“The Downturn Should Have Been Expected” In California
The Orange County Register reports from California. “California’s housing slump is in part a result of conflicting expectations of buyers holding out for better deals and sellers still seeking a premium for their homes, a state Realtors group concluded. As the market began to slow, buyers sensed they could get better deals by waiting. At the same time, sellers still hoped to get a premium for their homes.”
“‘This drove a wedge between buyer psychology and seller psychology,’ the report said.”
The Press Enterprise. “The California Association of Realtors said that according to its annual survey, homes purchased by first-time buyers slipped from almost 31 percent in 2005 to just over 27 percent last year.”
“Two of every five first-time buyers relied on 100 percent financing. Association chief economist Leslie Appleton-Young said first-time buyers apparently thought the goal of homeownership was worth stretching their finances. ‘I think when we look back at 2002 to 2005, appreciation was so strong that people couldn’t afford not to buy,’ Appleton-Young said.”
“‘Nontraditional mortgages are not going away. They are just a part of the landscape now,’ she said. She said they can be beneficial ‘for younger Generation Xers and Ys entering the market with the need to stretch every dollar.’”
The San Francisco Chronicle. “Appleton-Young pointed out that buyers are taking on a high debt load at the same time that foreclosure rates are rising.”
“The number of California homeowners who fell behind on mortgage payments more than doubled during the last three months of 2006, pushing defaults higher than at any other time in the past eight years, according to an analysis by DataQuick.”
“The steady increase in the number of people who have missed mortgage payments and received notices of default is cause for concern, Appleton-Young said. ‘You do have people, especially those who purchased in 2006 and 2005, who missed the big cushion of appreciation, who could get into trouble,’ she said.”
“Even as many first-time buyers showed a willingness to take on higher debt, the overall percentage of first-time buyers fell, reaching its second-lowest level on record. ‘The market is going to have to find a way to add new buyers,’ said Ed Leamer, director of the UCLA Anderson Forecast. ‘That’s another symptom of a market gone awry.’”
The Whitier Daily News. “The survey also found that the share of buyers who used a second mortgage hit 43 percent last year, more than triple the percentage since 2001 and the highest percentage since 1982.”
“‘We don’t know yet what the effect of defaulted mortgages will be like,’ said Norman Cox, VP for Coldwell Banker Town & Country in West Covina. ‘There’s no way to tell who’s gonna make it and who’s not.’”
“(Broker) Marty Rodriguez said she’s seeing more ’short-sell’ deals, where the seller owes more on the house than it’s worth. ‘What’s different about this market is now you’re dealing with first and second trust deeds, rather than just first trust deeds,’ she said.”
The Contra Costa Times. “Oakland was one of the few areas in the East Bay that reported a rise in median home prices in December year over year, according to DataQuick.”
“DataQuick analyst Andrew LePage said the rise in prices was mainly because of the drop in resale condominiums for December 2006, a number that historically ‘tugs down’ median home prices.”
“Agent Varnell Owens said she doesn’t see prices rising lately in her listings, mostly lender-owned foreclosures priced to sell. ‘Right now I’m seeing prices down,’ she said.”
The Redlands Daily Facts. “Residential real estate prices in the Inland Empire had been going up double digits in almost all market areas for several years until late 2005. As an appraiser, part of what I do is monitor what is happening to prices, whether they are going up or down.”
“Upward of 25 percent of the buyers during this run-up were investors or speculators. Add to this mix the commuter buyers who were coming from more expensive areas to the west and south. All of this was fueled by low interest rates and up to 100 percent financing.”
“Will prices fall? Yes. How much depends upon the local area, and where supportable demand levels exist. It is my estimate that the Inland Empire Region will experience 25 percent to 50 percent price declines during the cycle we are now in.”
“In Redlands’ 92373 ZIP code, prices started to decline in March 2006. Calculate the change between March and January 2007 and you get a little more than 10 percent. Where will the trend line go in the future? Downward for a while, maybe two to three years, then it will level off.”
“How much will prices decline in 92373? If the average price change was 1 percent per month but the most recent months were higher, what would you project? Probably more than 12 percent this year, maybe less than that in 2008, say 8 percent and maybe 5 percent in 2009.”
“Bear in mind too that all of these sales numbers include any concessions or cash-back that might be in many transactions.”
“When put into perspective of a 10-year pattern, the downturn should have been expected based on the huge run up since 2002. No reason to panic if you purchased your home for the quite peaceful enjoyment of it.”
“Only the speculators and flippers and the last ones that purchased in 2005-2006 are in any trouble at all. The rest of us just need to continue to enjoy our homes, unless we were using it as an automatic teller machine.”
“Orange County real estate agents earned a fifth less in commissions last year, forcing brokerages to close some offices and pushing some agents out of the business.”
“More than 59,000 people in the county have real estate licenses, 44,000 as sales agents and nearly 15,000 as brokers.”
“‘There were payroll reductions. Offices closed. All kinds of things happened to … keep (offices) running with the total loss of commission revenue,’ said Rich Cosner, president of a chain of realty offices in Orange County and the Inland Empire.”
“‘It’s back to the basics for the industry,’ said Steven Thomas, a broker in Aliso Viejo. ‘Our agency has let people go. Other agencies have let people go. We call it the year of the professionals in 2007.’”
“Amanda Wheeland, a flat-fee broker, said last year’s market actually favored her business because she was able to take over expired listings and sell homes that full-service agents couldn’t sell for a reduced price. Her sellers still had to pay full commission to buyers’ agents to attract showings, however.”
“Still, Wheeland said many agents who were just barely making a living selling homes had to leave the business or go into a related field like property management. ‘If they’re not getting clients, they’re not making enough to pay their rent,’ Wheeland said.”
Readers of my Foreclosure blog: I am not able to post to the network right now. Please check back.
Many posters here predicted this:
‘Never in his darkest dreams did Estrada think the two-story house a few feet from his contained an indoor marijuana-growing operation that authorities believe is the latest wrinkle in drug traffickers’ efforts to hide their illegal business. In August and September, 41 houses were busted in Elk Grove, Sacramento and Stockton.’
‘According to Taylor and court documents in the recent cases: Growers paid up to $750,000 for houses in new subdivisions, usually obtaining 100% financing and putting no money down.’
Estrada watched on Jan. 12 as federal drug agents busted into the unoccupied, stucco-clad house, hauling out enough marijuana plants to fill a truck, along with high-intensity lights, fans and other indoor hydroponic growing equipment.
Guess I’m just a pessimist, but I have way darker nightmares than that. Getting hit by a truck seems to be one of them - oops, that’s just my commute, not really a dream after all.
Watch the story about the Marines in the Burn ward to put that silly pot stuff into perspective. Gosh, we’ve gone nuts. There is a whole world of really bad stuff out there. DEA agents pulling pot out of the house next door isn’t high on the list of “really bad stuff”. DEA agents mistaking your cell phone for a gun would probably be right up there, though.
No matter how you rationalize it organized crime hurts everyone.
1. The no money down houses will end up going into foreclosure
2. The crooks screwed up comps so regular people just trying to buy a house end up paying more than it’s worth
3. Growing weed can make a lot of money fast. To protect their investment crooks will hire guards with guns to patrol the area
You think all that sounds ok?
It pisses me off.
The moisture level in the house from this may well fill the walls with mold.
We should just make pot legal and be done with this.
Consider this. Many times, the DEA/FBI/other law enforcement agencies have obtained search warrants for properties suspected of drug use. They go to raid the house and serve the warrant…
At the house next door.
Innocent civilians have been shot and killed in these mistaken raids by idiot cops who apparently can’t be bothered to read the street number on a house before blasting their way in. Are you really surprised that the next door neighbor is concerned?
The dirty little secret of the War on Drugs is the body count from innocent homeowners who find their doors being smashed in [the Orwellian "no-knock warrants"] at one or two in the morning, and try desperately to grab a weapon and defend themselves and their families from the intruders. In every one of the post-tragedy investigations the SWAT dullards always claim, “We shouted ‘Police’” - as if that strategem could never be employed by home-invasion thugs. Even if the homeowners survive the encounter, they are liable to be imprisoned for the “crime” of defending themselves from the errant raiding parties, often acting on “tips” from paid scumbag informants who tend to be a bit hazy on things like actual addresses.
Yeah, I’d be concerned too if my neighbor was a grower or dealer. Too much potential of ending up as collateral damage.
Of course not. Concern is understandable, comparing a drug bust next door that goes off without a hitch to your darkest dreams is.
You just hit on a real dark dream possibility. Fortunately it didn’t happen. Mr. Estrada ought to be happy. The DEA is not known for compassion on people who get in their way. The sooner those guys are gone the happier I’d be. I didn’t say drug dealers next door was a good thing or even an ok thing, but they got busted and Mr. Estrada lives to see another day. That’s not dark dream stuff in my book. That’s a happy ending.
“Innocent civilians have been shot and killed in these mistaken raids by idiot cops who apparently can’t be bothered to read the street number on a house before blasting their way in.”
Semishag, why don’t you give us a specific case where this happened.
I’ve heard of a few cases, but it’s very rare. Sometimes the cops hit the wrong house. Sometimes the informant lied to get money to buy drugs. It’s no different from cops busting down the wrong door while looking for a fugitive.
It’s much worse than cops simply busting down the wrong door, since they can make seizures of cash and property to fund their extra-constitutional activities.
There’s the case of Donald Scott, “reclusive millionaire in California with a 200 acre ranch in Malibu. His home was raided by 30 law enforcement officers hoping to find marijuana plants, with a plan to seize the property. In the course of the raid, Scott was shot to death by two sheriffs deputies. No drugs were found. According to District Attorney Michael Bradbury:”It is the District Attorney’s opinion that the Los Angeles County Sheriffs Department was motivated, at least in part, by a desire to seize and forfeit the ranch for the government… Based in part upon the possibility of forfeiture, Spencer obtained a search warrant that was not supported by probable cause. This search warrant became Donald Scott’s death warrant.”
The so-called “war on drugs” is a sham, a co-equal partnership between street gangs that depend on drugs for funding, and corrupt law enforcement, who needs to gin up the “drug problem” to justify their funding. Ending this insanity…decriminalize it for adults, and remove the funding from street gangs.
http://franklinjefferson.blogspot.com/2006/04/search-and-seizure-does-governments.html
Old woman killed by narcotics officers:
Atlanta officers to face murder indictment
Fulton DA seeks charges in shooting of elderly woman in her home
http://www.ajc.com/metro/content/metro/atlanta/stories/2007/02/07/0207atlshoot.html
By BILL TORPY
The Atlanta Journal-Constitution
Published on: 02/07/07
On Nov. 21, narcotics officers went to Johnston’s home in northwest Atlanta to execute a “no knock” search warrant. Johnston was killed and three officers were injured in an ensuing shootout.
No-knock warrants are frequently issued so police can get inside before suspects can dispose of drugs.
Her friends and family members contended Johnston, who kept the gun for her protection, was a feeble and frightened woman who rarely ventured outside after dark. Her family says she was 92, while authorities say she was 88.
Hearing her door being kicked in, the elderly woman fired on the officers. Officers Gary Smith, Cary Bond and Junnier were wounded by either “friendly fire” shrapnel or by Johnston. No cocaine was found in her house.
Junnier later told federal investigators that officers had lied to a magistrate judge about sending a confidential informant to Johnston’s house to purchase drugs in order to get the warrant.
And, if the warrant to enter Johnston’s home was based on deceit, all actions that occurred after police broke down the door could be considered criminal, legal experts said.
Since we’re making political statements - ask some teens you know which is easier to get - pot or a bottle of good scotch. Drug dealers don’t check ID.
climber: right on! The DEA are a bunch of worthless robots. The war on drugs is a huge failure and should be stopped. Of course then we’d have alot of out of work agents and that would only bring more foreclosures! Let’s do it!
“Worthless?” Go say that to the families whose sons were killed in Mexico or Columbia trying to do what they think is right and enforcing what Congress (Yeah. You know. Those that were elected into office by…um….your families and friends.) has deemed illegal.
Truth of the matter is that particular household was doing something ILLEGAL and got busted.
I think you’ll find the families already know that the death of their loved ones was pointless.
Loafer
Please watch the movie Traffic. Good movie that looks at different viewpoints on the War on Drugs.
Having lived in Colombia for a long period of time, I can attest to the fact that the ONLY way to clean up this mess is to legalize drugs. It is simple economics really. As an illegal drug, the drug itself commands a huge price premium for the risk involved. Take that risk premium away, prices come down, and it is no longer an attractive venture.
Yes, there will be those that will be unable to control their drug intake, as there are those who over indulge in Big Macs, Budweiser, Cigarettes, or even houses…. All of them legal, all of them highly addictive, and all of them could eventually lead to broken families and death…
Spending millions of dollars spraying defoliant across Columbia is not only not the answer, it’s a ecological crime against humanity.
The War on Drugs has certainlly achieved something, Carlsbad Renter. We’re now #1 in prisions. Yeah, team! Key findings from a UK study:
● More than 8.75 million people are held in penal institutions throughout the world, mostly as pre-trial detainees (remand prisoners) or having been convicted and sentenced. About half of these are in the United States (1.96m), Russia (0.92m) or China (1.43m plus pre-trial detainees and prisoners in ‘administrative detention’).
● The United States has the highest prison population rate in the world, some 686 per 100,000 of the national population, followed by the Cayman Islands (664), Russia (638), Belarus (554), Kazakhstan (522), Turkmenistan (489), Belize (459), Bahamas (447), Suriname (437) and Dominica (420).
Internalize this Carlsbad Renter. We imprison a greater proportion of our population than any other country on earth and we have more prisoners than any other country on earth. Land of the free and home of the brave. And we have the gall to accuse other countries of being evil?
This is a consequence of bubble pricing that I had not really thought about before this story, but I believe we will hear more and more about people turning to crime to help them keep making mortgage payments on homes they cannot really afford.
We had a case like that one state north of me (New Hampshire) recently. A Vietnamese drug cartel bought a huge new McMansion and used it for growing pot. I don’t think anyone ever actually lived in the house; using the house as a residence was not these folks’ goal. From what I understand, the “buyers” used 100% financing and never made a payment. My guess is that they planned to clear out after they’d sold their stuff and default on the mortgage.
When drug dealers can use the credit industry to set up something like this, it shows just how badly broken the industry is.
“to pay their rent“?
(Snigger)
ohhhhhhhhhhh
The irony…
I caught that too - (unintentionally) hilarious. Quite a product you have there when even your salespeople won’t buy it –or can’t afford it.
Appleton-Young pointed out that buyers are taking on a high debt load at the same time that foreclosure rates are rising.”
This woman is every evil name in the book. I don’t know about anyone else, but if she can’t see the relationship between these two items, she is just plain (fill in the blank). I am so disgusted.
Sure, take on more debt than you’ll ever be able to payoff in a lifetime and then go into forclosure. Wash, rinse, dry, and repeat.
One things that never ceases to amaze me is how greedy these people are. She would rather get her big fat commission and whatever else, even if it means saying the right things or spinning them while others go broke (either through their own fault or catastrophe).
Sheesh!
OCDan,
As you have mentioned before, it is a sympton or the high level of greed in our country. Everyone wants to get rich and climb the socioeconomic ladder and it doesn’t matter if it is on the backs of others. There is no sense of delayed gratification.
I’m all for ‘getting rich’. But man, what ever happened to ADDING VALUE to get there?
People will sell their integrity and their soul to make an ‘easy buck’.
In SoCal…instant gratification isn’t fast enough for most people. They will do whatever (or whomever) to make an easy buck…or go into debt to ‘look’ important.
It is going to be interesting to see how all the ‘rich’ RE brokers fare with their $5000 mortgages and $1000 car payments when that ‘easy money’ stops flowing.
Also…the econoMISSED appleton-young is a moron. I have chronicled her ‘genius’ comments on my blog for a long time.
SoCalMtgGuy
http://www.housingbubblecasualty.com
“I’m all for ‘getting rich’. But man, what ever happened to ADDING VALUE to get there?”
********
I used to ask that question here in the Bay Area in the late 1990’s, when an incredible number of those worthless dotcoms were going public and making a good many “do nothings” worth a lot of money.
I think that era, and it’s signature “instant wealth” aspect (a greed factor), could perhaps have infected the rest of the country and our society… leading to what we saw in recent years in real estate.
Surely someday, a sociologist type will study it all and reach a similar conclusion.
The late 1990’s were an amazing time in the Bay Area, lots of stories of people getting rich and a highly optimistic buzz in the air. It was a fun and crazy time in a way and I am sure a lot of people wish those times were back, especially the hi-tech workers.
When EARNINGS per share were “old economy” and REVENUE per share became the “new metric,” I knew it was time to head for the door.
I was with a company that was about to go public - a going business that had gone from 60 to 250 employees in one year. A co-worker asked me how many shares I would buy. He thought I was nuts when I told him $1000 worth at most. He said, “there’s no way it can go down.” He was right… the bottom fell out of the market a couple months later. We never did the IPO. There are 30 people there now, scratching and clawing. Four of them bought the company for $1.
Have you heard of web 2.0, there ain’t no IPOs, but there plenty of dumb money venture capital and Google, Yahoo, Microsoft still can’t do basic math when buying out these clowns.
Some 56 ipos were issued many more were pulled and about 400 private companies were acquired.
The cost of IPO is to great in this day and age of SOX.
As for the late 90’s many that did get rich simple left the bay area. Once they saw the California taking 9.1% in taxes that was enough to leave for no state tax location.
I know a few that left for Florida (no State income Tax).
The game is more on private equity and not IPOs today. Thats a very exclusive club!
As bad as the .bomb era was, I do think there was value added in the end. Do I think it was a good use of all the money that was burned? No, it was absolutely awful.
But for a brief time, you did see a lot of creative ideas. Some of them were quite horrible, but it did force people to push the envelope. A lot of people spurning big business to join small ones, those small guys aggressively went after the big ones, and for a while, the big ones were very scared. The ending was predictable, but it was an interesting time if you can look past the wanton greed, arrogance, stupidity, and about…100 other faults by various parties.
But to me, the housing bubble is just lame. People passing houses to each other and upping the price each time. Folks getting cheap credit and buying overvalued assets and not understanding the risks of leverage. *yawn*. The only creativity in the housing bubble is financing, and even then, a lot of these instruments have been around for a while. Banks just lowered their standards for them and made them available to the mass public.
As a user, I benefited from the .bomb days through the energy and creativity of these hopelessly doomed companies. But some of the ideas still survived in more sustainable fashions. And the next generation did better in providing services to me in a more sustainable fashion.
Again, this wasn’t worth the huge amount of capital that was burned. I’m just saying that I think the US at least got something of value out of it.
But I’m not sure what will be gained from the housing bubble. Just a restoration of saner financing. Whoopee.
California is really that out of it? I have been there for vacation. Seen people spend money like water, there. Bothers me greatly that the Californians are so arrogant.
Trust me we’re not all like that. Many of us are saving money, renting, and waiting for our chance.
Those few of us that did not participate in this madness live quiet lives in the shadows of these pretentious idiots. Our day will come.
Yes, but in SoCal, that’s the small minority, and many of them are leaving.
SoCal Bubble
Yes thank you. I was one of the quiet renters, not living beyond my means, saving but still having a life.
However, despite how nice some people think Tokyo and Japan is, have never made it to the areas that look like third world slums or never start a REAL business here without hand picked Japanese partners. But I’m hoping to head back to California soon.
But I agree the greedy idiots that are ubiquitous have ruined alot of California. But I still can’t think of anyplace I’d rather live.
Tokyo’s Jusco and Porroroca cann’t compete with Trader Joes.
Trader Joes is the only reason I haven’t left California!
to bring up Trader Joes as part of making your life decision on where to live, you are one of those pretentious idiots. Renting does not clear you. I like trader joes too, but plenty of other places to live outside of trader joes commute.
That’s a little harsh, dontchathink, calling someone a pretentious idiot just because they like Trader Joes?
Blanket statement: not worthy of reply.
But I’m replying! D’oh!
There are Trader Joes stores in Massachusetts (though you won’t save much on your housing here, and, well, it’s 15 degrees and windy outside right now!) I think they’ve moved into some other areas as well, and the stores here carry the same stuff as the California stores. The employees even wear the same silly Hawaiian shirts, albeit with a long-sleeve T-shirt underneath at this time of the year.
There are rumors that TJs will be one of the stores in a new shopping center about 5 miles from my house (the other MA TJs are all at least 20 miles away.) I am licking my lips in anticipation! TJs was one of my regular splurges when I was in grad school at UC Irvine.
National Azabu compares well to TJs. I liked it so much I moved to Minami Azabu after 3 years in Tokyo
Appleton-Young pointed out that buyers are taking on a high debt load at the same time that foreclosure rates are rising.”
This woman is every evil name in the book.
Check the adds in the LA Times this weekend, Appleton & Keyser are speaking at a economic summit, tickets going fast!
I have seen a lot of short sale and REO ads here in San Diego, but I can’t figure out why banks are still listing at Wishing Prices. It’s not like they have a sentimental attachment to the home or care what will happen to the neighbors’ comps. So why the high prices?
If there are comps still to justify them, perhaps they think that they have some sort of duty to their shareholders to try to get the most value possible…
Bartolola? on CNBC interviewed some guy today who is coming out with an article tomorrow that HSBC Bank could be going under due to bad housing loans.
HKSB Hong Kong Shanghai Bank going under.? I doubt it very much. They have the Bank of China behind them.
Not HKSB-HSBC
U.S. stocks lower after HSBC warns on lending
Wal-Mart weighs on Dow; HSBC warning hits financial shares
Apology accepted.
Because once they start the write-down process, their whole mortgage portfolios will have to be marked down, then they’ll have to increase reserves as per S&P, Fed, etc. requirements.
GOOD COMMENT BECAUSE HERE IS THE ARTICLE JUST OUT:
HSBC to Boost Loan-Loss Provisions on Bad Mortgages
http://www.bloomberg.com/apps/news?pid=20601087&sid=apwzE_JBFFSg&refer=home
WOW. That is a huge development ! I wonder when MS and GS and Citi are going to get caught up in this ? Notice I didn’t say “if” !
Do they keep them on their books at a higher value than they are actually worth (as prices have been declining)? Maybe it makes the ‘books’ look good, and they hang on until they are forced to sell at a loss? Just conjecture.
As long as there are comps at a similar value to what’s on the books, they can justify it to the auditors/regulators. Expect plenty of mark downs by the end of this year. Banks will try to take the hit all at once, not spread it out over the course on many months/quarters/years. Not good for the stock price.
The same folks that made the disasterous loan are now selling the house. Does that answer your question?
LOL! Good point.
‘The market is going to have to find a way to add new buyers,’ How about cutting prices by 50% to start, instead of assuming everyone wants a lifetime of debt servitude. What an a@#hole!
Builders and Corp. have this stupid mind over matter nonsense they think since people don’t protest like in the 60’s at Washington’s doorstep we all turned dumb and will give in and pay their stupid prices for their junk houses. Yes many were blind but thankgoodness many came to their senses and said a resounding we have had it, either get your prices down or give us good dollar value like lot that isn’t 5K sq ft and you put a 4k sq ft house on it?
How about the RE-equivalent of shot-gun weddings? They’ll need something pretty strong to get people into the bottom of the pyramid now. And do they need them!!!! Without the first time buyers, the whole Ponzi scheme comes to a grinding halt.
I honestly don’t think there are that many people who are qualified buyers out there that have not purchased yet. I am no longer in the R.E./mortgage/appraisal business, but that is my thought. Otherwise, the RE industry would have found them and they would still all be making money.
Qualified buyer:
willing (ready to pull the trigger) - many of those
able (can qualify from debt ratio and credit standpoint) - few of those
and some of us who could pay cash are not going to
I can buy a house right now but why should I? In the areas I’ve been looking over the last 6-8 months prices have dropped over 60k. (San Diego) If I was to see any indication that prices will go up again I be right there. But I don’t and so I keep waiting saving money and watching the prices go down..
Signed,
A Qualified Buyer
I don’t think that simple price movements are a good indicator when to go back into the housing market as a buyer. It could be something similar to a dead-cat bounce due to lower mortgage rates or whatever. First, I want to see a clean-up of the lending gone wild and the establishment of reasonable mortgage standards, e.g. fully amortizing payments.
“I honestly don’t think there are that many people who are qualified buyers out there that have not purchased yet.”
And many who purchased the last several years could hardly be considered “qualified”. I think it’s time to abandon that term until the lending industry gets its act together.
“I honestly don’t think there are that many people who are qualified buyers out there that have not purchased yet.”
Recent foreclosure trends argue that qualified buyers were not as abundant the last few years as previously thought. Can’t imagine that’s changed much.
Maybe not loan related:
‘On a street of $1 million homes, 117 Woodsmoke Way in Folsom stands out as both a dream house and a neighborhood nightmare. At his home this week, Larrick was cleaning a chimichanga from his prized custom crystal chandelier. He said he was baffled by the accusations. He admitted there have been problems, but said, ‘We don’t have parties. There is no dope sold here and there is no dope in the house.’
“There is no dope sold here and there is no dope in the house.”
Hey Potsy-maybe a dope just OWNS the house.
A million dollars in FOLSOM?
yeah - wtf is that?
A chimichanga in a chandelier/ wtf is that?
Cleaning a CHIMICHANGA from his CHANDELIER? How the hell did it GET there?
I want to know why they’re so sure it’s a chimichanga.
Hmm, it is shaped like something else that is more common.
Pretty funny, I used to live in Creekside apartments maybe 400 yards from there.
Houses there used to run in the $400-$600K range.
““‘Nontraditional mortgages are not going away. They are just a part of the landscape now,’ she said. She said they can be beneficial ‘for younger Generation Xers and Ys entering the market with the need to stretch every dollar.’””
What is this “need” to stretch every dollar? How about being young, renting, having fun, and starting to save (401K, down payment for a house, etc.)? What kind of life is getting out of high school or college, and scrimping every penny to feed your ‘alligator’ (mortgage payment), with the risk that, if you have to find another job and move, you’re screwed (because of low to negative equity via “nontraditional mortgages”)?
I agree.
The willingness of the bicoastal people to commit to such large mortgages is frankly unbelievable to me.
Others asked in the last thread why does MN have expensive RE: the answer is obvious: we have incomes that can suppor it. We probably have the cheapest RE compared to any other metro area of our size with our income. (comparable sized cities: San Diego, Phoenix, Seattle)
But these coastal areas people are spending 2 and 3 times what we are here in flyover land, and yet your incomes are often less than ours, or imperceptively higher.
I’m astonished whenever I go home and see people in their 20’s and early 30’s spending $600k and above on a tiny starter home.
That was what put the nail in the coffin for us. When we went looking in 2003 for a home in my neighborhood (mission hills neighborhood of San Diego) and couldn’t find anything over 1,000 sq ft for under $700,000. Then we noted that we could spend 1/2 of that for a 2,000 sq foot home in the exact same neighborhood in Mpls (East lake harriet neighborhood) and make MORE.
Even at my income, I’d feel quezy with a $700,000 mortgage.
This simply cannot end well. for any of us.
yes, I understand that MN RE will fall too, but in the end RE here is AFFORDABLE for most people on a 30 yr fixed with 20% down, so the downward pressure here is less
I know several young couples here in Santa Barbara who have purchased $600,000+ condos and homes. They did it with interest only ARM’s. Now those loans are resetting and at least one couple I know gave up and let the bank take the condo. These people were all planning to sell before the reset and make a profit. Now, properties are selling for 2004 prices and dropping fast. People were buying as get rich quick investments. They believed that prices would always go up because “they’re not making any more land” and ” wealthy Baby Boomers are going to buy millions of homes over the next 20 years”. How could they go wrong? I thank God I didn’t have enough income back in 2005 to purchase one of those turd condos, or I might be stuck like a bug on flypaper.
Agreed.
We saw the prices of homes… and left.
A lot of people talk about GREED that motivated this mess
but let me tell you, as a prospective homebuyer in 2002 and 2003, there was a lot of FEAR too!
I also (at one time) believed “buy now or be priced out forever”
people simply said it as though it was true. and most believed. it was on the news, it was everywhere you looked… seemingly convincing arguments about why the housing appreciation was “normal”
We sure believed we were priced out forever… so we moved
now I’m glad we did.
(we bought here in Mpls, so we have downside risk in the coming crash, but we can easily absorb it if our house dropped 50%, and the dollar amounts aren’t so high so
Those are valid points. When my wife and I were looking at whether to move back to CA (specifically the ‘OC), I went to one of the money websites. The website had a city by city calculator that would allow you put in what you make and then it would compare to what you would need to make in other cities in order to have the same standard of living. Needless to say, most of SoCal was ridiculously high as compared to most of the midwest. And although we live in AZ, it is still cheaper than the ‘OC. And here in Scottsdale, it will fall harder and faster than the ‘OC, since for the most part everything here is second rate: ASU (not even scholastically ranked), job market (mostly built on illegals, construction and call centers), intelligence levels, amenities (no beach or snow).
Chrisusc - Go back to CA if you dislike it here so much. AZ has it’s issues, but it’s one of the youngest states in the Union so it’s going to take time to build the institutions that exist on the coasts. ASU may not be ranked overall, but many of it’s colleges are, and it is improving. U of A is a great school, too. The job market is not as dire as you make it out to be, and the cost of living here is lower even with inflated housing prices. I have many friends with very well paying jobs in engineering, technical writing, restaurant management, accounting and finance, etc. To imply that intelligence levels here are lower is insulting to me and all my well educated friends and family.
If you want beaches, move to the coasts and deal with the uber-inflated prices. If you want snow, move north. I was born and raised in Wisconsin. Snow is overrated. And real estate prices in the midwest (except Chicago which is insane) are lower because the jobs there really don’t pay anymore than they do here (I still have friends who live back there), and the taxes are through the roof. My grandparents used to pay nearly $4k a year in property taxes on their little 1200 s.f. house down the street from the airport that they built with their own hands for $5k in 1947. My friends in Chicago make about $30k more per year combined than me and my husband, but their condo association fees, assessments, taxes, mortgage payments, and other monthly expenses eat that up pretty quick. We live “better” than they do.
That all being said, the housing market here went nuts. Glad we bought our little non-HOA house in Tempe before that. Even if prices dropped another 50% we’d be well ahead. We can afford to live off my income alone if we had to. If people would learn to live within their means, and that they don’t need to drive a BMW, live in a McMansion, or own a 50″ plasma screen TV to be happy, they’d be fine.
Jen,
Chill out girl. Phoenix is a hell hole for at least 3 months of the year. Everything is brown and people have ROCKS in their front yard instead of grass. And blue Hairs drive 50 mph in the left lane.
The big kicker is that the traffic is getting like LA. There is a reason that Az is cheaper. I don’t think Chris was too far off base.
Hey Jen,
ChrisUSC is doing you a favor by telling everyone what a Sh@#hole Phoenix is. Keeps the equity locust away!!!
By the way everyone, Oregon REALLY sucks!!!
Hey, I’m chill. Just thought I’d point out that ASU provides many of us with a quality education which leads us to respectable, professional, well paying jobs that aren’t in call centers. Yes, you can earn more than $12/hr. in Phoenix. Just sayin…he sounds like he really hates it here. So why stay?
“Phoenix is a hell hole for at least 3 months of the year. ”
Ever been to Wisconsin? It’s frigid and gray for 6-8 months out of the year and humid and mosquito infested for 2 months out of the year.
Besides, we have grass in our yard. It’s that horrible Bermuda grass that would survive a nuclear blast. Hate it. Sucks down water like it’s going out of style.
Last time I was stuck in the fast lane I was behind some idiot in a Yukon talking on his cell phone, not a blue hair. Don’t see many of those in Tempe.
Mr. Fester - Ha!
I suppose you’re right. Heaven knows we have enough Californian transplants here who cashed out of their $500k+ shacks and moved here.
Sorry Jen, didn’t mean to upset you. I was pointing out that in many ways, AZ is not considered a tier-one location to live. That’s all. It doesn’t have oceans, beaches and the educational level is not top notch. You can’t seriously compare ASU with the top ten schools in CA or the top 20 schools in the midwest or the top 20 schools on the East Coast.
And since Phoenix metro isn’t a top locale, then the prices will drop faster than other prime places. Face it Scottsdale will never be Newport Beach/Laguna Hills and Tempe will never be and of the nicer locales in South OC, no matter how many overpriced condo’s they build. And by the way, the illegal alien diaper-filled stench of a water hole named Tempe Beach is not really a beach.
But I digress; assuming that CA can overcome the illegals (not sure if this is possible) and keep jobs, then at some price, most homes will be very appealing, and folks will move back there again. But AZ will unlikely never be as pricey as CA, and if it is, then there is a lot of bubble involved.
Again, I did not mean to put down Phoenix metro, other than to point out that it is not the first place most would live.
Did I even try to compare ASU with the top schools? Of course not. Did I even mention the “lake” and it’s fake beach? No. (I grew up a mile from the shores of Lake Michigan. I know what a real beach is.) Did I even argue that AZ property would become as inflated/expensive as CA? Not once.
Not the first place most would live? Hmm…we were one of the fastest growing metro areas in the country last year. Arizona unseated Nevada as fastest growing state. When I moved here in 1994, the metro population was around 1.5 million. It’s now double that, if not more.
California will always be appealing. No, Arizona will never be California. That’s fine with me. I wasn’t all that impressed with CA when I’ve been there. And if I want to go for some reason, it’s only a few hours drive away. Then I get to come back to my cute house in my nice neighborhood and my 15 minute commute.
I was born and raised in California, I live in Santa Barbara. I love my home state, but there are too many people here who are stuck up about being Californians (native born or otherwise). What makes a place great is the people, and what makes people great is humility and honesty. California is a whitewashed sepulcher, clean on the outside but filled with decay. What this state needs is a big 9.0 earthquake followed by a plague of fleas to bring people’s egos down to ground level. Arizona is O.K, it gave the world Stevie Nicks.
I wish I could base my whole identity on what school I went to. Call me USCDork!
What are the top 10 schools in CA? Stanford, CalTech, Claremont/Mudd, UCs Cal, UCLA, SD, Davis… Even if we count USC, that’s 8 schools… ASU isn’t on the same level as UC Irvine or San Jose State?
ASU is a Tier 3 school in USNWR rankings.
What was it Ned Flanders said… “Heaven’s easier to get into than Arizona State.”
It’s always funny to see people defending cities that everyone knows aren’t the greatest places on earth. We should do Cleveland next.
College rankings are only argued by young people and loosers. After a few short years employers are only concerned with what you have done lately. Phoenix, although thought of as a retirement location, is the youngest city I have ever lived in. Lower overall wages and housing costs give it a chance of becoming a destination for industry. Hot in summer. Unbelievable the rest of the year and no earthquakes, fires, or huricanes to drive up insurance costs. I wish I was 25 years younger.
For my undergrad I went to a “State” school. In grad school I was competing with people from “elite” schools like Stanford, various UC campuses, etc etc.. I was not impressed. Why was a little guy from “State” doing better on standardized tests and other academic measures than the snobs like ChrisUSC? In fact, many of us “State” guys and girls outperformed the elites on a regular basis.
Chris, do tell what secret knowledge they instill at these prestigious institutions. It has puzzled me all these years. Especially in light of recent studies showing high achievers do equally well whether they go State or Ivy.
I don’t think that this is entirely correct. I thought the findings (of whatever study this was…) was that the long-term performance wasn’t helped by your choice of school. However, short-term there was a career bump for going to a “top” school. But this bump only represents a few years out of your life and gets swamped by the next few decades of your life.
When Warm learns how to spell “loosers” then we can talk. LMAO.
“It’s always funny to see people defending cities that everyone knows aren’t the greatest places on earth. We should do Cleveland next.”
Want to see a place that isn’t so great? My husband and I went to Eastern Europe for a family wedding after the area had been devastated by the overflowing banks of the Danube River. I think most people in the US and other Western countries have it easy compared to the folks that eek out a living there. Hardly worth debating two American cities. It’s rather subjective. Generalizing about all the residents of a state by saying the intelligence level is lacking is just uncivilized.
Feel free to check my spelling. Although I warn you that my “o” key is starting to stick.
Exactly. And what is so “beneficial” to the buyer about living on the edge, with ~80% or more of your net income going to the ‘gator? Or ruining your credit for seven years after the Foreclosure/BK?
Oh, wait… I forgot: she meant beneficial to the BANKS… My bad.
““Even as many first-time buyers showed a willingness to take on higher debt, the overall percentage of first-time buyers fell, reaching its second-lowest level on record. ‘The market is going to have to find a way to add new buyers,’”
Looks like no more coal to stoke the furnace…getting kind of chilly in here without first time buyers to burn, eh?
This is going to require a lot of discipline to stay out of trouble. Just last week it was revealed Bush administration pressured scientists from making claims about human involvment in global warming.
What makes people think the same people aren’t trying to control the housing bubble? Lets face it the HB Stocks are in their own universe disjoint from reality current and foreseeable future.
‘The market is going to have to find a way to add new buyers,’”
Ummm… you mean like LOWERING THE F***ING PRICES?
That’s exactly what he means. The REIC already pulled all the other trick bunnies out of their hats. Nothing left to do but try to make some $$$$$ on the way down and get right back on the ride again.
For some reason this reminds me of my fiancee’s “Happy Bunny” socks. (Imagine this is said to a FB): “I like you because you’re stoopid.” (Yes, the socks spell stupid with a “oo” not a “u”.)
I just smile at this thought:
Home sales last year divided by GNP: 16.5%
Translates to realtor commisions being 0.9% of GNP.
Normal bottom for realtor commiisions: 0.3% of GNP.
Normal peak for realtor commisions: 0.6% of GNP.
Does anyone else think that commisions will bottom at 0.2% to 0.25% of GNP? Or nominall a quarter of current commisions?
I know several realtors. Quite a few I like. They are ready to go 2+ years sans income (and stay on their retirement planning track). Does that mean the majority can do that?
I need to grab a camera and blog all of the realtor offices shutting down in the south bay part of LA… (Large office buildings are suddenly sprouting “for lease” signs. Some still have desks, most do not.)
Sellers will lower prices. They just don’t know it yet. The smart ones already have. (Hopefully their buyer can get a mortgage and get them out.)
Got popcorn?
Neil
Aw, sellers don’t need to lower prices, we just have to figure out new ways to “stretch” those “dollars”.
C’mon baby, stretch! And one, and two!
When you stretch dollars they break in half and you have 2 dollars!
LOL
We could smuggle them across the border and force them into buying?
It is my estimate that the Inland Empire Region will experience 25 percent to 50 percent price declines during the cycle we are now in.”
We all predicated that the IE was toast. If it goes 50% only those that have lived there for 10+ years AND don’t have the 100K HELOC will be okay. The rest of 400K McMansion, HELOCED tripped out Escalades, can kiss it all bye-bye.
I am really hoping this happens to the Santa Clarita valley with all the over-building going on there! I am crossing my fingers!
No need to hope, just sit and watch
Well the people who are currently out here in Valencia sure as hell do not believe it. I can’t wait! Everyone here looks like they are in debt up to their eyeballs and are “just” making it. They are in for a world of hurt.
OCDan
My neighborhood in LaQuinta/Indio area is already down at least 20% from the peak. I expect it to fall at least another 25-30% from here, maybe more…
Lots of pimped out Escalades in the area too!
Jeez - that stereotype just happens to be true and it instantly puts me back there in the traffic and smog. Lovely daydream. Thanks for that!
I knew it was out of hand back in 2003 when they were selling homes on the Moreno Valley Golf Course for the mid $600’s. For those of you who dont know Moreno Valley, it came about from people moving from LA ghetto. And if you spend that much, your kids will still be going to school with gang bangers.
Location, Location, Location.
LMAO
Let the good times roll. As Warren Buffett said, ” Party on. It’s fun and when the clock strikes 12, everything turns back to punkins and mice”. The run up was caused by the lenders/bankers who dropped the loan standards with “no” oversight with their banking
lobbyist who lobby for this in order to create easier loans for the public to buy and supplied the “punch bowl” for all those to drink from. The realtors with their scriptured words offered the punch to as many as would listen and drink the “one in the lifetime” offer to buy now before it’s to late was a great success and especially put smiles on the lenders faces. Any surprises what is happening now? I think not.
Yep, all these financial agents made big bucks off the public and now comes the hangover. But those at the top of these firms have a pile of cash and aren’t too concerned.
Buffet warned… if you listen to his details its a bit scary.
But he is also investing. Ergo why I think “recession” not depression.
How many more hedge funds are going to fail?
Got popcorn?
Neil
Neil,
Rarely have I read such wise words in only four lines.
I agree wholeheartedly. It is going to be unpleasant, but everyone doesn’t need to buy tinfoil hats.
I think the Private Equity and Hedge Fund worlds have peaked, and that their decline/failure during a recession will take out the excess of global liquidity we have now.
House prices will do what they always do, and cycle down to 10-20% below long term trend before recovering in a few years time. This will cause significant foreclosure rates bringing pain to the Banking sector, but small as a percentage of all households.
Loafer
Loafer and Neil:
Nice comments and I agree. I hope the economy keeps chugging except for secular deflation in housing.
But, those well reasoned comments won’t get anyone riled up now will they?
“When put into perspective of a 10-year pattern, the downturn should have been expected based on the huge run up since 2002. No reason to panic if you purchased your home for the quite peaceful enjoyment of it.”
Unless, you can’t afford it, or you have to move, or …..
“Only the speculators and flippers and the last ones that purchased in 2005-2006 are in any trouble at all. The rest of us just need to continue to enjoy our homes, unless we were using it as an automatic teller machine.”
—- Like ?? % of the population, or if you’re in a business that relied on cash out refi money like cars and boars or ……
The only thing we have to fear is fear it’s self, unless there IS something to be afraid of, then we still don’t have to be afraid because big government will solve all our ills. Or if it can’t then who can blame me, every one else was doing it too!?
Love the way this genius uses 2002 as the year the “big run-up” started (actually closer to 2000, or 2001 in most parts of CA), but only those folks who bought in 2005-2006 have anything to worry about!
Yup, the bottom’s in. Only the gains from ‘05-06 have been wiped out (so far). But, hey, the bottom’s in, right?? Correction’s behind us, end of story. Nothing but blue skies and 20%/year forever in front of us (whistling past the graveyard)….
“No reason to panic if you purchased your home for the quite peaceful enjoyment of it.”
Alright, all you people who bought a house not for peaceful enjoyment please exit the room through that door, you’re hosed.
“Only the speculators and flippers are in any trouble at all…”
All you speculators and flippers, you’re royally screwed. Leave the room.
…and the last ones that purchased in 2005-2006
Okay, all you late-comers, yeah all you over there, get out, your screwed too.
The rest of us just need to continue to enjoy our homes, unless we were using it as an automatic teller machine.”
Damn it! The rest of you, OUT!
Crickets: Chirp chirp, Chirp chirp
LOL…..How can the REIC call alot of these short term sales of 2004-2006 sales of homes . The sale was not a success if the borrower goes into foreclosure ,the sale was not a success if the borrower is a speculator bagholder ,the sale was not a success if the house is vacant with weeds growing in the front yard with criminals lurking ,the sales were not a success if you had to cash back some crook a 100k to get the sale . I’m sick and tired of the REIC calling their paperwork “sales ” of real estate . I would call these “sales “paperwork exchanging hands without regards to qualifying ,true market value ,or honoring the promise to pay, or just call them gambling sales .
I have a guy in my office who is a part-time realtor who says things really haven’t changed much and people are still paying near asking price (Pasadena/Glendale). He says prices really haven’t gone down and really aren’t going to go down. He said there is still a lot of fraud out there with people paying $100k over asking and getting it “rebated” back. It’s this kind of talk that makes me depressed! I am so sick of hearing it! Even he admits there is nothing underneath the crazy price increases over the past 5 years.
Well, you do the math…houses aren’t going “down” but you’re getting 20% cash-back under the table.
*sigh*, all I can say is ‘wait’. LA is still being held up by credit based magic tricks (including fraud)…let the tightening sub-prime mortgages, the dwindling supply of first time buyer ‘kindling’, and the skyrocketing NODs do their trick.
I have to keep telling myself, the best places are the first to go up in price, and the last to come down.
I’m employing a strategy of patience.
“I’m employing a strategy of patience.”
It’s a winning strategy that will pay off in spades. The fat lady is humming here. I hear her on the other end of my phone everyday.
Come on, mrincomestream, give us a good story or two. It’s been awhile, and you’ve usually got some good ones.
Yeah! How about it?
I say: “mrincomestream stories for everyone!!”
It’s really nothing different then what I have posted on in the past or that Ben post’s here regularly. With me it’s just a case of name and address change now. The difference really is the frequency. Before it was errant now it’s becoming more and more consistent. However, I will be posting the more unbelievable stuff. Oh, and for those of you in the IE in case you haven’t figured it out yet. The IE is toast and OC is soon to follow.
I’d like to hear some stories…I don’t care if I’ve heard them before!
Report the fraud to Paladin reports starting next week.
http://www.paladinreports.com/
‘The market is going to have to find a way to add new buyers,’ said Ed Leamer, director of the UCLA Anderson Forecast
Hmmm, with a net population outflow - OUTMIGRATION - a growing trend, seems to me CA is caught in a squeeze. Existing population can’t afford the first rung and a lot of those already on the ladder are trying their best to get off.
I thought it was net population growth, but net “native californian” outmigration. am I wrong?
(specifically, illegal immigration is still overwhelming those who are leaving, by about 100,000 people if I recall correctly.)
I saw a statistic recently. It was one of the big moving companies that publishes a yearly(?) report on where they relocate people. I think CA was 47% in and 53% out. Obviously this doesn’t count the people in old vans with Baja plates……
Nor the 12-kids-in-tow + bun in the oven people.
“bun in the oven people”
That is so wrong.
“bun in the oven people”
That is so
wrongfunny.The pyramid scheme needs an army of suckers to fill the bottom row so those at the top can collect their loot and run for the hills. Right now EVRYONE on the pyramid is scrambling to get off. Pryamid scheme is busted and the pyramid’s caving in…
But, the jobs for non-Anglos are/were largely in construction. Some will go home to Baja when norteamerica fails to fulfill its promise.
what promise? you are promised the pursuit of happyness nothing more…
The U.S. Census bureau forecasted that CA lost 29,000 people last year. A net loss is a BIG and surprising number, and I was astounded to hear it, but it is not true. The state keeps their own, much more refined tally and it showed CA had a net growth in population. I belive it was 350,000 or so net increase, or 1% population growth. Not explosive, but steady. You are right that native Californians had a net out migration. The backfill came from births and immigrants. I don’t know if it counted illegal immigrants.
Babies don’t buy houses.
Either do illegals, for the most part. They may break into them or occupy but buy? With what?
Since when do you need money to buy a house?
You have to make the payments with something, and rent payments are much cheaper than mortgage payments these days.
Yeah but with a mortgage you get cash back to make the first few payments and you can buy a Hummer.
Bun in the oven people.
CA was +1.5M over the last 5 years ~ 300k per year.
53% was natural increase = births minus deaths
42% was net foreign immigration (I searched the report for the words “illegal” and “undocumented”, no hits)
and a whopping 5% was net domestic migration. That’s 15k per year. Soon there’s a condo in downtown San Diego for nearly all of them.
The loss is on net migration between states, i.e. more people moved out of California than moved into it. Like someone else said, I doub’t babies and illegal immigrants are current home purchasers. Another troubling fact is the largest numbers of babies are being born by the poorest families, so I’m sure that screws things up as well.
we are 24th out of 26 nations for competency in Math right now (according to tonight’s evening news)…..I will let you all figure out why we think there are so many morons and sheeple in those ARMs…..
There has got to be a relationship between the death of risk premiums and the decline of our education system. Why learn if you can just get a job building/selling/fixing houses? Why worry about your pension fund if MBS’ are risk free?
Yet we are 2 out of 26 nations in the most amount of money spent per student. Somewhere there’s a breakdown in the educational system that money won’t fix.
Leslie Appleton-Young said first-time buyers apparently thought the goal of homeownership was worth stretching their finances.
Gee Leslie, who in the world could have given them that idea?
“It’s really, really tough for the first-time buyer. The only way to just get in the door is to take advantage of the low-interest rates and the riskier mortgage instruments like the interest-only loans,” said Leslie Appleton-Young, the chief economist for the California Association of Realtors.
July 2005
“There is one thing you need to get declining prices —- just one —- you need too much supply,” Appleton-Young said. “You need more homes for sale than there are buyers.”
But the current inventory of housing for sale statewide is below the historic average, she said, and there’s no indication that this inventory will dramatically increase.
December 2005
Nice one, Rainman! Too bad no one –least of all the media– will ever hold her accountable for it.
‘I think when we look back at 2002 to 2005, appreciation was so strong that people couldn’t afford not to buy,’ Appleton-Young said.”
How in hell did this Simpleton-Young get her job? With this drivel that leaks from her lips. She strings out some of the most pathetic lines, she should be tarred and feathered and run out of town on a rail.
Ummm it’s called CYA
Right. And I remember when she was proudly describing all the new millionaires created every day in CA… praising those capturing their new found wealth and living the dream by equity harvesting.
What a POS. This bubble has dug a deep crater of debt and will ruin a lot more lives than anyone even here can imagine.
YOU UNDERESTIMATE MY IMAGINATION
How can someone not afford to go into debt? Does not compute
Maybe that’s the unanswerable question fed into the supercomputer that will force it to recreate the universe. Who knew realtors would catalyze the apocalypse?
“Two of every five first-time buyers relied on 100 percent financing. Association chief economist Leslie Appleton-Young said first-time buyers apparently thought the goal of homeownership was worth stretching their finances. ‘I think when we look back at 2002 to 2005, appreciation was so strong that people couldn’t afford not to buy,’ Appleton-Young said.”
Leslie - YOU BITCH! It was YOUR cheerleading that duped these poor bastards to leap to their doom.
“Only the speculators and flippers and the last ones that purchased in 2005-2006 are in any trouble at all. The rest of us just need to continue to enjoy our homes, unless we were using it as an automatic teller machine.”
NOW you tell me!
“Only the speculators and flippers and the last ones that purchased in 2005-2006 are in any trouble at all.”
Good, most of the people I know are safe.
“The rest of us just need to continue to enjoy our homes, unless we were using it as an automatic teller machine.”
‘Unless we were using it as an automatic teller machine’? Ruh roe! Most of the people I know are doomed.
Isn’t it grating your nerves to hear them now demean the very behavior they spent so many years extolling? Now where is all the money to keep buying all the shiny new things in the stores supposed to come from?
“The rest of us just need to continue to enjoy our homes”
Sounds like that happy talk realtor that used to post here…
“open the champagne, sit back and enjoy your new home!….”
…while it gently depreciates around you at at least 10% a year!……
Ben,
You ARE going to write a book right??? There’s just WAY too much good material here not to.
Ben, if you write a book, I want to buy it. Autographed, of course!
We call it the year of the professionals in 2007.’”
Yea, exactly what we’re calling it…
Now, how many homes are owned by these laid off people… Man, those alligators are very hungry.
Got popcorn?
Neil
Yes, many FB’s were in fact unexperienced real estate agents.
“We call it the year of the professionals”
More like the “Night of the Long Knives”
So true
“Invasion of the Highboy Snatchers” (repo the furniture first, before the house)
I was thinking more like what Bubba will call his new cellmates.
“Come here professional ”
I’m sure that’s the word he would use.
Got popcorn?
Neil
Holy Moly! Straight from the horses mouth..
Fannie Mae’s Berson: House Prices to Fall - “this year, next year and possibly the year after that”
http://www.marketwatch.com/news/story/housing-still-falling-midyear-bottom/story.aspx?guid=%7BD3228219%2D2D28%2D4B44%2D8796%2DE63E9AD525ED%7D
“I don’t think we’ve seen the bottom,” said David Berson, chief economist for Fannie Mae. …
“Real home-price gains, adjusted for inflation, will be negative this year, next year and possibly the year after that.”
Adjusted for inflation? C’mon now, really?
Since recent mortgage payments for Californians peaked at 22% higher than at the last cycle peak (around 1990), let’s add some realism to the situation.
Hmm, let’s see…
In San Francisco proper, let’s add at least another 3 to 5 years to his prognostication… maybe more. And perhaps 5 to 8 more years for Bay Area locations that can’t see Bay water.
For much of the rest of California, we can up to 10 years… more in the Central Valley or High Desert McShoebox communities, and let’s include Reno in that, too.
Ah… the realism of inflation.
It’s very possible that, after adjusting for inflation, house prices will NEVER return to their 2005-2006 peaks again in our lifetimes.
until the next time the banks go insane
‘I think when we look back at 2002 to 2005, appreciation was so strong that people couldn’t afford not to buy,’ Appleton-Young said.”
“‘Nontraditional mortgages are not going away. They are just a part of the landscape now,’ she said. She said they can be beneficial ‘for younger Generation Xers and Ys entering the market with the need to stretch every dollar.’”
I don’t know if anyone has seen this but I just happen to have some clips of Mrs. Appleton-Young before she became head of the CAR. Enjoy
http://www.youtube.com/watch?v=60UeYH1mZlA
LOL! You’ve gotta watch this video. Just sent it to a couple of friends.
LOL
the third clip where the team mows down the cheerleader is what’s in the process of happening now
“The steady increase in the number of people who have missed mortgage payments and received notices of default is cause for concern, Appleton-Young said. ‘You do have people, especially those who purchased in 2006 and 2005, who missed the big cushion of appreciation, who could get into trouble,’ she said.”
——————————————————————————
I find it so disgusting that these RE “experts” like Appleton-Young are never held accountable for their previous analysis. I seem to recall that back in 2005, Leslie was one of the most obnoxious cheerleaders for purchasing real estate by any means necessary. Now she gets to play the sage economist and point out her “concerns”.
I’m waiting for the day when the NAR will be regarded in the same class as Enron!
Lady, If’en I were you, I wouldn’t go waving that “big cushion of appreciation” round here too much.
Here tell there is a big bullseye on it… and I think I see “Auger-inn” commencing a running start…
those who purchased in 2006 and 2005, who missed the big cushion of appreciation, who could get into trouble,’ she said.”
—————————————————————–
so how does the big cushion of appreciation help? by refinancing. If you bought in 03 or 04 and have to refi your adjustable, you’re still screwed.
Someone please help me understand these numbers . . . this came out today. Lereah’s giving me a major headache.
“While NAR said sales of existing homes looked set to rise, it looked for further weakness in new-home sales. It said sales of new homes would come in at 961,000 units this year and 971,000 in 2008, both below the 1.06 million sold last year.
“New-home sales should continue to slide, but we look for that sector to turn around later in the year. When you put it all together, home sales may appear weak in comparison with the record surge in 2005, but they will be sustained at historically high levels that are in line with long-term demand,” Lereah said.
NAR said it expected builders to break ground for 1.52 million new homes this year and forecast 2008 housing starts at 1.56 million. Starts in 2006 totaled 1.8 million units.
Maybe I’m just a simpleton, but this looks like we acknowledge a demand weakness, but are adding to the supply problem. Econ 101 taught me that prices typically fall in that scenario?? I’m gonna go lie down now.
There’s a simple equation that you’re missing:
S-D/(EWTLH) X (INBABTTB)= projected appreciation
where S= supply
D= Demand
EWTLH= everybody wants to live here
INBABTTB= it’s never been a better time to buy
There! Headache solved
Oops, I made a mistake. It’s the converse:
(EWTLH) x (INBABTTB) / S-D.
Since EWTLH and INBABTTB are infinate, they need to be in the numerator!
silly me.
infinite
ugh
Isn’t TANMAML somewhere in the equation (They are not making any more land)?
you missed HPNGD - “Housing prices never go down” in the equation
also BBNOBPOF (better buy now or be priced out forever) in the numerator
New Century Financial warns of fourth-quarter loss and to Restate Financial Statements
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-02-07T222346Z_01_WEN3853_RTRIDST_0_NEWCENTURY-RESTATEMENT-URGENT.XML
NEW YORK, Feb 7 (Reuters) - New Century Financial Corp. (NEW.N: Quote, Profile , Research), one of the largest U.S. subprime mortgage lenders, said on Wednesday it would restate earnings for the first three quarters of 2006 and report a loss for the fourth quarter.
New Century said it also expected earnings for the first three quarters of the year to be reduced by the restatement, which is happening because of errors in how it accounted for losses on repurchased loans.
Stock is DOWN 9% in after hours. Finally some bad news that is not met with an up share PRICE
Crispy, what would I do without you to brighten my day. I directly reported to them over $200,000 in mortgage fraud on one loan. They opened an “inquiry, looked at it, felt it was O.K. and made 3 more loans at a combined $620,000 over market value. I was incredulous and called them back. I am now talking with their investagation division about all 4 loans. They are getting it now, since the first one is already in default. (Oct. funding) They are going to get blasted. There is do much fraud in their portfolios, it is goofy.
Why doesn’t LEND have a message board on yahoo?
No comment is good news.
At a time when congress wants to investigate subprime lending. We need a few CH 11’s here. That should get the ball rolling.
Now down 15.5%
TIMBERRRRRRRRRRRRRR
Make that 17% down.
Make that 18% down.
Hopefully this pulls HB down just in time for selling season.
Why didn’t republicans hold hearings on subprime lending practices?
This is America not some 3rd world outhouse. How could this happen here?
Do I hear 19% down? Yes I do.
Republicans don’t “DO” anything. That is the idea behind voting Republican…isn’t it?
Pretty much yeah. Basically if we leave the lenders and FB to rot and enforce existing laws on fraud then all this gets worked out. Basic (R) plan.
Dem plan will be raise taxes on all us renters to bail out the FB with gov junk loans.
About the fraud… Credit tightening legislation will prove unnecessary as lender lose their shirts. That will teach them.
Sorry, have to rant - what the hell is this? I mean there are multiple institutions that have been the conduits for lending all of this faux “new money” into existance now teetering on the abyss, and the Dow just keeps going up! I admit that I have never been a stock market ace, but I have no means to understand how the market is not even somewhat worried that there is trouble dead ahead.
Can someone enlightent me please?
I’ve been pondering this for a while too. The only thing I can think is that the markets are counting on increases in “efficiency” (i.e., jobs moving offshore) and rate cuts once the historic housing crash is front page news. From Ben’s posts, it looks like this will happen in 2007 or early 2008.
Plunge Protection Team.
Funny money being pumped into the stock market.
At least Ameriquest is private. But they have placed numerous Joe6packs in debt slavery while charging high fees and tranferring the risk to the MBS market. Ebenezer Scrooge would be highly impressed with this outfit. In fact, the President was so impressed he appointed the owner as an ambassador to the Netherlands.
Use a gun,go to jail. Use your head really well, and go to the Forbes 400 list.
HSBC reporting $10B on US Mortgage losses…ouch
http://money.cnn.com/2007/02/07/news/international/hsbc.reut/index.htm?postversion=2007020719
PPT will be busy tomorrow
‘According to Taylor and court documents in the recent cases: Growers paid up to $750,000 for houses in new subdivisions, usually obtaining 100% financing and putting no money down.’
No need for farming subsidies here.
California’s largest agricultural crop by a wide margin!
I’m just wondering how many buyers are out there. The boom sucked up a lot of the people and pressure to buy was immense. The sales rate was much higher than the normal average. Unless there is a big boom of need then where are the buyers supposed to come from.
Since the household formation rate isn’t going anywhere it would stand to reason that the rate of purchases would fall off substantially.
I’m just sitting on the sides here till this all works out. And of course stealing Neil’s popcorn
The fence sitters are getting psychological reinforcement daily that they were right not to take the plunge. With the Spring inventory explosion it will become obvious to all that renters can afford to wait longer than sellers.
As I’ve said in the past, I have cash and time. What do FBs/GFs have besides a mountain of debt and a stucco box???
Pergo floors and granite countertops.
It’s so nice to feel vindicated. It’s even nicer watching our once smug friends sweat and rationalize home prices right back to earth!
munch munch munch…
Oh, I heard my name.
Don’t worry, I share the popcorn.
And this is only February. What the heck are sellers so nervous for?
This is the time of year when we traditionally see high appreciation. Normally the buyers come out a few months before most people list their homes. Hence the expression “spring bounce.”
I’m about to rent a place that’s more than I would like. So I looked at the payments. Lo and behold, after tax, its the same as buying at $350,000 before repairs, purchasing ad-ons (free washer drier, etc.) and insurance (vs. 30 year fixed, today’s rates, etc.). (Yes, I did include principal pay down, 5-year timeframe pro-rated back to monthly.)
Can you even get a place with a tub for $350k in LA anymore?
I’ll enjoy that extra bedroom & bath… the view. Community pool, jogging path…
Do you think, like I do, that these newish townhomes were originally built for sale?
We’ll be waiting a while. But (thanks to my fiancee’s urging), we’ll enjoy life while saving money.
Got popcorn?
Neil
‘The market is going to have to find a way to add new buyers,’ said Ed Leamer,
—————————————————————————
I have an idea, how about open houses during the week, on MonTueWed etc, like the houses on my street have been doing.
Oh, right tried that.
Next idea?
I got it! How about dead buyers! It use to work for elections!
How about renting out the house for MonTueWed only, at 1/500 of its nominal purchase price. If you could do that every week you could pay the mortgage AND the taxes, insurance, and maintenance. What? You think nobody will pay $1000 for a couple of days’ rent? oops
lower prices? Nah, that just doesn’t make any sense.
Guys,
You’re forgetting sign spinners. They work for condos/townhomes, why not SFR’s?
Besides, what else are unemployed realtors ™ good for?
Got popcorn?
Neil
What are you all bitter renters talking about?!?! The bust is over! It says so right here… http://tinyurl.com/27phqr
I’m an English teacher waiting for the market to blow out, so I can’t really add anything intelligent to what most of you are saying, economics-wise. However, I can add a bit of UC-trained literary analysis.
If you take a look at the article linked above and pay close attention to the way it was written you’ll see a definite shift.
Ladies and gentlemen, please note the way the writer very carefully attributes EVERYTHING to the speaker. He doesn’t paraphrase (which only adds the ring of truth for less critical readers). He makes it extremely clear that he’s only repeating what this jackass had to say. Then, look at the title again.
I think the MSM cannot ignore this story (or treat it with kid gloves) for very much longer.
Sigh… then again, we’ve been saying that for a while, haven’t we?
(Impending whininess; you’ve been warned!) I just want to live in the town I grew up in without having to put 1.5 kidneys up for sale on the black market (which still probably wouldn’t buy me a stupid condo).
Rest assured, we’re waiting ’til the end of ‘08, and if this little article (and more importantly, this –unintelligible to me– economic news you’ve shared here) is a harbinger of the way things will change in the next 18 months, then it’s a good sign.
The worst that can happen is that the OC market stays flat, right?
(BTW, thanks guys. I was really effing depressed that I’m a teacher and can’t afford to buy a house even in the sh*tty area where I teach. I’m glad you all think that there’s hope for people like me who are squirrelling away every dime they can in order to plunk a big down payment on a drastically price-reduced home. Thank you all.)
Ben, I’ve said it before and I’ll say it again………..
In the “public interest” because the main stream media do not properly challenge the stupid statements that come from people like “the silly apple” and DL etc, I think you should issue press releases to expose their nonsense. I’m sure the people frequenting this blog along with your own resources would be enough to achieve the required result.
IMHO there are 1,000’s of normal Joe’s being led to financial ruin by these paid mouth pieces.
It’s very sad, and to think some of these victims could be our own sons and daughters.
FWIW
The idea of press releases sounds worthwhile to think about. Ben has the largest housing blog (by contributions? by views?), which gives him much more credibility than any Realtor would have. Would writing and distributing (weekly?) press releases fit in your strategy, Ben, both for earning enough money from this blog and for keeping the quality of it high enough?
“‘Nontraditional mortgages are not going away. They are just a part of the landscape now,’ [Leslie Appleton-Young] said.
Yeah, and that landscape is strewn with the bleached bones of all the FBs who drank LAY & Co.’s “buy now or be priced out forever” Kool-Aid.
You read this cr*p and it makes you sick that someone has the media ear and keeps daying such nonsense. Tell a lie and repeat it often and the public believes it. Man! This is just getting us into deeper trouble.
“The steady increase in the number of people who have missed mortgage payments and received notices of default is cause for concern, Appleton-Young said. ‘You do have people, especially those who purchased in 2006 and 2005, who missed the big cushion of appreciation, who could get into trouble,’ she said.”
The tortured syntax and logic this ginch is forced to come up with week after week must be an incredible brain-strain. What’s even more incomprehensible is the way newspaper hacks and editors give LAY and her ilk a pass on imparting such blatantly disingenuous “wisdom” to their readers. Can they really be that deep in the pockets of their NAR advertisers, or have they - like 99% of the sheeple - simply lost all capacity for reason and critical thinking?
Maybe the editor are people who have owned houses for a few years
I’d also note that people that have the equity cusion. Well, its erroding away so do you put the home on the market to try and lock in those gains? So, your house will hold its value as long as no one tries to sell. Good plan.
Are you still going in debt faster and HELOCing your way to zero equity? It can happen a lot faster than you think.
This ladys plan is for more and more debt. Where the heck does that lead? Hyperinflation or exhaustion of debt.
“Only the speculators and flippers and the last ones that purchased in 2005-2006 are in any trouble at all. The rest of us just need to continue to enjoy our homes, unless we were using it as an automatic teller machine.”
By all means, let’s keep the herd creatures in a state of bovine complacency, as the Judas Goats called the “RE experts” and their MSN border collies keep them moving down the primrose path to the slaughterhouse.
LOl.
Well the RE industry already got a bunch of unqualified buyers to buy . Lets see ,a bunch of crooks bought a fair share of RE with cash backs . Thousands of speculator are holding the bag on a property they can’t sell without a loss ,so they wont be buying .
The people who are going into foreclosure won’t have extra money to buy a second house . Ist time home buyers can’t make the FICO requirement anymore for a low down loan and can’t afford the higher prices anyway ….
I got a idea ….Why doesn’t the REIC buy all the houses ?
California’s housing slump is in part a result of conflicting expectations of buyers holding out for better deals and sellers still seeking a premium for their homes, a state Realtors group concluded. As the market began to slow, buyers sensed they could get better deals by waiting. At the same time, sellers still hoped to get a premium for their homes.”
“‘This drove a wedge between buyer psychology and seller psychology,’ the report said.”
I’m amazed there are no comments here on the incredible nonsense spewed in the quote above. Rather than deal with the reality of numbers CAR responds with an ability to read people’s MINDS. They know the psychology of buyers and sellers….apparently nothing fundamental has changed just “feelings”.
Now I know California is renowned for psycho babble but if this pile of crap isn’t the most blatent attempt to deny STUPENDOUS market realities of oversupply, fraud and unaffordibility I will jump in the nearest (frozen) lake.
This has to be a market turning point. When idiocy like the above is the best a “professional” group can come up with to try and rationalize their inherently irrational comprehension of real estate economics it CANNOT GET ANY WORSE.
My bet is the next stage is capitulation. They’ll admit they “don’t know what’s going on in the market”. That’s the best spin you can put on their history of lies.
Maybe I’ve read too many Realtor statements, but this one actually seems sensible to me? Aren’t they saying: “The psycology has changed, buyers now believe that RE can go down while sellers are holding on to their dreams of last years prices”? Obviously they don’t want to offend their direct customers (sellers) by saying “a lot of sellers HAVE to sell, but most buyers don’t have to buy, which is what’s going to drive prices down very soon”.
Yes, this is my experience right now. Went with an agent 4 weeks ago and chuckled at the overpriced nothing specials. 8 of the 9 homes we saw were overpriced ! on the market 10 MONTHS and no reduction. Some needed to come down as much as 20 % I thought. I figured they would laugh (or cry) at any reasonable offer we made. Sellers really are NOT accepting what is happening. Agents are pushy, defensive, and scared. Believe this - an actual email I received from an agent yesterday ” It might be a dog but if you could get it for $575,000-$590,000 that would be worth it as you could remodel using your family members so that would cut your costs and if you update it and live there 5 years you could double or triple the value.”
I’ll wait, thanks.
Wow, you could double or triple your value in five years? Where do I sign up?
Realtors: Real estate has already bottomed
Existing home sales have likely hit bottom and should rise this year, says National Association of Realtors, but new home sales should show further weakness.
http://money.cnn.com/2007/02/07/real_estate/realtors.reut/index.htm?postversion=2007020712
I don’t expect correction to be over till Bush is out of office, he will go to great lengths to not have a bubble show up on his watch. Otherwise, he will definitely contender for modern day worst president.
It’s too far gone for anyone to stop it. They could lower interest rates but it’s not going to help. The dominoes have already started to fall.
I wish.
But with all the deception and power abuse going on, we’re not talking about a level playing field here.
I would suggest a weekend topic such as: What kind of scenarios are possible/likely?
We’ve got the PPT, false CPI, GDP, employment numbers and pretty much any gov. statistic. Helicopter money. Conspiracy theories such as the (mortgage-) enslavement of the middle class. All that money that was made in RE has trickeled to the top. Are there someone waiting in the wings with tons of money?
Please - someone decide: Is Bush Gomer Pyle or Dr. Evil? The guy can’t be a bumkin and an evil genius at the same time… can he?
Gomer Pyle =lovable doofus.
Dubya is not so lovable.
Karl Rove =evil genius
Bush=puppet.
‘Please - someone decide: Is Bush Gomer Pyle or Dr. Evil?’
Cheney = Dr. Evil.
Dubya = Howdy Doody sitting on Dr. Evil’s knee.
Don’t you mean Mr. Bigglesworth sitting on Dr.Evil’s knee.
don’t you mean Mini Me?
*pinky to corner of mouth…
one MILLION dollars!
Looks like banking giant HSBC is reporting a $10B charge due to bad US mortgages:
http://money.cnn.com/2007/02/07/news/international/hsbc.reut/index.htm?source=yahoo_quote
And they expected $8.8 Billion. It is strange, this “we don’t care who gets screwed in these sub prime foreclosures, as long as we make enough income of the other FB’s to cover the loss” scenario. How about NOT MAKING THE LOANS AVAILABLE TO THESE IDIOTS who can not afford it.
Don’t make me call Barney Fife….er I mean Barney Frank.
20% higher for delinqencies than expected…more bad news is a given for the next earnings quarter as well…
” HSBC’s 2003 purchase of Household International Inc., which initially helped it boost profit as U.S. house prices soared, is now eroding earnings as defaults jump. Home loans to borrowers with poor credit ratings or large debt burdens are defaulting at a faster rate than during the U.S. recession six years ago, according to Friedman Billings Ramsay Group Inc.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aHwD8qUFOn6g&refer=home
Watch the stock go up! As Cramer says, Buy Buy Buy! Oh wait he is saying sell sell sell, which is why it goes up? down? oh whatever. The stock go up on bad news and down on good. That is when you know sh*t is about to hit the fan!
How about shutting down Fannie and Freddie and making the lenders keep their own loans? That would end this ponzi scheme in a New York minute
HSBC has been offering some of the best CD rates fora while and I have one with them maturing next month. Should I roll it over or take it out and buy HSBC puts?
A Career Adjustment for Carlos
Hey Ben.
Tim , this article tells me that realtors are well aware of what competition is ,so why don’t they understand supply and demand ?
NAR is trying to get people to buy RE and many uninformed people will pull the trigger in 2007 half way throught the correction.
The rest of us will just have to wait for the new lending standards to be put in place before buying.
A GROW OP? You should see Vancouver. They’re everywhere. Every time there is a bust…it excites very little comment. “BC bud” is where it’s at”, I’m told.
We will be seeing open panic here in california before the end of july.there are actual lending standards again! borrowers actually have to demonstrate some ability to repay their loan!!! with all the folks being forced to sell out of the very first wave of resets,plus all the folks counting on being able to sell this spring it is going to be special.I know a lot of “professionals” who took the short bus to real estate school and bet the house on continued appreciation.It will not be a silent spring this year,you will be able to hear the screams in the white house.
If your a prudent buyer I don’t think you should fear a tight money market . Much better to get a place at a lower price with lower taxes than buying during a mania where the money is easy but the prices are inflated .
How fake can the lending industry get to qualify people on some low teaser rate, that only lasts for 3 to 6 months ,than sock it to the borrower . Actually it was backmail . The lending industry was saying this is the only loan you can qualify for, so take it or leave it .Course the REIC promised that the borrower could refinance out of the cr-p loan once those borrowers made big appreciation on their property and you know how the CAR said “you can’t afford not to buy “.
I wonder if people were saying in June of 1929 ,”You can’t afford not to buy this stock on margin”?
Besides if you buy in a “tight” market you can always refinance when interest rates drop and you have built up some equity (even if appreciation is just slight).
If you buy high you can lose equity making it also impossible to refinance because of being “upside down”.
This used to be just called “common sense”. Not it appears that this is “secret knowledge” known only by the annoninted few.
Makes one wonder if IQs are dropping and we are “devolving”…..”Are We Not Men?”
they tell us that, we lost our tails,
evolving up, from little snails,
I say it’s all, just wind in sails,
r we not men?
“”You can’t afford not to buy this stock on margin””
Overheard in The Netherlands in 1636:
“Make up your mind, do you want to buy these tulib bulbs or not? ‘The ship is sailing’, everyone wants them, they aren’t making (much) more of them, and if you don’t buy them NOW, you will be priced out FOREVER.”
Another day, another sub-prime lender getting tough on guidelines. This time, it’s New Century.
In an email titled “Guideline Changes on 1st Time Homebuyers”, a New Century employee advised that effective immediately, New Century will no longer allow first-time homebuyers to finance more than 90% of a home’s value if their income documentation is considered “W-2 Stated”.
“W-2 Stated” means that the borrower’s income is not verified by the underwriter and the borrower is a full-time employee somewhere.
W-2 Stated is very different from “Self-Employed Stated”. When people are S/E Stated, it’s usually because their income taxes include write-offs associated with their business. This makes their reported income calculate lower their actual income.
With W-2 Stated, it is generally the exact opposite. Applicants (and their brokers/bankers) usually state their income higher than their actual income in order to help them qualify for loans.
This is a practice that is drawing scrutiny in Congress right now.
According to the email, New Century is making this change because W-2 Stated loan “are not performing well”.
What a shocker. People who overstated their income by 50% are unable to repay a loan that required an income 50% greater than their real income. Who woulda thunk?
test
My inbox is filled with angry Madison Wisconsin Realtors - tough crap…
http://madisonhousingbubble.blogspot.com/
Don’t know if someone has already posted this, and I haven’t read the article, but USAToday.com Money has headline “Predatory mortgages labeled a ‘crisis’” sorry no link.
http://www.usatoday.com/money/industries/banking/2007-02-07-subprime-usat_x.htm
i believe that’s the link you were talking about…here’s a quote from it:
Fannie Mae in a statement said subprime loans and bonds backed by the loans were 2.2% of its business, with short-reset subprime adjustable-rate mortgages about 1.5%. It has anti-predatory guidelines in place.
i’m not sure if i believe that…if it is true though, that means there’s a bunch of banks out there holding the bag that aren’t mbs’s
hmmm…gonna be a crush landing if you ask me
v/r
crush
Much of it has been sold to foreign schmucks. They sell us their cheap slave labor crap, we sell them our garbage bonds
Never mind. I read the article, “crisis” is term used by Senator Chris Dodd. I thought maybe it was uttered by someone noteworthy.
“‘Nontraditional mortgages are not going away. They are just a part of the landscape now,’ she said. She said they can be beneficial ‘for younger Generation Xers and Ys entering the market with the need to stretch every dollar.’”
CLICK. Let’s pull that snapshot out of Ben’s blog archive next January after the subprime meltdown has played out for over a whole year and see where we stand. I predict that a reversion of subprime lending to its historic market share close to 0% is in the bag.
I second your prediction GS. The secondary market will lose its taste for these loans after the foreclosure meltdown .
Somebody was talking about the Feds lowering the rates to 0% to save the real estate market . So what if the rates went to 3% fixed and 1 % adjustable .There would be such a refinancing wave that the lenders couldn’t even handle the volume . But the big question would be what investors would tie up money for 30 years or even 10 years at rates that low ?
The Fed could go to 0% on overnight rates, but they don’t control the long rates. The state of the economy and inflation will determine the long rate. At this point, lowering rates would be like pushing on a string. There just aren’t enough buyers out there to suck up the inventory. The flippers have been burned. The MBS buyers have been burned.
You are spot on GS. How many times do we have to hear complete BS from the RE schills based on nothing more than what they hope reality is. How many times does GS have to be proven right in contrast to LAY or DL or GW or any of their baseless assertions, predictions, or whatever else they are lying to everyone about? I guess the number is equal to the steps on the ladder down to the capitulation point. How do these folks sleep at night? I sleep just fine cause I “GetStucco” to read and believe. Thanks GS.
Subprime Meltdown Summary and a few new rumors!:
http://bakersfieldbubble.blogspot.com
http://www.statesman.com:80/business/content/business/stories/realestate/02/08/8housing.html.
What does one do?……laugh or cry?
Drool.
It shouldv’e been expected … and when we were saying (you bloggers in particular …) its going to crash, its too high … its all fake demand and its all fake estate … what did “they” say … I’ll tell you what they said, … they said, “shut up you bitter renters” my house will appreciate 10% YOY ad infinitium …
Cool.
Cow_tipping.
“”Two of every five first-time buyers relied on 100 percent financing. Association chief economist Leslie Appleton-Young said first-time buyers apparently thought the goal of homeownership was worth stretching their finances.”"
40% of first time buyers are doing so with 100% financing. This is very significant, and probably the biggest risk factor in this market. 100% iinancing pushed prices to their peak and sustained the bubble. In a declining market, it causes the most delinquency/forclosures. This is based on my experience with FHA/VA loans in the early 90s (The 100% LTV loans of that time.)
The “Predictions” article calling for a recovery by year-end reminded me of this chart,
http://bigpicture.typepad.com/comments/2006/11/19271933_chart_.html
and to always, always, look more closely at the messenger than the message.