“We Reached The Top And We’re Cresting Down A Little”
The Monroe News reports from Michigan. “Foreclosures in Monroe County soared 64 percent during 2006. The number of sheriff’s deeds climbed to 498, up from 303 during 2005, according to the Monroe County Register of Deeds office. It means about one in every 94 owner-occupied homes in Monroe County went into foreclosure during 2006.”
“Spending beyond their means is oftentimes part of the equation, meaning when times were good people spent every penny they had and there’s not much savings,’ said Thomas G. Myers, chief lending manager at Monroe Bank & Trust. He said the stereotypical belief that overspending causes foreclosures isn’t always the main reason.”
“‘There’s no doubt there are some people who have recklessly gone and spent above their means, but there are a lot of people who haven’t done anything wrong and it has turned around and slapped them in the face,’ said Arlene Walsh, mortgage office with LaSalle Bank’s Home Lending Center in Monroe.”
“If there’s a silver lining behind the numbers, it’s in the pockets of the people who are getting deals on foreclosed homes. ‘That part of the story is pretty good because usually if it’s owned by a bank or some type of lending institution, they are asking a rock bottom price to move the house,’ Ms. Walsh said. ‘You’re going to get fairly good deals on any home that’s in foreclosure, just due to the sheer number of them now.’”
“To add some perspective, about 1,260 homes sold in Monroe County last year, just over twice the number foreclosed.”
“Ms. Walsh also said in response to the foreclosure rate, some lenders are tightening up loan policies, looking at credit scores and income-to-debt ratios much more closely. ‘If people want a competitive rate, they have to be following guidelines that are much stricter than they were five years ago,’ she said.”
The Indianapolis Star. “In a sense, though a very qualified sense, Central Indiana has been a victim of its own success when it comes to home mortgage foreclosures. Historically a leader both in the rate of homeownership and the frequency of reliance upon federally insured loans for buyers of modest income, the region also finds itself among the front-runners on the downside.”
“Metropolitan Indianapolis dropped from first place to third place nationally in foreclosure rates last year but had nothing to celebrate. Lenders took back 48,000 homes, up nearly 36 percent over 2005.”
“Who’s at fault? Who isn’t? Illegal loan scams that have made the headlines in recent months and led to multiple arrests certainly have cut a swath of blight as phantom financing led to abandonment and foreclosure. However, far greater loss results from widespread activity that defies no law but too often defies good sense.”
“Joel Epstein, president of the Greater Indianapolis Mortgage Bankers Association, cites a nationwide push ‘to create a culture of homeownership’ which has led to excess as well as success. ‘Did we as a lending industry and a real estate industry, in trying to get people into houses, maybe go too far in some cases? I would say yes. Were some people given the wrong kinds of loans? Yes. Were some people not ready to be in homes? Yes. Was the economy at fault? Yes.’”
The Journal Sentinel from Wisconsin. “Brenda Boyce is frustrated. Her tax bill assumes her house is worth thousands of dollars more than anybody seems willing to pay.”
“‘Our townhouse in Wauwatosa, on the market for eight months, was reassessed at $391,000 last summer,’ Boyce said. ‘Our asking price, after being lowered twice, is now $349,900 and still we have not received any legitimate offers. Assessments are completely out of whack with values.’”
“Boom conditions ended abruptly last year, sapping value from many properties. Yet the latest crop of tax bills is based on assessed value as of Jan. 1, 2006 - which may have been the finale of the 2000-’05 housing price run-up.”
“Homeowners trying to sell are hard-hit when assessments collide with harsh market realities. ‘After trending up, trending up, for five years straight, suddenly we reached the top and now we’re cresting down a little,’ said Steve Stiloski, president of the Appraisal Institute’s Wisconsin chapter.”
“Some local assessors, especially those who rely on mass valuations of residential properties, ‘may be overshooting’ housing values, Stiloski said.”
“House values rose an average of 10% in 2005, the boom’s peak, according to the state Department of Revenue. It’s likely, said Dale Knapp, research director of Wisconsin Taxpayers Alliance, that the downturn left some overvalued housing in its wake.”
“Milwaukeean Jim Gehl puts himself in the unhappy camp of those whose homes wound up overvalued and are paying more than their fair share this year. He and his wife, Kim, are selling their 2-year-old east side condo, asking price $249,900, because of a job transfer.”
“Despite no offers in six months, Gehl said, ‘I’m in no mood to sell for a lower value than I paid, especially after paying taxes from a city that says my assessment is $12,000 higher than what I purchased it for. The city needs to look at the real value of properties.’”
‘Did we as a lending industry and a real estate industry, in trying to get people into houses, maybe go too far in some cases? I would say yes.’
What if we restated it: (My words)
‘Did we as a lending industry and a real estate industry, in trying to “make a buck”, maybe go too far in some cases?’
“…in trying to get people into houses…”
HA! I never realized how socially responsible the banks and realtors were. I guess that was the problem. Like OJ, the banks and realtors “just loved us too much”.
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“Despite no offers in six months, Gehl said, ‘I’m in no mood to sell for a lower value than I paid, especially after paying taxes from a city that says my assessment is $12,000 higher than what I purchased it for. The city needs to look at the real value of properties.’”
Are these people ridiculous or what. Deal with it you dumbkopff.
Jas
He’s in no “mood”.
Have you ever seen a bigger bunch of neophyte ninnys??
I thought his statement was silly as well. Who should he be mad at:
1. current prospective buyer who will pay current market (and stil catch a falling knife)
2. current cycle-aware buyer/investor/bottom feeder who will offer 20 cents on the dollar for the property and then be will to go up slightly to 30 to 35 cents on the dollar (or whatever property was selling for in 1996-1998 plus inflation).
3. himself for being the idot that purchased without knowing what he was doing
“Mood?” Halleck’s voice betrayed his outrage even through the shield’s filtering. “What has mood to do with it? You fight when the necessity arises - no matter the mood! Mood’s a thing for cattle or making love or playing the baliset. It’s not for selling houses !.”
“I’m sorry, Gurney.”
“You’re not sorry enough!”
(Stolen from Dune)
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Good one.
“The city needs to look at the real value of properties.”
No, he should have taken a look at the real value of the property before he bought it. Condos on Milwaukee’s east side, I wonder which ones? Nearly Chicago level prices with nowhere nearly the Chicago job market. I’m disappointed Milwaukee, I would have hoped you would have let the condo insanity stay south of the border.
Hey, he may be an idiot and most of what he said is dumb, but he is right that it’s nonsensical of have the house assessed for tax purposes at a higher price than it has been listed at for six months.
Actually, he isn’t right about the tax assesment (at least in Canadian terms, and I think that it would apply in American cities as well).
Bottom Line: City has a budget and has to collect a certain portion of that budget from property taxes. Using data from previous years with adjustments for thing in each area such as newly paved roads, new sewers, trees, etc property taxes are distributed as fairly as possible over the cities homes.
In Canada we have seen house property tax levels decrease each year and I’m sure that as the prices drop (and I think that once they start falling here they will fall faster than south of the border) the tax rates will go up to match as best as possible the cities property tax revenue needs.
The real windfall for cities last year was building permits. It was a record year Canada wide. It seems to me that we are about a year behind the US in terms of the housing market “Correction”, but we have relied heavily on US investors to bump up our property values. Now those investors are finally non-existent and properties values are starting to slide a little. Like I say, we’re about a year behind, but considering the large amount of outside investment, I think we’ll drop hard and fast because that was one of the BIG selling points the last few years is that:
“Everyone wants to live in Vancouver, Canada. We’ve got the Olympics!”
Speaking of which, did anybody notice that the tax receipts are starting to get a little light in California? I guess the Guvenator will have to rethink some of his proposals, especially the “healthcare for everyone” bit. Unless this housing downturn drives out a lot of the illegals, in which case maybe we will be able to afford healthcare after all.
“The city needs to look at the real value of properties.’”
And, you should have done that too, buddy. And, considering that your house still isn’t selling, it sounds like you still aren’t doing it.
Sounds like this guy needs to look at the REAL value of his property too. The REAL value is much lower than what he was stupid enough to pay at the top of the bubble.
Sue the city, and good luck doing so.
A welcome sign; we are no longer seeing real estate brokers, mortgage brokers, and other industry promoters blaming the media for sales declines.
It is likely that some reality is setting in for them, that there is more to it than just the press making the market decline.
Now, I don’t see many of these individuals ackowledging fundamental market problems publicly, but at least they are no longer saying it is a “press problem.”
Dave,
I don’t think 95% of these “experts” have any clue in regards market fundamentals, which is why they are unable to comment.
“We Reached The Top And We’re Cresting Down A Little”
Yup. A roller-coaster almost comes to a complete stop a the top.
Is “cresting” even a word?
From wordsmyth.net:
Part of Speech transitive verb
Inflected Forms crested, cresting, crests
Definition 1. to reach the top or peak of.
Crossref. Syn. crown
Definition 2. to top with, or as though with, a crest.
Well then he has got it pretty right, as after cresting you would head diwn a little before heading down a lot.
“‘There’s no doubt there are some people who have recklessly gone and spent above their means, but there are a lot of people who haven’t done anything wrong and it has turned around and slapped them in the face,’”
Hope for the best, but plan for the worst.
“Hope for the best, but plan for the worst”
amen brother, never get caught with your pants down!
Unless you’re Dirk Diggler
“If there’s a silver lining behind the numbers, it’s in the pockets of the people who are getting deals on foreclosed homes. ‘That part of the story is pretty good because usually if it’s owned by a bank or some type of lending institution, they are asking a rock bottom price to move the house,’ Ms. Walsh said. ‘You’re going to get fairly good deals on any home that’s in foreclosure, just due to the sheer number of them now.’”
It’s a GOOD thing so many people are being kicked onto the street!
“House values rose an average of 10% in 2005, the boom’s peak, according to the state Department of Revenue. It’s likely, said Dale Knapp, research director of Wisconsin Taxpayers Alliance, that the downturn left some overvalued housing in its wake.”
Wisconsin? Wisconsin?? ………are all the boomers moving to Wisconsin? I was told the boom was created by “market fundamentals”…….baby boomers retiring and buying second homes,
lower interest rates making houses more affordable, higher costs of building materials, blah, blah, blah ……..AND………..primarily onlong the Coasts and the Southern retirement zones.
This can’t be true. Not possible. Huge house “INFLATION” in Wisconsin? How can this be??
Wisconsin? Wisconsin?? ………are all the boomers moving to Wisconsin?
Heck no. I have it on good authority that they’re making a beeline for East Orange, NJ.
‘That part of the story is pretty good because usually if it’s owned by a bank or some type of lending institution, they are asking a rock bottom price to move the house,’
Definitely not true. The bank will seek to recover the entirety of the outstanding balance, which, these days, is normally more than the house’s value. FBs beware! These waters won’t be safe to swim in for another several years.
“These waters won’t be safe to swim in for another several years”
I agree Anthony. Savy Northerners will take this misfortune as a good time to move to better Southern employment centers further depressing the RE market.
Well it is the job of bank regulators to make the banks sell at market and take the writeoff. If the property was worth what was owed, the bank wouldn’t have had to foreclose. Until it is sold, it is a big red question mark on the bank’s balance sheet. Unfortunately, there are SO many potentially bad loans out there, that I’m betting that there is a good number of banks that will become insolvent if they are all forced to sell. I’m under the impression that the FDIC doesn’t mind shooting a few of the sick and crippled, it improves the breed. But machine gunning the herd is bad for business and tends to cause a stampede. So when the foreclosure ball really gets rolling, later this year and next, I’m not sure that we can count on them to aggressvily pressure banks to get REO off of the books through sale.
“Cresting Down.” Is that like “Falling Forward?”
More like “Negative Growth”
The rate of inverse appreciation is rapidly increasing in a positive sense.
“Cresting Down.” Is that like “Falling Forward?”
More like falling knife.
Dear Mr./Mrs. F@cked Homedebtor:
I am willing to extend you an offer for the house you are desperately trying to unload. Now I know this is really hard to understand, but what you owe on the house and its current market value have no relation to each other. I know you paid $800,000, and now thanks to the voodoo no money down we pay you for 6 months toxic loan you took out, your balance is now $903,539.35. However, I can only give you $200,000 in cash, after you settle with the Bank of Joe 6Pack, who is the present bagholder of your mortgage. I can only give my more than generous offer when J6PK will release the title to me, and you will need to deal with them for any outstanding debt. I can only hold this offer for 3 days, because there 50 other homedebtors in your neighborhood alone wanting to bale out of their white elephant home also.
Sincerely,
Refused to be a California Homedebtor.
Can I borrow this letter, I am considering buy a house and I think this letter may work.
ROTFL
Ok, 200k won’t work, at least where I want to buy. Incomes will keep it from dropping 75%! But I might just copy the format.
I still think prices will drop 30% to 60% from the peak and we haven’t seen most of the depreciation… yet. 
Got popcorn?
Neil
I think it would be nice if we had a form letter like this we could download and flood our local markets with. Enough FB’s get something like this from enough people and it might sober them up a little from all the cool-aid they’ve been drinking. The sooner we get the FB’s out of the denial stage and into fear and desparation the better.
My writing skills stink but I would love to have a form letter to mail out. My wife and I were talking about sending letters to the FB’s to see if we can get a reponse.
Did you ever think that sending out a couple of dozen mocking and derogatory letters to highly stressed, nothing-to-lose home debtors might provoke a hostile response. Make sure you include your home phone number and address! On the other hand, this could be a great way of easing yourself into the security/ bail bondsman kind of business!
God bless America!
Uhhh…I thought drinking the Kool-Aid was terminal, as in the Jonestown flavor.
“‘Our townhouse in Wauwatosa, on the market for eight months, was reassessed at $391,000 last summer,’ Boyce said. ‘Our asking price, after being lowered twice, is now $349,900 and still we have not received any legitimate offers. Assessments are completely out of whack with values
Sheesh…It was just yeaterday that Realtors, homedebtors and the Milwaukee Journal Sentinel were DANCING and jumping GLEE at the run-up in the VALUE of these outdated 1932 moneypits. I guess we’re not selling our OVERPRICED?OVERTAXED Tosa McMansion this week and going to Disneyworld after all Brenda because Wisconsin IS BROKE !!!!
What we have here, is a seller obviously in need of an illegitimate offer.
“If there’s a silver lining behind the numbers, it’s in the pockets of the people who are getting deals on foreclosed homes. ‘That part of the story is pretty good because usually if it’s owned by a bank or some type of lending institution, they are asking a rock bottom price to move the house,’ Ms. Walsh said. ‘You’re going to get fairly good deals on any home that’s in foreclosure, just due to the sheer number of them now.’”
Big fookin’ deal…foreclosure or not-all any buyer is doing at the moment is catching a falling knive.
Wait until the real panic hits after the coming and going of this coming spring selling season.
Virtually nothing has changed in the economy.
Despite the drop in oil prices (attributable to a warm winter), the reports out about peak oil are enough to scare the bejesus out of anybody.
Even the foreclosure buyer’s will be left sucking wind with six-figure negative equity as a decade of price declines unwinds.
Peak oil is scary, but it probably won’t happen as a free market will find an alternative.
“Necessity is the mother of invention” after all.
Many alternatives are out there, many are better for the environment too.
Caramello,
You miss an important point. Alternatives require their own production, transportation & distribution systems, and building those will take decades and trillions of dollars. Things could get pretty interesting in the meantime.
B-B-But… Suzanne researched this and said EVERYONE wants to OVERPAY and be TAXED to Death in Wauwatosa, Wisconsin Brenda, she SAID it’s really DIFFERENT HERE !!!
” Cresting Down ” — LOL !!!!!
Is that similiar to “Dropping Upward” or “Falling Softly” or “Crashing Gently”
LOL !
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THBB is a laughter therapy. Does Ben have a liability insurance in case someone dies laughing?
Jas
Check out this paid ad from the Orlando Homebuilders Association practically begging people to buy a house. This has been running on all of the local TV staions. http://www.realopportunitycfl.com/tvSpots-carmen-eng.php
How do they do that with a straight face. She sounds so sincere in her speculation!
Realtors on a commission… of course prices always go up!
http://comfree.com/
There’s even a rolling commissions saved counter!
How do they do this with a straight face? Real Estate always goes up I guess… except when it goes down.
Check out:
http://comfree.com/
No more commisions for realtors. There’s even a rolling commissions saved counter.
IndyMac’s loan volume up, profit margins down
Lender faces higher credit costs, makes less-profitable loans
Monday, January 29, 2007
Inman News
IndyMac Bankcorp Inc. posted record loan production of $26 billion in the fourth quarter 2006 — a 44 percent increase from the same quarter a year ago — but said profit margins were down because of increased credit costs, increasing loan loss reserves, and a shift to less-profitable fixed-rate loans.
IndyMac Chief Executive Officer Michael Perry predicted 2007 will be “a very challenging year,” with the company continuing a hiring moratorium on “non-revenue-generating” employees, a freeze on base salaries, and a plan to increase outsourcing from 9 percent of the workforce to 13.5 percent by the end of the year.
“The MBA is forecasting a 5 percent decline in industry mortgage originations to $2.4 trillion, following 2006’s 17 percent decline,” Perry said in a statement. “While we expect to continue to capture market share, we also believe that competition will be fierce and the housing market will be challenging. As a result, we believe that in 2007 our revenue margins will remain under pressure and credit quality will likely worsen to more normalized levels.”
IndyMac’s fourth-quarter earnings totaled $72 million, up 3 percent from the $70 million posted in the fourth quarter of 2005. But earnings per share were down 8 percent to 97 cents per share after adjustments to reflect employee stock options exercised.
The lender doesn’t expect to beat the $4.82-per-share earnings for 2006 this year. IndyMac projects profits of $4.15 per share for 2007, with return on equity of between 12.5 percent and 17.5 percent, compared with 19.1 percent in 2006.
While IndyMac boosted loan production 48 percent for the year to $89.9 billion, it has also shifted production mix from high margin adjustable-rate mortgage (ARM) loans to less profitable fixed-rate loans. Fixed-rate mortgages made up 22 percent of mortgage loan production in the fourth quarter, compared to 20 percent in the third quarter.
Increased credit costs related to marking-to-market delinquent loans held for sale and increased loan repurchase reserves affected margins. IndyMac’s mortgage banking revenue margin declined to 91 basis points during the fourth quarter, down from 103 basis points in the prior quarter and 110 basis points in the fourth quarter of 2005.
The ratio of nonperforming assets to total assets increased to 63 basis points during the fourth quarter, compared with 51 basis points in the third quarter and 34 basis points in the fourth quarter of 2005. Net charge-offs increased to $7.6 million during the quarter, up from $1.9 million in both the third quarter of 2006 and fourth quarter of 2005.
IndyMac Chief Financial Officer Scott Key said the company has warned in the past that historically low nonperforming assets and charge-offs seen in the last few years “were unsustainable.”
“We expect current credit conditions to worsen further in 2007 in connection with the housing market cycle and therefore are planning for significant increases in loan loss provisions and charge-offs in 2007 versus 2006,” Key said.
But subprime loans made up a smaller percentage of IndyMac loan’s production — 3.6 percent of first mortgages in 2006, versus 4.5 percent in 2005, the lender reported. First mortgages closed in the fourth quarter had FICO scores of 703 and combined loan-to-value ratio of 81 percent, compared with a 700 FICO score and 78 percent loan-to-value ratio in the same quarter of 2005.
IndyMac posted substantial gains in home equity loan funding (up 97 percent for the year, to $7.2 billion) and reverse mortgages (up 71 percent to $5 billion).
I don’t remember the site I was on last night but it had the forclosure rates for the month of December. The state of Denver had a 1 in 369 households in foreclosure. I got to thinking that times twelve (for just one year at the current rate) is 1 in 30. OMW! Is that right? The next point is that rate is for just one year. What about multiple year downturns? 1 in 10? Hard to stay positive. My sh$t is in order. Where are the alarms? Where the heck is anyone on this news? Anyone doing any analysis? I also find that realtytrac isn’t updating the numbers like they used to. Houses I know owned by banks are not on the website. The same with forclosure.com. Can someone clue me in to any of my observations?
Analysis is a dirty word in the modern media. It means you’re being “judgmental” and since your conclusions might suggest that one position is better than another, you would be “biased” toward the better action. You also can’t find that a whole bunch of people have been inexpressibly stupid because those people will blame you for exposing their stupidity and crashing their jolly-cart.
I’m not sure that you can simply multiply by twelve. How long does a house sit in the foreclosure process. With the crazy insanity that we have now, you have to wonder how many houses get foreclosed on twice in a year too.
Uhhh…..
“W” would call your logic “fuzzy math”. I think I have to concur.
State Senator proposes $10,000 giveaway for Bay State graduates
BOSTON — A Massachusetts’s lawmaker - State Senator Brian Joyce of Milton - is proposing a $10,000 giveaway for graduates of Bay State colleges.
He says the cost of living in Massachusetts is so high that most students can’t afford to live here after graduation.
Under the proposed plan, students would receive a $10,000 down payment, which must go towards a house or a condo.
Recipients would have to stay in Massachusetts for at least five years, or pay back the money with interest.
It would, however, apply only to graduates making 135 percent or less of the statewide average income.
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Oh, yes! America needs more govt. programs to push people into “homeownership.” Fannie and Freddie didn’t do enough?
Jas
Homebuilders need more taxpayer-funded subsidies.
I suspect the state wants to try keeping its college graduates.
Would $10,000 even cover closing costs in the Boston area these days? Would it even cover if the price drops another 20%?
Guess what guys….At 135 percent or less of the statewide average, THEY STILL CAN”T AFFORD ANYTHING!
Geez, unless you put them in a suicide loan, and if you do, they’d have a better shot of success if they put the 10 grand on Black….
Are they trying to keep this under the rug in hopes some activity props things up in the spring? That would just extend the pain in my opinion. Bring on the rollercoaster! Hopefully we all will learn something from this lack of responsibility and treat it as we should instead of considering irresponsibility ‘as the norm’ and allow it in our society.
Slamming slightly, plummeting gracefully, collapsing softly, plunging peacefully, tumble tenaciously
My 2 cents
Your so right ylekiott on your 2 posts .
It gets me when realtors say they were putting people into houses. How about all the people that have to sell their houses because the property taxes went to high because of this inflated market or all the people that will be throw out because of foreclosures .
People do not think about the fact that the real estate market in general should not exceed inflation in pricing (which it did for the last 5 years ). This keeps the market in check for not exceeding the homeowners ability to pay property taxes.
The real estate market is a conditional sale . If buyers went around paying cash for real estate purchases than lenders would not have a say so in the market price . Because real estate is a conditional sale based on a borrower making payments and paying
the money back ,they have to qualify . That makes market prices in check with the local communities and economy. its a balance of these factors that will determine true market value.
When you go messing around with that balance and turn the market into a speculation and unqualified buyer market you have messed with the delicate balance . If the lenders lend to unqualified buyers and that ends up inflating the market , the market was a false market .
The market stays in balance when you have about 10% speculation purchases of a somewhat long term duration . If that figure goes up to 40% ,50% ,70% ,and the borrowers are short-term marginal buyers ,who are gambling on appreciation ,the balance has been upset again and it a false market .
Oh slap me ,I’m going on and on .
The part that I will watch with great interest is when the ripple effect from the “overspenders” ceases. Consider: by overspending or drawing on credit, these folks, call them FBs, have consumed more in their community. Whether it’s Starbucks every morning, granite countertops, expansions, remodeling, power tools, boats, second homes, deluxe cable, electronics, dinners out, whatever, they have boosted the economy enormously. They will obviously pay a price for their financial folly, but what about the community? That Starbucks’ revenue will drop, the Lowes, Home Depot, or whatever will drop, even the mom-and-pop eateries and small businesses will see a revenue drop when the FBs start folding en masse. What then? How far will it unwind?
Folks seem to think “not very far.” We’ll see.
Well one question was whether MEW (Mortgage Equity Withdrawal) is a leading or lagging indicator of consumer spending. What percentage of MEW enables debtors to go out and buy the BMW and trip to DisneyWorld (money to be spent) versus how much goes pay off credit card debt? (money already spent).
The Fed is still flooding the markets with HUGE amounts of liquidity. That money still must go somewhere. It is why they stopped reporting M3, after all. So, don’t expect deflation anytime soon.
I thought mortgage interest rates was going up. I’m betting on deflation still, even tho’ I’m getting impatient.
It’s not like current overspending will only be offset by future “underspending”. Since the excesses are financed, future expenditures will be reduced by both principal and interest and spread out over a greater period of time. Can we say “economic contraction”?
Principal? What are you thinking. The government’s got a good FICO and they’re going IO all the way!
Sean from NVA - feel free to use my letter. If anyone can take and improve on it - go for it. Its on Ben’s site now - it is public domain to copy and use as anyone sees fit. Thanks all. This blog is so entertaining. The FB stories getting more outrageous, and these ‘experts’ coming up with dumber and dumber statements.