explanation is that there is no evidence of a bottom in the housing market. Despite the self-serving rhetoric of biased real estate industry spokesmen, a bottom is nowhere in sight, both in terms of price and time.
Although 2006 saw existing home sales decline by 8.4% (the biggest drop in 17 years) and new homes sales fall by a stunning 17.3% (the largest in 16 years), Wall Street Pollyannas stressed that opinion and sentiment trumped data. For example, based solely on a 7.9% decline in existing home inventory, perennial real estate shill David Lereah (chief “economist” for the National Association of Realtors) claimed “It appears that we have established a bottom.” (Mr. Lereah has seen more bottoms than a diaper attendant in a hospital nursery.)
However, the drop in inventory in existing homes is most likely the result of discouraged sellers taking their homes off the market with the intention of re-listing them in the spring. This is a common tactic among realtors as spring is traditionally the strongest home buying season and stale listings are a turnoff to potential buyers. Also, my guess is that lots of other potential home sellers are planning on listing their homes for sale for the first time come spring, and many more would list their homes now if they thought they could actually get their “appraised values.”
New home sales figures are even more misleading. Although the headlines trumpet that inventories dropped in December, the figures ignore cancellations which are running at record highs. So while cancelled contracts are excluded from the “official” inventories, they are definitely part of the real inventory that will ultimately exert additional downward pressure on prices. Also, while new home prices “officially” fell by a modest 1.8% in 2006, the real decline is likely far more substantial. That is because the sales incentives now typically offered by developers, such as paying closing costs, free upgraded floors and countertops, free appliances, free swimming pools, free plasma TVs, free landscaping, decorating allowances, health club memberships, vacations, etc., are not reflected at all in sale prices. However, they are reflected in recent home builders’ earnings reports, which have been universally dismal.
The elephant in the living room is that the recent jump in bond rates suggests that things are about to get much worse for the housing market. Since January 5th, interest rates have risen by over 30 basis points and gold has risen by over $40 per ounce. When rates and gold prices rise together the most likely explanation is escalating inflation fears. Indeed, my guess is that rather then sensing a bottom in the housing market, bond investors around the world are beginning to appreciate the inflationary implications of a real estate crisis.
A substantial decline in real estate prices will either produce a severe recession on its own or exacerbate one that arises from other factors. In either case, the result will likely be the Fed coming to the “rescue” with inflationary monetary policy. Inflation will push long-term rates even higher, causing more loans to default. With credit destroyed and home equity and jobs lost, foreign creditors will rush for the exits sending the dollar into a tailspin. The Fed will be forced to buy all of the paper foreign lenders no longer want and that savings-short Americans cannot afford. Domestic money supply will explode sending consumer prices soaring.
As is so often forgotten, interest rates are merely the price of money, which like any price is determined by supply and demand. In the United States, where hardly anyone saves and almost everyone borrows, that price should be very high. Our low interest rates are a temporary fluke, once made possible by naïve foreign savers but now mainly a function of misguided foreign central banks.
Instead of trying to fabricate benign explanations for why interest rates are rising, Wall Street should instead prepare investors for the unpleasant consequences to their portfolios should rates continue doing so. The true mystery is why long-term rates have remained this low for so long. Unfortunately by the time Wall Street solves the riddle many of their clients will be broke.
here in canada the bubbles still growing
theyre huffing and puffing
Yeah. In Montréal 3,000 new “luxury CON-dos” are vacant. A lot of bankrunpties in the luxury market is coming.
in Europe the housing bubble is still growing as well; in fact, I think the US is currently the only big country where homeprices are declining. Amazing, especially because the US bubble was much younger and smaller by percentage of appreciation than the EU bubble…
today’s Investors Business Daily has a piece on the subprime blow up and how it won’t lead to a recession
No It will lead to a depression. Naturally these things only happen in places like Russia or Asia.
Casey Serin’s website has “been suspended.”
Too funny.
If you can’t do the time, don’t do the crime.
I just came here to post that. Serves him right
> Casey Serin’s website has “been suspended.”
You forgot:
“Please contact the billing/support department as soon as possible”
Clearly he can’t pay the bills for the website.
Hmmm, so he doesn’t make those payments either. For all the amusement he’s provided us, maybe we should take up a collection to keep the site up.
Oh, he’ll be back with another excuse. He’s a drama freak and this is another way to raise the bar.
Gee, maybe Wells Fargo “stole” another $1000 from him.
Here’s Casey’s new sugar daddy’s explanation of what happened:
http://www.renewsnetwork.com/2007/01/why-casey-is-down.htm
“Duane LeGate said:
Here’s a copy of the complaint as reported by Gator:
I am writing this to demand the removal of the content displayed at the domain [blah blah blah]
domain author has:
…
- posted, and allowed his bloggers to post, untruthful and slanderous information in effort to defame the character of the parties aforementioned
- posted a link to a video created and owned by Robert Kiyosaki…and allowed his bloggers to post, untruthful and slanderous information in effort to defame the character of Robert Kiyosaki…”
Not to defend Casey or anyone like him, but using the DMCA (Digital Millennium Copyright Act) to take down web sites, in part because they claim that the website has post which are “untruthful and slanderous information”, stinks.
You could take down almost ANY blog-type site with this reasoning, and it would be up to the blog owner to go through the appeal process. In the meantime, the blog is down, losing eyeballs.
This sounds like a dangerous turn of events.
Is there an offshore weblog service? Freedom is tough to find in this world.
Robert Con-u-saki is a well established fraud.
John T Reed ‘outed’ him - there was no rich dad, its fiction and bs.
As if Casey has the spare time to solve this website problem.
His site has been foreclosed ?
Renting isn’t always peachy (especially if you’re poor). Today’s Inky has a look at the practical results of some subprime defaults:
http://www.philly.com/mld/philly/16549937.htm
(sorry requires registration, so I will quote a bit):
WILHELMINA JONES and her daughter made sure to do their homework before renting their house in Southwest Philadelphia.
Jones is ailing and out of work and her daughter was eight months pregnant at the time. The $3,000 they had for rent and security deposit was a gift from a family member; there was no more where it came from.
“We know there’s a lot of people out there who are flim-flam artists and we didn’t want to get involved in no real life drama,” Jones said.
So they checked city records on the two-story brick rowhouse, and it seemed as if everything was on the up and up. But the caution turned out to have been for naught.
Kia Morrison, the woman who rented them the property on Edgewood Street near Elmwood Avenue, had lost it at sheriff’s sale three months earlier.
It was a fact they hadn’t uncovered in their research - and a fact they said Morrison didn’t disclose.
The real owner is Wells Fargo Bank, which - despite pleas from a city official - is evicting them along with the infant who was born in the meantime.
Where I live (Canberra, Australia) security deposits are held by the government, not the landlord.
At the time the legislation was introduced, there was a lot of moaning about how the politicians were just engineering a cash-grab. This may indeed be true, but stories like this make me think it wasn’t such a bad idea . . .
I remember trying to get my security deposit back in Australia some years back.
Since I was on excellent terms with the landlord, it should have just been a handover of check (or cash), but with their system, I had a bit of paperwork to go through for it, harder because he’d dropped the rental agency but didn’t take their name off the deposit (so we had to beg their sign-off).
Still, I have to say it was a minor annoyance, and I kind of appreciated the fact that if I’d been unlucky and had an evil landlord, I’d have been a lot better protected. Strange that with 50 states here all with different tenancy laws, none (that I know of) have such a reasonable system.
Why not just rent apartments from the gov’t itself, as in the old USSR? That would really simplify things, if that’s so important.
Good idea comrade. Otchin xarracho tavarich….
technically, your Russian translation is “very good comrade” rather than “good idea comrade”
Yes why not have govt supply healthcare, housing, education and jobs for everyone? Were headed there, pretty scary comrades.
At least the internet isnt provided by the government (yet) so its still works and is and affordable.
Let me clarify before people get carried away and think I’m advocating that governments get involved in all that other regulatory and spending crap…
The only thing the government (NSW) agency did there in regards to this was to hold the deposits.
They dod not provide housing for average people; they had no rent control that I was aware of for private landlords; and there was very little rental property condition regulation. It was, in fact, far more of a free market in housing in Sydney than many US cities offer! (Witness DC just up the road, ugh!)
About the only “meddlesome” thing the government did was this deposit scheme, thereby playing more arbitrator than regulator. And I was quite fine that they did no more than that, to be honest.
So they checked city records on the two-story brick rowhouse,
Oh what a surprise, somebody at the Recorder of Deeds screwed up…
A friend of mine,city resident, was informed her house was going up for tax sale. This is a woman who pays her tax well in advance of the deadline. After numerous phone calls and visits to City Hall, documentation in triplicate in hand, she got nowhere. Finally she figured it out, and phoned her Council member. No more tax sale notices.
Well William Zantzinger (who was made famous by Bob Dylan) got away with collecting rent on houses that had been seized for back taxes for years.
“Ahh, but you who prophesize disgrace
And criticize all fears
Bury the rag so deep in your face
Now is the time for your tears”
Seems pretty relevant right now.
And I should add that he’d actually had the sherriff evict tenants during that time.
“Jones is ailing and out of work and her daughter was eight months pregnant at the time. The $3,000 they had for rent and security deposit was a gift from a family member; there was no more where it came from.”
She should have BOUGHT a house…at least with buying, you don’t have to have any actual MONEY.
Renting is for people that can afford a deposit.
yes renting is for rich people.
renting is the new owning.
Houses here in Portland that didn’t sell while on the market for six months in 2006 are coming back on after being removed from the listings over the holidays. In many cases, the prices are equal to their original 2006 offering prices which in some cases were reduced.
Can’t sell a house for $725,000 in May? Reduce it to $699,000 in September and $675,000 in Novemeber.
But be sure to relist it in late January at $725,000!
some cold weather to greet them
good point- would love some last week of Jan inventory info
tyhe super bowl hasn’t even happened yet……
Don’t forget February 2nd is Ground Hog Day. If Phil sees his shadow, it’s six more months of housing winter.
“If Phil sees his shadow, it’s six more months of housing winter.”
Don’t you mean *years*?
No. “Nucular” winter.
I remember a while ago there was talk of a “neutron bomb” effect with this overbuilding; the foreclosures would leave the homes without the people.
We’re getting there.
What I’m watching more than anything is the stock market. Why? The shear number of high end homes going up in the south bay part of LA is staggering. I’m talking real mansions (not McMansions). These $2.5M+ homes sell mostly dependent upon stock market performance. If they don’t sell… the big squish down gets bigger.
(Hattip to “Jim the realtor for the phrase.)
Got popcorn?
Neil
Thanks for the good news. I would love to see a huge inventory pile up by the end of the summer. God forbid sellers come to market with a reasonable price which might clear the log jam and prevent a good price crash.
lot’s of people in my area in the Netherlands have been doing this for years; some homes have been for sale for nearly ten years now (of course they are relisted every 6 months or so with another agent) and they just keep increasing the asking price ….
I’ve seen this a few times as well in the other Portland.
In one, price had fallen to $475K by the holidays. Just saw it listed for $530. WTF?
dodd to help folks worry about morts and debt
wonder how many times he voted for buyer “programs” and other easy credit crap
http://www.investors.com/editorial/IBDArticles.asp?artsec=16&issue=20070125
Subprime Loan problems.
Looking to rent a house as my landlord where I am renting now has jacked up my rent again. Is there anyway to tell what type of loan or financing a person has taken out on a house? I would hate to move my wife and two children into a home only to find out two months later that the bank is taking over and I am SOL. The house is at: 11827 Eagle Ray Lane Orlando FL 32827
Anything else I should be aware of on something like this? I appreciate any thoughts or feedback.
Hey Bobbymac,
I’ve had good luck putting an “excellent renter looking for apt” type ad in the paper. You end up getting landlords bidding for you.
thanks waaahoo. Where I live in Orlando, there are about a dozen townhouse and 10 houses that are for rent so it really isn’t about the price as they are all competing against each other. i can get an excellent price if i wanted to leave my current apartment. i don’t know if i want to take the risk of moving to a house or townhouse. i am just worried that the place i move my family to is going to get foreclosed on and i would have to pack up and move again. i was just looking to see if there is any way on the public records to do some research and see if the the people renting the homes have either bought the house outright (yeah…like that would be the case) or at least put 20% down or something like that so they would be at less risk of getting foreclosed on.
bmac,
The benefit of having landlords bidding for your services is that you can request that they put their financial cards on the table. If they hesitate to do so strike them off your list.
gotcha…i am little slow this morning…baby was up all night……
Is there anyway to tell what type of loan or financing a person has taken out on a house?
you can do a record search on the house at the county deeds..
AL-
Forgive my stupidity but is that something i can do on a website?
thanks.
I know the Miami-Dade site and it lets you search via the owner and then you can looks at the recorded mortgage to see what the owner owe’s as well what kind of a mortgage they took… I also look at the taxes to figure out what they need to pay in taxes per year
I apologize if this ends up being a duplicate post (I don’t know what happened to the original). I would recommend doing a record search using a combination of the following websites:
Orange County Property Appraiser
http://www.ocpafl.org/
Orange County Comptroller
http://www.occompt.com/
The Property Appraiser’s website will show sale info such as when the property was purchased and for how much. You can search by owner name or address. The Comptroller’s website will show all public records such as financing (and refinancing) documents. You can search by owner name.
“Forgive my stupidity but is that something i can do on a website”
Depends on the state…in Cali, we have to go to the county recorder’s office…you can look up and get all of the record #s on line, but the actual records are only available at the recorder’s office. I think the reason for this is to make it harder for stalkers to stalk movie and tv stars from public records. Now, the stalkers will have to actually make an effort to go to the recorder’s office before they can begin stalking.
Actually, forget what I said above…OTownCajun just proved me wrong.
The Orange County Comptroller rocks!
http://www.occompt.com/
Actually, forget what I said above…I thought that it was Orange County Cali, not Orange County, FL.
FL Rocks!
I would recommend doing a record search using a combination of the following websites:
Orange County Property Appraiser
http://www.ocpafl.org/
Orange County Comptroller
http://www.occompt.com/
The Property Appraiser’s website will show sale info such as when the property was purchased and for how much. You can search by owner name or address. The Comptroller’s website will show all public records such as financing (and refinancing) documents. You can search by owner name.
Bobbymac - Get a formal lease on your rental for as long as you would like to stay - if the house goes into foreclosure, the bank must honor the lease and can’t kick you out. Call a local housing organization to get details.
Are you sure about this? I know that if the owner sells the property, the new owner must honor the lease (at least in Florida), but I thought that a foreclosure was a different story.
thanks for the input. I guess the best thing for me to do is find out what the deal if there is a sale or a foreclosure.
I live in Fairfax County, a suburb of Washington DC. I was curious how people were affording homes here as prices are almost as bad as California.
Fairfax County Median Income - 2 working 2005 $94,610
United States Median Income - 2 working $46,326
Average credit card dept - US - $ 8,000
Average mortgage for a family with a median income of $90,000 in 2005 was $4,075 for a house appraised at $479,000.
The above figure is assuming a 20% down which is not going to be true for a significant percentage of the homes purchased.
I did a rough estimate of what that equals in take home and then subtracted for 1 CC, car payment, HOA, food for 3, utilities etc. and it is doable just barely. That is if you do not have any unforeseen emergencies and you are not funding retirement, college plan and savings.
If energy costs or inflation really rise you have a problem, especially with stagnant wage growth. Add a reset for an ARM and you have a problem
The next county is Loudoun. Foreclosures have risen from 13 in September 2006 to 109 and climbing by at least one daily. Loudoun is a horrible commute with a number of subdivisions built on sub-prime land. A veritable sea of townhouses.
I believe I read 11% of the jobs in NoVa. are housing related.
This may not turn out well.
the other 89% are gov- they never get fired so they can spend to the max-Western fx and Loudoun are comming down quickley
we only came down 10% in the 90’s
Jesus H. Christ flatffplan! You’re a goddam broken record. Most of the people I know in Fairfax and Loudoun do not work for the federal government.
No kidding!
89%? Where’d that number come from? I know a lot of government workers, but nothing at all seems to indicate anything that high. Sounds like a made-up number to me.
That said, how do people afford it? Lots of them bought a few years ago. The rest, well… I have no idea how the average family would do it. Those I know who are in that 90k/year income range and have not bought a house are NOT buying any houses. They rent.
I also suspect your numbers:
“Average mortgage for a family with a median income of $90,000 in 2005 was $4,075 “
indicate what an average mortgage WOULD BE, but only IF that average family bought the average house. The only families I personally know who bought houses last year in Fairfax County made at least $150k.
I think Flatffplan was the only person ever to get fired from a government job and is now “disgruntled”.
So what was it, calling the african americans Dirty N—-ers? Surfing for PRON from a govt computer? or dipping your hand in the till?
Enquiring minds want to know.
NOVA,
Foreclosures are headed up in Fairfax, Loudoun, and Prince William. It *is* ugly.
I talked to a real estate agent yesterday who said all of his new listings in Prince William County are divorces - financial hardships due to real estate speculation in every case. Most have young children and babies.
It’s sad. I literally feel slightly sick to my stomach about the human misery side. Not that I feel sorry for them for not making easy cash in real estate. I feel frustrated that people find it so easy to destroy what *really* matters over foolish speculation.
Creditors Are Not Being Paid on Their Albatrosses
http://wallstreetexaminer.com/blogs/winter/?p=356
“Indications are mounting that China is at last to going to increase interest rates to stem inflation, a hyper heated economy”
He got that right:
http://tinyurl.com/2evavo
LA Times
China’s economy grows 10.7%, fastest in a decade
“…Spending on real estate and other assets soared despite government efforts to cool an investment boom that it worries could ignite inflation or a debt crisis. Consumer spending grew more slowly, suggesting that Beijing still faces challenges in its effort to reduce reliance on exports and narrow its trade gap by boosting domestic consumption.
“Fast growth in itself is fine. It’s more about the composition of growth,” said economist Mingchun Sun of Lehman Bros. “Investment needs to slow even faster. Second, there is an urgent need to reduce the trade surplus.”
Many analysts expect Beijing to raise interest rates again this year, after two hikes last year.
The government has imposed investment curbs on real estate, auto manufacturing and other industries and tried to restrain exports by levying new taxes on steel and other products.
Beijing has allowed the gradual rise of its currency to quicken in recent weeks, which could slow the growth of the trade surplus by making Chinese goods more expensive abroad…”
At least China has a 40% savings rate. The USA, Canada and a good part of anglo-saxon world and western Europe, have a negative savings rate and record debt levels.
Just looking for opinions. They say that the buyers are on the sidelines waiting. While I believe there are SOME buyers waiting…I feel the people who need a house and plan to stay in their house are still buying. The lack of investors or “flippers” is what’s been holding the housing market back. We have too many homes and not enough people to live in them. Combine that with high levels of foreclosures and I think there’s a long way to go down. Am I on the right track?
Referring only to people buying houses to live in, not investors/flippers; In 2003-2005, I feel that there was a pretty good percentage of people who couldn’t economically justify buying, but did it anyway because they:
- figured since prices were going up, they could always get out if they got in trouble, and maybe even make some profit
- were scared that they would be totally priced out if they waited
- believed they should take advantage of the lowest mortgage rates in years
Since the three things above are no longer true, I believe that most of those types of buyers are either now out of the market completely, or are waiting for prices to drop dramatically.
I wasn’t even thinking in the people who shouldn’t have purchased mode…but you’re right. Those liar loans worked just as well for people residing in the home as for the flippers.
I would say we have less people waiting to buy and can afford to buy than a continuing inventory increases. I also think that some of the people that may be able to qualify for one of those ARM loans now will not be able to in a couple years as the banks will be more tight with the lending standards as their losses increase with forclosures.
Just think of how stupid it was for people to respond to “Buy now or be priced out “.The Buyers were put on loans that would go up,(adjustables ), while there was no assurance that prices would continue to go up .
There is just no question that fearful or greedy borrowers were pushed into buying based on getting out of the bad loans they went on down the road ,which would only be possible if the market went up or their incomes went up .
The REIC failed the public in their own self-serving interest by selling a “urgency ” myth that was feeding the mania .
How dare the realtors and lenders put families into property that they couldn’t afford for more than a year . How dare the realtors and lenders put speculators and unqualified flippers into homes that now sit vacant that are foreclosure -bound . How dare the realtors and lenders raise taxes across this nation resulting in homeowners being forced to sell their long term residence .How dare the builders with their lenders spike up property values and overbuild and sell to short term investors resulting in vacant houses everywhere . There is nothing acceptable about what happened and is still happening .
“I feel the people who need a house and plan to stay in their house are still buying”
I think that they are taking LONGER to buy. They are no longer thinking “we need to buy something, ANYTHING before someone else snaps up any available decent house”. Instead, quite a few are thinking, “well, this house isn’t quite to my liking, I want to see a few more, and it won’t matter anyways because if I eventually *do* want this house, it’s likely to still be on the market, and then I can low-ball it”.
I am looking to buy,I put a reasonable offer 10% less than listing price as most of the homes in the area are quickly reduced off 10% priced listings within a few months. The house originally purchased in 02 for $378K yet the listing price exceeds 4% a year gains for inflation. My offer was within the 4% a year gains. The seller countered with less than 1% off the listing price, so I am playing the wait and see game. The house is vacant and is owned by a relocation company and has been on the market for over 3 months. In two months if it still listed and the house isn’t sold I am going to put the offer back on the table to see if the seller will budge. I can wait this out and they can’t as the taxes are due in May.
I am in the frame of mind that a house is to live in and is expense not as an investment. All I am looking for is a decent house without the sellers wishing prices of double digit gains within the last 4 years. I can determine if a house is overpriced by the original sale of 5-8 years ago from the tax records and then include a 4% a year for the rate of inflation. If it exceeds that is overpriced. If they really want to sell they will realize that there are buyers out there that want to buy, but that if it the gains exceed 4% a year when they originally bought the house, buyers aren’t willing to pay that price especially if there have been no major upgrades. You also have to figure in the fact that if it doesn’t follow the below formula ( purchase price + 4% increase a year) that with a major correction within the next few years the asset value of a house will decline like a car. What I am seeing is house prices are still overpriced based on 4% yearly rate of return and the sellers are looking for buyers to fund their retirement. One example house was bought 1999 for $320K, sale price $519K, no major upgrades and it should be priced at $423k. (320 X (4%year x amount of years owned).
If a house is priced accordingly I will buy based on that formula .
I bought a house and now I’m crying every day
“Dear Cary:
“I am 35 years old, and we recently bought our first house. I have cried every day since. Our house is an older fixer-upper. All I could see when we looked at it was lots of potential. Most of my TV time is spent watching shows like “Flip This House” or “Designed to Sell.” They make it look so easy. There were so many red flags, but for some reason I persisted. I was determined I could do it, and now I am consumed by guilt and regret. My fiancé did not want to buy this house but agreed to because he wanted to make me happy.
“We were able to get a mortgage, with no money down, that covered the closing costs. We have no savings and love to spend money. I had it in my mind that this would be a good way for us to get our finances in order, as we would have to start saving money. I know this sounds ridiculous, but I was so consumed with the American dream of owning a house to raise my son in and having the dog, garage, etc., that I lost sight of the true picture.
“This dream has turned into a nightmare. I think too much emphasis is put on the ultimate dream of being a homeowner. Along with being a homeowner comes great, great responsibility, and this is a very scary thing. I now feel that maybe I am not cut out to be a homeowner. I doubted myself along the way, but everyone kept saying, “You will be so happy,” and, “It is the best investment you will ever make.”
“We have the finances to make the payments and start saving, but I still cannot get past the sadness I feel. Looking back, I never had a great feeling about this, but I blamed it on the amount of work we needed to do on the house and the overwhelming task of moving.
“I think we could sell and make what we have put into the house so far, and at this point, I am even willing to take a loss. This is a heavy, heavy burden that has left me feeling so empty. Is this something that will pass, or should I try to get out now so I can get my sanity back? I know I used poor judgment and made a mistake that will not be easily fixed, but I don’t want to spend the rest of my life in this lonely, sad place that I am at right now. Please help.
“Sincerely,
“Melissa”
It’s not the house. Something else is going on.
You think it’s the dog?
Whiny, self-absorbed little twerp. Who cares. Next.
No sympathy for someone who spends all their time watching “Flip That House” and “Designed To Sell”.
You think it’s the dog?
Whiny, self-absorbed little twerp. Who cares. Next.
Yeah, whiny little dog! It would drive me crazy, too!
Seriously, there’s other problems that are only perhaps exacerbated by the real estate. Doesn’t even sound like they are dire financial straits yet. Maybe that’s because her fiance is volunteering for lots of overtime, just so he doesn’t have to go home and hear the whining.
Maybe it’s your husband. You should not feel depressed and lonely just from buying a house. I think it might be a relationship thing.
“Dear Cary, a few months ago I bought a (pick any that apply)
-car
- refrigerator
- sweater
- frozen pizza
And now I don’t like it, and I’m so depressed! The dealership won’t take the car back, I shrunk the sweater, and I don’t even like pepperoni. Please help me.
“It takes a heart of stone to read that story without laughing out loud.”
Oscar Wilde (originally in reference to the death of Little Nell)
My fiancé did not want to buy this house but agreed to because he wanted to make me happy.
What happens when a man is ‘whipped.
This story reads like a couple I know and reported here on this blog several months ago. The couple is stunned by the additional costs of owning versus renting; add to that, fix up costs. The wife is ambitious and wanted to own but her husband was indifferent. As a result, their relationship is in the toilet.
This woman is the perfect consumer; gets excited about buying but it don’t make her happy. The economy is built on exploiting her.
Husband/fiance/whatever is in for some tough sledding.
Reality sucks.
Durable goods orders are up (so they say). Good thing we are all getting rich building airplanes. But look at that 10-year. It is back up to 4.9%. The HB stock rally was built on the 10-year going from 5.0% to 4.4% in the hopes that rate cuts were coming. It looks like that illusion is dead. What do people think of the HB stocks now that the 10-year has turned against lower mortgage rates?
I just checked out RYL on yahoo Finance. There is a headline about M&A for the HBs since they have been mauled lately. WTF? The HB stocks are up 40 - 50 percent since July, all on a string of bad news. Those stocks have not been mauled at all lately. The entire MSM should be fired and then bludgeoned with a Louisville Slugger.
The prospects for the homebuilders is dire. They are only now starting to lay off employees after building more homes in the last half of 2006 in the face of plummeting sales. Most of them are leveraged, some highly so. So how are they going to pay their debt? By the end of this year, expect some to be in bankruptcy.
yeah but I would not touch a 10 year until the rate is above 5% - just my magic number. Nice to see the rate going back up. Buy a couple of 10 year $1000 notes between 5 and 6%, buy 5 of them from 6% to 7%, buy $15,000 worth between 7% and 8%, buy $25,000 worth up to 9%, and buy $50,000 worth from there to 10%, and so on.
10% yield?
before that happens everything will roll over.
expect 5+ to cause major harikari.
You must have not lived in the 1970s. Yields in the late 70s were above 13%. We had malaise in the White House, especially 1977 through 1980. His predecessor thought you could beat inflation by wearing a badge “WIN”, for “Whip Inflation Now.” The one before that was the crook that was not any different from LBJ or JFK, but got caught in the act of being a crook. The other crooks got off scott-free.
Somehow this was still w’s fault.
“Somehow this was still w’s fault.”
Not to bash any die-hard R’s or D’s in the crowd, but I’ll actually be glad when W’s gone, so WE CAN ALL GET OVER THIS.
And I’ll be glad when the federal gov’t is gone, so we can all get over that.
Just think, no more federal income taxes or foreign wars. Sweet.
sure would love to see those +10% rates here in Europe again
In 1990, mortgage rates were 11-12% here, if you had a solid job/income stream you could get a 20% down, 3x income mortgage. Now mortgage rates are around 3.5% (for 10-15 year fixed), no downpayment required and even 10x income seems to be normal. As a result homes are nearly 10x more expensive than in 1990, while incomes are just 60% higher. If rates go back over 10%, something has got to give I guess …
http://money.cnn.com/2007/01/24/pf/millionaire/derico/index.htm?postversion=2007012509
Just a very good story I want to share. She is a good example of how to manage personal finances.
good job! and she doesn’t care if the house is worth 450k or possibly 200k in 3-4 yrs. Good for her.
Great story. I once encountered a couple with six kids. Husband worked for the government, wife was homemaker.
Put kids through school and put money, religiously, into Pioneer and Templeton stock funds.
In their late 50s they’d accumulated about $300,000 (as of 1981).
There’s plenty of stories like these. You don’t have to be “special” in any great way to accumulate wealth. A lot is merely paying attention, making sure you save, and not spending unnecessarily.
Sure, it takes time and some sacrifice. Too bad, too many are in too big a rush.
Oh, and they were very pleasent people to work with I might add.
I hate reading stuff like this because I’m about the same age, but not anywhere near as well off. I see they don’t mention her income.
And don’t believe her $100/month food bill. That’s impossible for one person. I know, I experimented with that last year.
Good for this lady, but if she bought a $30,000 car (and you can get a very nice car for $30K) instead of a $70,000 car, she’d have an extra $1,000 a month for food and extras.
Or if you just wait a few months for all the FB’s to “give” theirs back to the bank, then you can get the $70k for $15K cash with no interest.
Hey!
who needs food anyways? It’s not even in the core infation rate.
nah, it’s totally possible. my grocery bill is about $25/week, and my lunch/discretionary is $20/week. If I had to, I could drop the lunch money and make it on the grocery money, but I’d be eating a lot of beans and rice. It just depends on if you can cook and what you choose to eat.
I’ve noticed that if I shop at the local produce market I get better prices, fresher food and spend less than if I shop at the big name Grocery store. As a single dad I am hoping I can teach my kid not only to shop and eat simply, but also that we do not need all of the packaged and expensive products that are pushed at us.
But . . . see how much more incredibly difficult it’s gotten for someone 8 years later, with the prices in Fairfax County? She bought her home in ‘99. The perfect year to do so.
Derico succeeded in making the down payment and took out a 30-year mortgage on the $114,000 home.
Not long after, she refinanced and brought the length of the mortgage down to 15 years.
The value of the property has soared in Fairfax County’s overheated real estate market. Similar homes in the area sell for $500,000-$600,000.
Not to knock a person who’s obviously come a long way, but $8K doesn’t seem like a lot as your “rainy day” fund. Guess it all depends on monthly outlay, just seems like a low number. Of course, her mortgage is circa ‘99.
I work in the securities industry as a salestrader in a US house here in Asia. Take a look at the wild ride of the Shenzhen and Shanghai markets today (Friday). Both indices (NOT stocks) down about 4% in the morning session, and then rebounding to be UP on the day about 1.5% in the afternoon. The volatility is huge there since the year started. An official for the gov’t entity overseeing the market was trying to “tell” local securities houses to “not bus in investors from the countryside to buy mutual funds” as these investors have no ideas about fundamentals, etc. I can imagine the pitch to a Chinese farmer:
local broker: “How much you make a year?”
farmer: “About 2200 RMB a year” (roughly U$300)
local broker: “You can make that much daytrading. Get on the bus”
farmer: “Lead me to the promised land”.
Daytrading and stock touting sites are making a big comeback, along with high margin debt. As a bear, that makes me pay attention for a turn down.
Lord, I keep whipping this thing, but I loved the markets of 2001 and 2002. Such wonderful volatility. In ‘02, I traded about 80% on the long side! It was a great market!
Is there a Shenzhen or Shanghai equivalent of the VIX?
Macao casinos.
Nah. Volatility of any casino game is a constant, mathematically.
VIX is a measurement, replete with unpredictibility, errors, and uncertain rules.
From something which came up on a thread yesterday, about how long this blog’s been running.
IIRC Ben has had 3 sites for this blog. First 2 were at blogspot.com (thehousingbubble and thehousingbubble2), then this one. The second blogspot address sends you here, but the first one is still up as an archive. First threads are from December 2004.
I do remember that before I started posting (initially anonymous) comments at the original site I read through all the then extant threads first, so I wouldn’t ask any questions that had already been answered.
It took about 3 evenings, with the threads right at the start having only a few, or even zero, comments. Times have changed.
I did the same thing when this site went down last week. Ben’s growth is amazing.
The Brandenton Herald had on their front page today an article titled “Realtors Predict Home Sale Uptick”. The article was in repsonse to the horrible December statistics put out by the FAR. I loved how Beth Barnett of Coldwell Banker said “she is beginning to see an uptick in sales interest”. KEY WORD “INTEREST”. They are shameless!
Brahttp://www.bradenton.com/mld/bradenton/16548926.htm
A reason why “flipping” is less of a problem in New York City. Real estate transfer taxes make every sale hugely expensive.
http://www.nytimes.com/2007/01/26/nyregion/26tax.html?ex=1170478800&en=ef393f1e62a2d359&ei=5070&emc=eta1
http://online.wsj.com/article_print/SB116981296135288939.html
SEC Begins Formal Probe Of KB Home Stock Options
KB Home Inc. disclosed Friday that the Securities and Exchange Commission has begun a formal investigation into the company’s stock-option grants.
The Los Angeles-based home builder said in a filing with the SEC that it has cooperated with the agency regarding this matter and intends to continue doing so.
Last August, The Wall Street Journal reported that several past stock-option grants to Bruce Karatz, who resigned as KB Home’s chief executive in November, were dated at unusually low points in the company’s stock price. (See related article1.)
At the time, the SEC began an informal inquiry of the company’s option-grant practices.
KB Home board’s audit and compliance committee undertook a review of the awards, which found evidence of options backdating. The company has said it plans to restate its financial results for the past three fiscal years and the first two quarters of 2006 as a result of additional compensation expenses stemming from incorrect
KB=BK Coming Soon! KB Homes will be ” BK ” Homes
From today’s WSJ - Bigwig finananciers as rock stars of Davos like the Internet ‘visionaries’ were in 1999:
————————–
The Davos Disconnect
Conversations in this Swiss village take place at a meta level, as if the high altitude was forcing everyone to engage on an equally lofty intellectual plane. This year, there’s a meta-disconnect between the conversations on economic issues and those on political and social issues.
On the economic front, there is remarkable optimism. The U.S. seems to be weathering its housing bust well, Europe is strengthening, and China, India and much of the rest of the developing world are providing a raft of new consumers and new business opportunities. Risk has been priced out of financial markets. Capital is available to anyone who wants it, including the most questionable emerging markets and most debt-burdened companies.
Testament to that is the omnipresence here of hyper-successful financiers: Lloyd Blankfein of Goldman Sachs, David Rubinstein of Carlyle, Glenn Hutchins of Silver Lake, Stephen Schwarzman of Blackstone. They are this year’s Davos rock stars, much as the Internet entrepreneurs were in 1999.
But when the conversation turns to political and social issues, the storm clouds gather. Risk, which has been all but banished from the economic and financial conversation, is suddenly everywhere.
So even though these fellows are super rich and “hyper” successful they are still pulling their puds when compared to Mick Jagger or Eminem per the WSJ. That’s cool.
“They are this year’s Davos rock stars, much as the Internet entrepreneurs were in 1999.”
Most of those “internet rock stars” were actually missile pilots, steering their companies (with huge warheads of investor cash) straight into the ground. Rock stars indeed, more like crater diggers.
It’s real convenient that the thing is in Davos. That way they can go visit their friendly swiss banker.
“Be careful what you say to a Realtor!” -
Realtor’s parting words to me yesterday. I had expressed surprise that he recalled something I’d said to him a month ago, when he showed me the house the first time. Til yesterday, I’d never met a realtor who had an attention span of more than 15 minutes.
This guy is good. The first time he showed me the house, he just left me alone, didn’t happytalk me about now is a good time to buy before prices spike up again, etc. When I asked for the HOA docs, he sent them. No questions, no argument.
Then he started calling. He’s got that low-key approach - persistent but smooth. I agreed to see some houses, mainly to see what’s out there. Finally yesterday he starts asking the money questions. “What are you doing for financing”. me: “I’m not going to use it. Not busting my bank, though. I have a ceiling and I’m sticking to it.”
R: What’s your ceiling?
me: If we ever get around to submitting offers, you’ll get an idea.
So his parting advice to me was kind of unnecessary. I’ve learned to say as little as possible to those guys/gals. Maybe that’s a good weekend topic: How much should prospective buyer reveal to REaltor?
you showed him!! if you don’t tell your realtor how much you want to spend on a house, how is he/she supposed to even begin searching for properties for you? two bedroom condos can vary drastically even in the same neighborhood. i assume that he dumped you as a potential client.
They’re too desperate right now to dump clients.
I don’t really see the value added of a realtor in bird dogging properties unless he/she is able to bring me something “special” before it hits the MLS. Once a property is on the MLS I am perfectly capable of doing the preliminary search myself myself through the internet.
And if I had given him a dollar figure (re: ceiling amt.), then he would have put the arm on me:
“You know you can upgrade to a better neighborhood, granite counters, blah blah, and you won’t even have to commit to much of a loan…”
Better to trump them now.
So his parting advice to me was kind of unnecessary. I’ve learned to say as little as possible to those guys/gals. Maybe that’s a good weekend topic: How much should prospective buyer reveal to REaltor?
Same as a good strategy for buying a car - hold your cards close to your chest. Eliminate middlemen as much as possible. there is a good website carbuyingtips dot com. also do a google search for remar sutton.
this guy’s initial low-key approach is quite an effective seduction.
Tx for car buying site.
Yes, the initial low key BS did have me thinking he was different…along the lines of, “But it’s different here!”.
hehehe… movie recommendation for you: The Tao of Steve
Here’s a CNN Money article that gives advice on how to keep your realtor honest and to find the best deal for you.
http://money.cnn.com/magazines/moneymag/moneymag_archive/2007/02/01/8398744/index.htm?postversion=2007011810
I know that occasionally a few wonder if the “Mary Tyler Moore” house is still up for sale here in Mpls…it is:
http://www.edinarealty.com
search for “2104 Kenwood” in the address box
Or take comfor in the fact that it is a mere $3,620,000!
An article on the staging of the home:
http://www.mspmag.com/homes/roomology/50842.asp
The owners have never lived in it. Wow.
Hey, a reporter who reports on the “increase” in new home sales and doesn’t forget to talk about incentives and cancellations!
http://tinyurl.com/2ykg9w
“WASHINGTON (MarketWatch) — U.S. sales of new homes jumped by 4.8% in December to a seasonally adjusted annual rate of 1.12 million, the highest level since April, the Commerce Department reported Friday.
Warm weather at the end of last year, along with low interest rates and aggressive discounting by builders, boosted sales far beyond the 1.07 million rate that economists surveyed by MarketWatch had expected. See Economic Calendar.
By region, sales gains were strongest in areas that enjoyed unseasonably warm temperatures. Sales rose 27% in both the Northeast and the Midwest, while sales were flat in the South and fell 4% in the West. Read the full government report.
Also, sales for November were also revised higher to a pace of 1.069 million new homes, up from 1.047 million previously.
New-home sales have thus risen in four of the past five months, having bottomed at a 979,000 annual pace in July.
Compared with December 2005, last month’s sales were down 11%.
For all of 2006, sales plunged 17.3% to 1.061 million, the largest percentage loss since 1990. It was the weakest sales year since 2002, when 973,000 new homes were sold.
In December, the number of unsold new homes on the market slipped 0.9% to 537,000, the fewest since January 2006. That represented a 5.9-month supply at the December sales pace, the leanest inventory since last January.
The median sales price of $235,000 in December was down 1.3% compared with a year earlier.
Moving the product
Home builders have piled on incentives, including offering free vacations and new cars, to sell homes and reduce inventories.
Such incentives are not subtracted from the sales price reported to the government. Sales are reported when a contract is signed, not at the closing of the sale.
What’s more, many of the nation’s home builders have reported a large increase in cancellations in recent months. Cancellations are not reflected in the government data, so the reported sales are likely overstated.
The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions are common.
The standard error of 12.2% is so high, in fact, that the government cannot be sure sales increased at all in December. The 4.8% increase is statistically meaningless.
It can take up to six months for a trend in sales to emerge. New-home sales have averaged 1.01 million per month over the past six months, compared with 1.03 million in the six months ended in November. The six-month sales average is now down 22% from last December’s 1.30 million pace. “
Here’s my take on the new home stats just out for December. I also have some more stuff at my blog about subprime lending, the latest bond market action, etc.
http://interestrateroundup.blogspot.com
In December, we saw …
* A gain in the monthly sales rate of 4.8% between November and December. That’s well above the forecast of a 0.5% increase. However, sale are still down more than 11% year-over-year.
* The Seasonally Adjusted Annual Sales rate came in at 1.12 million units vs. an upwardly revised 1.069 million units in November
* There were 537,000 homes on the market in December, down 6.3% from the peak of 573,000 in July. That’s good for a 5.9 months’ supply at the current sales rate. However, inventories are much, much higher than at any time in U.S. history (up 5.5% from a year ago and up 74% in the past five years)
* Prices remain relatively weak – down 1.5% year-over-year to $235,000 in December. That’s the third time in the past four months prices have declined YOY.
MY ANALYSIS:
I expected the official, new home sales to look decent, given the roughly three-quarters of a percentage point decline in 30-year fixed mortgage rates from July through early December. The aggressive use of incentives by new home builders helped as well. Builders have been showering buyers with everything from free pools to mortgage buydowns to price cuts of $100,000 or more.
But there are a couple of major problems with the new home sales figures:
First, they do NOT take into account the impact of cancellations. When a home buyer signs a contract to buy a new house, it’s recorded as a sale. The official tally of homes for sale also drops by one. But if that buyer walks away from the contract, his property is not added back to the inventory count. And in recent months, home builders have been reporting extraordinarily high cancellation rates. One condo and single-family home builder that’s active here in Florida – WCI – actually reported net NEGATIVE orders … gross orders of 261 were wiped out and then some by cancellations of 270.
That’s an extreme example. But based on the cancellation rates public home builders have been reporting (30%, 40% or more), REAL sales are clearly lower and REAL inventories are clearly higher than the government’s numbers show.
Second, there’s the weather. December was an extraordinarily warm month and that probably distorted the sales gains. Just look at the regional breakdown of sales – sales were down 4.4% MOM in the West and virtually unchanged (up 0.3%) in the South, the regions unaffected by the warm weather. On the other hand, sales were reported UP 26.6% in the Midwest and UP 27.3% in the Northeast.
The new home market IS doing better than it was this summer. But this will be a long road to recovery. 2007 should be another relatively weak year for sales and pricing. After all, homes are still relatively unaffordable, especially with the recent rise in mortgage rates. And real, new home supply remains higher than at almost any time in the past 40-plus years. Buyers – you’re in the driver’s seat!
I am not surprised by the uptick in new home sales. After all, homebuilders are the most informed and rational sellers in the market. I suspect the uptick in the NE is probably due to weather and statistical seasonality adjustments — good buying weather was adjusted upward.
Wow! The Virginia Beach / Norfolk market has a _huge_ jump on the stats this week! It isn’t superbowl weekend. And the best part is last night on a radio talk show the host said there was 11K homes for sale in the REIN (Hampton Roads MLS). So that says that the new housing tracker is tracking our market well.
Do de do … do dooo de do do….. POP goes the bubble!
Here’s one reason why some houses don’t sell:
http://newanimalcontrol.org/takeserious.shtml
Saw a priceless UK RE TV program. UK people will know it. “Location Location”. The couple had rented for 4 years and were tired of “throwing their money away”. They were paying roughly $1,200 U.S. per month for their newer rental townhouse. But it was quite nice and close to their work. So they now want to “own”. But they are both recent grads and have student debts, plus no savings. So the only way they can qualify for the approx. $240,000 it would cost to buy something similar (in a cheaper location with a long daily commute) would be with an interest-only loan. And they actually have a Bank or building society that will lend them the money.
So, let’ see… They are putting themselves on the hook for a $240,000 debt obligation and NEVER paying it back. So they are still “throwing their money away”. What is better about this than renting? Plus they are on the hook for insurance (their street was flooded! in 1999 - a big issue in some areas of the UK), and council tax - about $1,600 per/year. And god knows what the rate terms are and how they wil reset down the road. So I figure even with interest only they are paying $300-400 MORE per month, while getting a stressful commute, and the obilgation of house maintenance for no reason. Yet Phil and Kirstie - the show hosts - said they were doing the prudent thing financially! Of course the elephant in the room was that they all expect the values to rise. For a flat that in say 1999 would have sold for about $100,000. I have a good idea for a follow-on series. Visit all these people in two years and see if they are bankrupt.
UK is a cunundrum
5x income loans
I think the UK is staying up because it is perceived as a safer place to keep foreigners’ wealth than the US. Sarbox and the Patriot Act are not freedom oriented, but its the perception of an untrustworthy government that is the problem.
no conundrum at all, in Netherlands people use 10x income loans, some of them including free housing put options from the government (’National Mortgage Insurance’). I guess 5x or higher loans are more or less the norm in a big part of Europe nowadays. Nobody gives a damn about ability to pay back all those loans, and certainly not those ECB banksters. If Ben B has trouble keeping his black helicopters in the air, maybe he should hire Trichet to give him some advice.
There is ZERO news coverage in Europe on the troubles in the US housing market. People here still believe housing goes up forever (and it’s difficult to disagree, because in countries like Netherlands prices have been going up for nearly 20 years now, making real estate by far the best investment of the last generation).
Regarding the visit in two years: I think you are wildly optimistic about the implosion of the EU housing bubble. This thing is BIG beyond imagination, it stretches all around the world by now. EU Politicians from left to right will use all tax money that they can steal from their citizens and every incentive they can think of to support the housing bubble. I wouldn’t be surprised if the EU bubble takes one generation to collapse.
The UK does have a bit of a recent history with housing booms and busts. I don’t know about the rest of Europe. One more comment from the show: The host admitted that they need the first time buyer to sustain the property ladder. What this looks like to me is that when buyers need to resort to exotic finance to afford anything, we must be near a peak. As to whether the UK government will bail this out, who knows? Maybe it’s different in continental Europe, but in the UK, the government does not give a d*mn.
the Netherlands also has some boom/bust history, e.g. average home prices down -40% within 1.5 years in 1980. But that’s one generation ago, nobody remembers and the realtor/banking crowd conventiently starts their statistics after 1985. RE booms and busts are a regular feature of the Dutch economy after the invention of the stockmarket in the early 1600’s.
regarding the first time buyers: in Netherlands politicians keep coming up with new subsidies, free loans and other incentives every year to keep firsttime buyers entering the market, despite the fact that they don’t have any money and that the homes keep rising much faster than incomes. It’s all financed by the taxpayer. As long as politics gets away with this (looks like we have another 4 years of this legalized theft to go here) the housing bubble will continue.
David Lereah notes link between ARMs and mortgage delinquencies
http://query.nytimes.com/gst/fullpage.html?res=990CE5D71E3AF931A25750C0A963958260&sec=&spon=&pagewanted=1
“In the past year, 55 percent of all new housing loans were adjustable-rate mortgages,” said David Lereah, chief economist for the Mortgage Bankers Association in Washington.
Most adjustable-rate mortgages are “re-priced” every year, Mr. Lereah said. Interest rates have surged in the last 12 months. And, he said, such loans are most attractive to “consumers on the margin, those trying really hard to qualify.”
“Virtually all of the ARM-holders with one-year ARM’s will be repricing with 2-percentage-point increases,” he said. “That can mean a significant increase in monthly payments. Mortgage delinquency rates will be on the rise.”
When he worked for the other side.
—————
Don’t get excited. This is from circa 1995
http://www.investors.com/editorial/IBDArticles.asp?artsec=16&issue=20070125
Subprime Loans Soared In Boom, But Are Now Creating Problems
BY SCOTT STODDARD
INVESTOR’S BUSINESS DAILY
Posted 1/25/2007
However, about $1.5 billion in adjustable rate mortgages will reprice this year, the Mortgage Bankers Association said.
——-
That doesn’t sound like much. Only 3000 $500,000 houses. Assuming no one dropped 3 decimal places.
1.5 trillion is the correct number, and the math is closer to reality using a 250,000 median. That’s 4 million homes.
Cognitive disconnect (again)…
ECONOMIC REPORT
New-home sales rise to highest since April
By Rex Nutting, MarketWatch
Last Update: 10:25 AM ET Jan 26, 2007
WASHINGTON (MarketWatch) — U.S. sales of new homes jumped by 4.8% in December to a seasonally adjusted annual rate of 1.12 million, the highest level since April, the Commerce Department reported Friday.
Warm weather at the end of last year, along with low interest rates and aggressive discounting by builders, boosted sales far beyond the 1.07 million rate that economists surveyed by MarketWatch had expected. See Economic Calendar.
By region, sales gains were strongest in areas that enjoyed unseasonably warm temperatures. Sales rose 27% in both the Northeast and the Midwest, while sales were flat in the South and fell 4% in the West. Read the full government report.
Also, sales for November were also revised higher to a pace of 1.069 million new homes, up from 1.047 million previously.
http://tinyurl.com/3a4rqa
Rex NUT-ting. This aticle was written by a good for NUT-ting.
Are you sure it’s a cognitive disconnect ? It’s maybe just a NUT case multiplied by a million screwed up sick brains ?
How many of these “sales” will actually take place? The builders have said that cancellations are running at around 40%. Also now with the new FM rules the GF’s will find out how bad the toxic loans really are. I think that the cancellation rate may go over 60% now. Also how many of these houses have now been sold 2 and 3 times?
An observation: waiting for a doctors appointment yesterday, I picked up the local paper. After reading every page doing the crossword (erne, esne, etna etc), I started looking at the “help wanted” - A lot of help wanted ads for car salesmen - as always, but what struck me as extremely unusual were the number of car salesmen ads for Toyota, Lexus, Mercedes Benz, Honda. I had previously never seen these dealerships post salesmen wanted ads. My understanding was that salespersons for these dealerships averaged 60k/year and that turnover was very light, ergo no need to advertise. Obviously this can no longer be true.
don’t know about the US, but in Europe all the luxury car makers are doing EXTREMELY well. Long waiting lists for the most expensive models, record profits, etc. Luxury yachts, same story. I guess times are busy in those luxury showrooms.
I have a question for the scam department.
Due to out of control spending on things like QVC and garden statues, my mother in law in Salt Lake got herself into so much debt — she refuses to work, no longer gets alimony, and won’t rent out any rooms — she put her house up for sale. She actually got a full-price offer and turned it down because she didn’t want to move in 45 days. Now a friend of one of her friends (oh boy) knows an “investor” who has offered to buy part of the house, give her cash to convert the basement into an apartment, and to let her live there rent-free for as long as she wants.
So, how does this scam work and how long before my husband and I have to deal with her being homeless?
Oh, also, my sister says that there are a bunch of California-owned, vacant properties in her part of Salt Lake where the ‘tards were too cheap to turn on the heat and didn’t drain the pipes. Apparently these investors have no idea what happens to water in pipes when it freezes and it has been really cold (single digits) this year.
She is in a historic area and I bet getting at those leaks through all the lathe and plaster isn’t going to be easy. Then there’s repairing the hardwood floors. Ha ha ha.
SLC is nations capital for preying on older folks. They are probably trying to fool her into signing a quitclaim deed. Any deal that she decides to work out should be reviewed by a RE lawyer SHE pays for.
No, that’s Boca Raton
Does anyone here subscribe to RealtyTrac or any other foreclosure list sites? If so, could they relate their experience, is it worth the $$, etc. I’m not subscribed, but I get periodic emails from them with updates of preforeclosures in my zipcode, but can’t view the details without subscribing. I’ve looked all over the site for subscription rates but can’t find them, which makes me suspicious. Any info is appreciated; thanks.
Question for the masses:
Let’s say you sold your home and have some proceeds, ~ $100K. Where would you put that money right now for the next few years? Leave it in cash, short term CDs, another currency, hard metals?
Thanks.
Treasurydirect for the most part, contrarian funds, gold funds, Hussman.
The key will be to keep what you have and speculate only with the money you can afford to lose. Stock market at this time is pretty much pure speculation for the ordinary folks like us.
Mine is 60% CDs, 10% physical gold, 30% contraian spec. I would note though that about 1/3 of my bubble cash out came from spec. land resold for profit.
I’d wait until late October and put it into the large cap ETFs such as QQQQ, SPY, DIA
Is this the “October to May” plan? What do you recommend until October?
Stay out?
Another few side questions:
How can you find out how much a bank has tied up in RE?
What are you doing to hedge against a falling dollar?
against what do you think the dollar is going to fall? certainly not against the yen or the euro …
Already has been against the Euro, no?
well … it’s at the same value as two years ago so basically nothing happened. And you can be sure that the ECB burocrats won’t let the euro appreciate beyond 1.30-1.35 - if it goes higher, the EU parliament will vote them out of existence. If the dollar goes down, the euro will go down just as fast (and probably even faster).
You are right. It’s called competitive devaluation. Japan has been doing this alone for many years. China too. Soon Europe will be doing the same. In that context I would opt for physical gold and silver.
Comment by mrincomestream (from yesterday):
“Not even knowing anything about the area it would appear that 30% off the current list price was quite generous on your part.”
In my opinion, yes.
That’s pretty funny.
Housing report from Long Island shows prices held steady in 2006, inventory overhang [25% in Nassau, 20% in Suffolk], threatens price decline in 2007.
Long Island Housing Inventory Threatens Prices in 2007
Has anyone dug into the various mortgage & building companies’ D&Bs? I don’t have an account or the cash to do it myself, but I bet their scores are going down pretty quickly.
Homeowners’ Insurance Rates On NC Coast To Rise By 25%
DOW JONES NEWSWIRES
January 26, 2007 9:41 a.m.
RALEIGH, N.C. (AP)–Homeowner insurance premiums will rise by 25% along the coast this year as a result of the rising cost of homes, higher repair costs and a recent history of severe damage from storms, North Carolina’s Insurance Commissioner Jim Long said.
The new rates, which take effect May 1, are the result of a settlement between the insurance industry and the state Department of Insurance.
The average premium increase on home insurance statewide is 5.4%, far below the 21.9% jump sought by insurers. Rates are set by region, based on the number and type of claims and repair costs in each area.
Those who rent out their beach houses will have to cover the higher insurance costs, said Alan Holden, who owns a property management company and RE/MAX at the Beach in Holden Beach, N.C.
“The owners are going to pass it on,” he said. “I’m in shock by such an increase. Having just gone through a recent increase, it makes you wonder where it is going to stop.”
The last rate increase was in 2005, when rates along the coast jumped 15%.
The last storm to hit North Carolina’s coast was Hurricane Ophelia in 2005, which caused more than $40 million dollars in damage.
Wahooooo! I guess it’s official. Peter Jennings says the housing bubble has burst. Just gave his powerful reporting advantage during GH…more on WNT! Can’t wait for tomorrow.
“Wahooooo! I guess it’s official. Peter Jennings says the housing bubble has burst.”
Peter Jennings is dead.
Homes in foreclosure are gonna be tough to sell. I looked at one this past weekend. Stains in many places on the carpets, someone had torn the microwave off of the wall. It looked like they tried to take the stove out as well - it was several inches away from the wall. They had taken the door that opens into the garage from the utility room. The cheap blinds were all bent in many places. And the place was very dirty as well. As I pointed these things out to the realtor she kept saying “just put it in your offer”.
Why would someone buy that house when Mr. builder will not only cut his price, but also throw in some upgrades?
ziprealty.com shows 125 new listings for SD with today’s date — a pretty high number of new homes on the market in the dead of winter. I can’t wait until the new listing rate passes 200/day during the red hot spring sales season, with a dearth of buyers to match…