“It’s Like A Snowball Going Downhill”
The Kalamazoo Gazette reports from Michigan. “Home sales in the Kalamazoo area will remain fairly stable this year compared to other parts of the state and country, a seasoned real estate professional and statistician says. ‘Even by my worst projections we will do better this year than in 2002 (when 4,443 units sold), and that was a really good year,’ said associate broker Woody King.”
“King said he hears multiple complaints from sellers that their homes aren’t selling quickly enough and their listings aren’t generating enough potential buyers. That’s reflected in turnover analyses showing that current listings in the $100,000 to $200,000 range represent close to a year’s inventory.”
“‘The average buyer has twice as many houses to look at as he did two years ago,’ King said. ‘The problem is, they’re not looking at as many houses.’”
The Star Tribune from Minnesota. “The rapid rise in foreclosure rates in Minnesota has lawmakers looking for ways to crack down on abusive lending practices. But some mortgage brokers argue that the proposed new guidelines, expected to be introduced in the Legislature in several weeks, are overly restrictive.”
“Minnesota has the nation’s highest home ownership rate, 78 percent, but its foreclosure rate jumped 46 percent last year, according to RealtyTrac. More than 2,000 homes in Minneapolis and St. Paul went into foreclosure last year, according to sheriff’s records. Cities and counties across the state are seeing record increases. Much of the concern centers on subprime loans.”
“‘State officials ought to step up,’ said state Rep. Karen Clark. ‘You look at abuses and fraud we’ve seen in Minnesota and what it does to individual people involved, what it does to the communities involved, and what it does to people’s confidence in the integrity of the market. A destabilization of the mortgage market can have a huge impact on our economy.’”
“Pat Martyn of the Minnesota Association of Mortgage Brokers, and others say foreclosures are costly to their industry, about $50,000 per home by some estimates, and that market forces eventually will make it too expensive for inappropriate products to be sold to inappropriate borrowers.”
KARE 11 from Minnesota. “Last month alone 436 Hennepin County homes were sold at sheriff’s sales, a modern day record, and more than three times as many foreclosures as in January two years ago. Ramsey County’s 172 foreclosures also set a monthly high.”
“That comes as no surprise to John McEnaney, who nearly added to the statistics himself. John purchased his home in Mound with an adjustable rate mortgage. He thought it made sense at the time.”
“‘By getting the ARM I got the better interest rate,’ he said.”
“But when interest rates rose his mortgage started adjusting. Over three years his initial interest rate of less than 8 percent rose to nearly 12 percent. The increase in John’s monthly house payment: nearly $900.”
“He had planned to refinance; but then lost his job. Without help from a friend and a community agency John would have lost his house too. ‘Once it started adjusting it’s like a snowball going downhill, it just gets worse and worse and worse,’ McEnaney.”
“Credit counselors place much of the blame for rising foreclosure rates with non-traditional mortgage products. ‘Consumers really have to watch out because there’s a financial incentive to sell them loans,’ said (credit counselor) Darryl Dahlheimer.”
MyFox Twin Cities. “Jon Falk’s Falk’s $400,000 condo in downtown Minneapolis has been stripped clean. It had once been the building’s showcase model, upgraded with designer furnishings, art and a home theater worth tens of thousands. Now, all of it’s gone. Video from a security camera shows a man carting it away on the freight elevator.”
“‘I met a realtor out partying,’ Falk said. ‘She goes, ‘There’s a deal I got if you’re interested’.'”
“That realtor is Mickey Wong. It sounded like a very sweet deal. He’d get $4,000 just for signing his name. Falk says Wong arranged for him to buy the Minneapolis condo in his name and then transfer the property to a man who would actually pay the mortgage. That man calls himself Jesse James Holliday. Holliday is a loan officer and licensed real estate agent.’”
“‘All of a sudden I’m a half-million dollars in debt, like that,’ Falk said.”
“A lot of things happened that Falk says he never expected. The property never was transferred out of his name. Someone lied on his mortgage application, claiming his income was three times what it really is. And they didn’t mention that he already has a mortgage on a home.”
“‘There’s no way I should have been approved,’ Falk said. ‘Someone fixed this. Someone had to. This isn’t my signature.’ Falk says that someone had to be Jesse Holliday.”
“After the deal closed, Holliday moved into the condo, but he never made any of the monthly payments. Now, the bank is going after Jon Falk to the tune of $400,000.”
“Holliday was convicted last March for using stolen identities to open up credit card accounts and buy a car. He got his victims’ financial information while working at a mortgage company. Holliday eventually did talk to FOX 9 by phone. We wanted to know how John Falk, with his modest income, ever got approved to buy a luxury condominium.”
“‘We didn’t verify anything,’ Holliday said. ‘He’s on a stated asset, income verification program. He stated to us what he made annually, we write that on the application. We’re not police officers.’”
“Both Holliday and Mickey Wong say the condo deal was legit. So what was in it for them besides a place for Holliday to stay? As real estate agent and loan officer they were in line to collect thousands of dollars for putting the deal together.”
“So who was the man on the security camera moving furniture out of the condo? Holliday says he took the stuff because it was his. He claims Falk sold him tens of thousands of dollars worth of furnishings for just $4,000. He says he won’t give it back unless ordered by a judge.”
“This FOX 9 investigation got the attention of the state commerce department. Jesse Holiday is now barred from ever working as a loan officer again, but he is also a licensed real estate agent.”
“KARE 11 from Minnesota. “Last month alone 436 Hennepin County homes were sold at sheriff’s sales, a modern day record…..”
We laugh at that total of forclosures here in SoCal….
all the foreclosures are direct result of subprime loans. when i think about the subprime market i just laugh. it’s like going down the street and start handing out cash to homeless strangers. doh, no wonder the banks are losing billions.
Subprime Mortgage Bond Risk Surges, Credit-Swap Index Suggests
By Jody Shenn and Shannon D. Harrington
Feb. 8 (Bloomberg) — The perceived risk of owning low-rated subprime mortgage bonds surged today after the two largest U.S. lenders reported growing problems stemming from the loans, an index of credit-default swaps suggests.
An index used to create swaps based on 20 BBB- rated bonds sold in the second half of 2006 and consisting of home loans to the riskiest borrowers fell 2.3 percent to about 88.5 today, the lowest since it was created Jan. 18, according to Deutsche Bank AG. The so-called ABX index was down 10 percent before today.
HSBC Holdings Plc, the world’s third-largest bank, late yesterday said more of its U.S. home mortgages were going bad than it expected. Irvine, California-based New Century Financial Corp. said it would post a fourth-quarter loss, restate other 2006 earnings lower and make fewer loans this year.
“People are observing that New Century and HSBC are saying that their loan performance is worse than expected and translating that into a broader statement,” said Andrew Chow, who manages $6 billion in asset-backed bonds and their derivatives at SCM Advisors LLC in San Francisco.
Implied premiums for bid prices mean investors must pay about $775,000 per year to protect $10 million of bonds, according to Deutsche Bank. Dealers set premiums on the contracts at $389,000 when launching it last month.
Countrywide Financial Corp., Lehman Brothers Holdings Inc. and RBS Greenwich Capital Markets Inc. last year underwrote the most “home equity” asset-backed securities, which are mainly subprime mortgage bonds, according to newsletter Inside MBS & ABS.
Shares Tumble
Shares of New Century tumbled 28 percent, the most since October 1998. Shares in rivals such as Fremont General Corp., Accredited Home Lenders Holding Co., Fieldstone Investment Corp. and Novastar Financial Inc. also plunged.
Subprime mortgages, which typically have rates at least 2 or 3 percentage points above safer “prime” loans, are given to people with low credit ratings or high debt. They made up about a fifth of all new mortgages last year and about 13.5 percent of outstanding home loans, up from about 2.5 percent in 1998, according to the Washington-based Mortgage Bankers Association.
Trading volume centered on an index in the previous ABX series linked to 20 BBB- bonds from the first half of 2006, which fell about 2 percent to 86, according to Peter Fitzpatrick, co- head of asset-backed credit-default swap trading at broker GFI Group Inc. in New York
“If it’s not the record, it’s pretty close,” he said.
Supply and Demand
The ABX market has been driven more by supply and demand issues than the concerns of all bond investors in the past three months, according to traders, investors and analysts including Peter DiMartino at RBS Greenwich in Greenwich, Connecticut.
“There’s little you can take from the ABX and infer to the cash market,” DiMartino said in a Feb. 7 interview. “Show me where in the housing market prices have declined or depreciated as much as one would infer by looking at the ABX.”
Federal Reserve Governor Susan Bies said last month regulators are particularly worried about lenders that added layers of risk by combining low down payments with low documentation, or with interest-only loans that allow borrowers to skip payments and add the sum to the total amount of the loan.
The Fed added a special set of queries on bad loans to its regular quarterly survey of senior loan officers. The Feb. 5 report found half expect credit quality on non-traditional mortgages, such adjustable-rate and interest-only loans, to get worse in 2007. In response, more banks tightened lending standards in the past three months than in any quarter since the early 1990s, the survey said.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on the odds the debt will be repaid. Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates.
Why can’t the MSM or the experts whom they quote get their brains around the implications of the subprime implosion?
“…like going down the street and start handing out cash to homeless strangers…”
You say this as though to compare the situation at hand to a preposterous straw man. Some of us who have read here for a while will recall the story of the homeless guy in Florida who managed to qualify for loans to purchase several homes.
“Even by my worst projections we will do better this year than in 2002 ….”
This blog foresaw that tactic a long time ago. As the numbers get worse, move the bar backwards.
Exactly…push the bar back…back…back…and the further back you push it, the better the current numbers look. You can dress a dog up like a chicken but you still have a dog in the end.
MI has an even more special problem than the rest of the country. They have VERY high unemployment and a governor that’s pushing new taxes as we speak. That’s not the way to get jobs back to the state. When people aren’t certain about their future they don’t buy houses!
I hear that Al Franken is running for US Senate in Minn. Let’s get Springer and algore in there also.They will say you descriminate when you don’t approve a home loan for an broke illegal alien ,if they are elected. I can’t laugh at the financial ignorance and stupidity of the electorate. Heaven help us.
I can’t speak for MN as I don’t keep up on politics there. I used to live in MI and follow it closely. I’m very thankful that I’m not selling property or looking for a job there right now…let alone putting up wit that cold snap!
Bogus. I know Al and he is very conservative financially. Unless you can post some evidence, I’d suggest you post your smears elsewhere.
Hey Pismoclam, let’s think a little deeper. Who has been running this country into huge debt for the last 6 years? I used to think the term ‘conservative’ actually meant what it said, but no more. On another note, I am currently in New Zealand and will be returning to the US in 2008. Housing thoughts (Washington, Oregon - I’m a wine maker)?
I sure hope that’s directed at pismoclam and not me. I don’t come here to discuss politics…just real estate.
Hey Spike,
How about taking your own advice. Why don’t YOU post evidence that you know Al Franken. More important, post evidence that he is financially conservative.
Ok JCM,
known him for years as a member of the 87th street dog run. His lab Kirby and my mutt mugsy were puppies 7 years ago and still hang today. Al’s from middle class folks in MN, Franny is from country folks in Maine.His son’s still at Princeton as a senior, his daughter graduated Harvard, and has been a schoolteacher in NYC for 3 years. Guy is cash only–claims to be the only harvard grad without a cc card. Also an avid bike race. If you’re hoping I’ll give you a ss# so you can broker a voodoo mortgage fraudulently, dream on.
Al and Franny are in MN, Kirby’s in NY with his daughter.
Franken mentioned on his radio show that he invests like a retired schoolteacher. He sounds thrifty, despite having plenty of dough. Hopefully, he would also be just as careful with the public’s dollars.
Of course, his Mom was a realtor, but we should not hold that against him.
” When people aren’t certain about their future they don’t buy houses! ”
Well, we know that’s not true. Buying houses has become the new economic model for the past 5 years. Buy, cash-out refi, flip, buy again, cash out….
“Even by my worst projections we will do better this year than in 2002 ….”
This blog foresaw that tactic a long time ago. As the numbers get worse, move the bar backwards.
Lesse 5 years ago… ok… just sixty more loan payments until 2012!
“Holiday is now barred from ever working as a loan officer again, but he is also a licensed real estate agent.”
He was lucky to have multiple licenses to steal, but at least he still has one of them.
Yeah, he can probably still work remotely and do some “deals”.
LMAO
And it figures that it would be the real estate license.
“‘I met a realtor out partying,’ Falk said. ‘She goes, ‘There’s a deal I got if you’re interested’.’”
Dude, get some better opening lines before trying to score tail at the clubs again.
Jesse James….? is no Police Officer……his name says it all! OMG, this train wreck is just getting started!
No big Bomb… more like millions of little “Jesse James” cluster bombs ready to pop far and wide. The Real Estate fraud … so plain in sight is so overlooked by goverment. Wont matter if its demo or repub! Both promise the same thing— house in the burbs and chicken in the pot, you get the marked up bill later… Its all corrupted!
I wish I could have tape recorded when the mark was telling all his buds how he made the easy 4 grand and couldnt wait to do it again. You know it happened. What a toad. Unclean hands Falk.
‘He’d get $4,000 just for signing his name.’
Right, how does this guy got to the police when he expected to get $4,000 for doing nothing? Enjoy your half a million dollar alligator.
“After the deal closed, Holliday moved into the condo, but he never made any of the monthly payments. Now, the bank is going after Jon Falk to the tune of $400,000.”
HAHAHAHAHAHAHAHAHAHAHAHAH He deservers the problems it will take to clear this up. And I guarantee it will cost this dip$hit more than $4,000
Imagine that, there’s been fraud everywhere. Not just on the coasts, but in mid-America, too. And that fraud has artificially increased comps, causing other buyers to overpay. This bubble was built on credit, and that credit was available nationwide. So, while there will be variations in how far prices crash, the prices will drop everywhere. And for those (usually REIC) people who claim that it is different in their burb - they simply don’t understand (or won’t acknowledge) what really happened to real estate since about 2000.
–
For the record:
I coined the term Scam Options in 1998 — while sitting at my desk at Cisco Systems!
I coined the term Bankrupters and Frausters in 2002 just as the Housing Bubble was broadeninf from SoCal to other parts of CA and to other states.
The fraudulent nature of our financial system has been very onvious to me ever since the tech bubble.
Jas
Well Jas the equity boom in mid 90’s peaked in 99 with many IPO’s… this in turn created a “Asset” bubble which I heard first coined from the founder of Business 2.0. That turned out to be in 2000 the “housing bubble”. We had RE bubble here since dare I say ~ 1999. Best values are reflected around 1998… At best we need around 50% or more haircut to get back into normal market. As Businessweek pointed out, SF Bay Area is heaviest with Toxic Loans than any other city…
Right here in Silicon Valley I saw homes which sold in 1998 for under $190K selling two years later for nearly $500K… As of today we saw them at $700K… oddly enough looking at local zip codes the median have actually leaped even further from mid 2005 and have been flat…
Very little makes sense in SFBA…
http://www.zillow.com/Charts.htm?chartDuration=5years&zpid=19557842
There’s been concern about RE fraud in Minnesota ever since this bubble took off. Back in 2001 the local media was doing stories about ‘flipping’ which is illegal here - collusion between unscrupulous real estate agents, sellers, lenders, and appraisers to acquire a house, falsely inflate its value, then sell it to a sucker. Problem is, we’ve been under a Republican administration here which has a strict hands-off policy when it comes to enforcement of consumer and labor laws. As a result, the Department has refused to investigate almost every report of RE fraud submitted to it, weakly excusing their inaction on the basis of insufficient staff.
And that’s why the new Democratic State Attorney General is making this a political issue - because while the Repubs were in power, they turned a blind eye to this problem.
Hello Homoaner, thanks for some elucidation about my new home state. Could you tell me which part of flipping is illegal in MN? (Buying many houses is certainly allowed and lying about owner occupancy is illegal everywhere.)
I don’t think it has to do with politics. RE fraud is going on all across the country and everyone in power is turning a blind eye or being paid off. The worst state of all is California. Their Attorney General is Bill Lockyer, a Democrat. The REIC has greased both corrupt political parties.
I thought Jesse was Governor back in 2001??
‘By getting the ARM I got the better interest rate,’ he said. But when interest rates rose his mortgage started adjusting. Over three years his initial interest rate of less than 8 percent rose to nearly 12 percent.’
He got the better rate alright, better for the lender.
A state dumb enough to elect Jesse “the body” Ventura governor has plenty of potential for stupidity.
I thought Jesse was great. A collective Ef You to the Repubs and Dems. It’s too bad the rest of the country, for the most part, doesn’t have the same balls (and collective wisdom) as MN.
He was a little abrasive but I like that in a governor.
I remember an ARM being explained to me as something that would lower my monthly payment. To that mortgage lending officer I said, “At FIRST it does. Then your payment goes higher.”
FYI: I insisted on a 30-year fixed rate mortgage, and that’s what I’ve got.
FYI: I insisted on a 30-year fixed rate mortgage, and that’s what I’ve got.
30-yr. fixed? Feh. Boring. Predictable. Zzzzzzzzzzz.
What’s the matter with you, Slim…don’t you know what you missed? With an ARM, you could have seen your monthly payment balloon to amounts you had never anticipated…and then on the verge of losing your home, you could have filed suit and told the judge you didn’t know the interest rate would change, ’cause you, y’know, trusted the Mortgage Broker…and then you might have heard your Lender explain how the copier trimmed off the critical word on your loan docs…and in the process you would have become a media darling!!!
It could have been, you know - fun!
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Ben,
Do people remember that Alan Greenspan made comments, in 2005 I believe, to the effect that it is better to take ARM mortgages than the traditional 15/30 year mortgages?
Jas
Fleckenstein was on the case:
http://moneycentral.msn.com/content/P73977.asp
Ya gotta love Fleck, he’s been sounding the alarm for quite some time now.
My jaw dropped when I heard him say that. My friend used that argument from Uncle AL. I reminded him that it would cost him everytime he refi’d and all that suppose’d savings would be paying the broker over and over and over and he would still be no closer to owning his house.
here you go (original MSM article no less)
Whatever you do, don’t let the significance of the date of the article mislead you because cause good ‘ol uncle Alan started rasing rates in in june 2004 (three fed meetings later)
Is it a sin to Tar and Feather an 80 year old man
2004 - remember it like yesterday because that was the straw that broke my back as far as having any faith that TPTB gave a damn about anyone other than themselves. Disgusting, criminal, deceitful advice if I ever heard it. 2004 was exactly the WRONG time to be going with an ARM.
People on this board take that quote from Greenspan all the time while forgetting the context.
Greenspan’s point was that given the patterns of how frequently homeowners in the US stay in one home (and there are many who move every 5-7 years or less), there was a substantial segment of people paying a higher rate for a 30 year fixed (i.e. taking a higher rate and keeping all of the interest rate risk with the lender), but not getting any of the benefit.
He wasn’t recommending ARMs for everyone. He wasn’t recommending moving every 5 years. He was observing actual data and commenting that a bunch of people were paying for something they never used. Now how his quotes were interpreted by the MSM…..
Please don’t justify Greenspan’s idiotic comment. No excuse for that, period!
Have you ever read the actual testimony cashonlyplease? I have it below:
I think the key phrase is at the end, ” To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks” … in other words, it’s still up to each homeowner to figure out if this is right for them. Also, at the time he made these comments, there was a large spread between a 30-year fixed and the 5/1, 7/1, even 10/1 ARMs amortizing over 30 years. If the situation was right for you there was money to be saved.
Fast forward to today, the spread between the 5/1 ARM & 30 year fixed is tiny. It’s worth a whole lot less to take on some interest rate risk today.
http://www.federalreserve.gov/boarddocs/speeches/2004/20040223/default.htm
“One way homeowners attempt to manage their payment risk is to use fixed-rate mortgages, which typically allow homeowners to prepay their debt when interest rates fall but do not involve an increase in payments when interest rates rise. Homeowners pay a lot of money for the right to refinance and for the insurance against increasing mortgage payments. Calculations by market analysts of the “option adjusted spread” on mortgages suggest that the cost of these benefits conferred by fixed-rate mortgages can range from 0.5 percent to 1.2 percent, raising homeowners’ annual after-tax mortgage payments by several thousand dollars. Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade, though this would not have been the case, of course, had interest rates trended sharply upward.
American homeowners clearly like the certainty of fixed mortgage payments. This preference is in striking contrast to the situation in some other countries, where adjustable-rate mortgages are far more common and where efforts to introduce American-type fixed-rate mortgages generally have not been successful. Fixed-rate mortgages seem unduly expensive to households in other countries. One possible reason is that these mortgages effectively charge homeowners high fees for protection against rising interest rates and for the right to refinance.
American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.”
No people on this board know exactly what was meant and are smart enough to use ARM’s properly. The bad part is it was replayed for the MTV generation on MSM shorts that only played the part that got all these dumb a$$’s were they are today…crying about ARMS and prepay’s. He never should have said it period. He is NOT paid by us to give the masses financial advise, especially since he doesn’t understand Joe6pack, he is paid to keep the USA in the money and by trying to lecture Joe6pack he has now screwed up the USA in the money. Written as dollar falls, and falls, and falls…
Greenspan is a moron. Actual economists know very well what people are paying for: it’s security.
It’s well known in economic theory that if there is higher chances of fluctuations then people will demand a higher return. When it comes to a loan, this means that people will demand a better deal (i.e. lower rates) to take the risk it will shoot up.
Hence, the people in Greenspan’s example were not necessarily making any mistake at all; they paid a little bit more for insurance against unexpected rate hikes.
The USA is very lucky that the financial system is deep enough that you can even GET 15 and 30 year FIXED rate mortgages. It’s insane that people don’t take advantage of this gift.
Even in the UK most mortgages are tied to short term funds rate, not because borrowers want it.
To avert one crisis (bank insolvencies as interest rates increased from record lows), the fed created another by releasing ARMs onto the masses. The end result was home prices shot up, people overpaid, the bloody ARMs reset, people missed payments, foreclosures increased, and bank insolvencies followed.
things realwhore/manikins say-should be a book
The average buyer has twice as many houses to look at as he did two years ago,’ King said. ‘The problem is, they’re not looking at as many houses.’”
Associate Broker Woody King sounds like a real pipperoo…
Oh, what a gal, a real pipperoo
I’ll make my bid for that freckle-faced kid I’m hurryin’ to
I’m goin’ to Michigan to see the sweetest gal in Kalamazoo
(Zoo, zoo)
(Zoo, zoo, zoo, Kalamazoo)
Apologies to Glenn Miller. It’s probably some kind of sacrilege to quote his lyrics under the post where Woody King babbled away.
Amazing these realtors… The banks are so stupid !
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No banks are NOT stupid. Banks are loaning OPM, i.e., they are playing with Other People’s Money.
Banks were raking in money by making loans. Why should they care if the problem develops some time in the future?
The incentives in the system are such fraud gets you ahead and if you don’t commit fraud you lose the business to someone who is ready to.
Jas
“He had planned to refinance; but then lost his job. Without help from a friend and a community agency John would have lost his house too. ‘Once it started adjusting it’s like a snowball going downhill, it just gets worse and worse and worse,’ McEnaney.”
Not to make light of his situation, but I find it entertaining that the story from Minnesota used a “snowball” analogy.
“The average buyer has twice as many houses to look at as he did two years ago,’ King said. ‘The problem is, they’re not looking at as many houses.”
This is my nomination for idiotic quote of the week.
No, Mr. King, the problem is there’s not as many buyers right now. They’re sitting on the sidelines until prices are more reasonable.
There are literally millions of buyers… you just have to slide that price wayy down on the supply/demand curve to find them. Lower prices, increased demand… Higher prices, decreased demand. Apparently he never took Econ 101.
I don’t think that such simple economy applies to asset markets, without any expectation of future asset prices. As long most people expect appreciation, demand can even increase with increasing prices. Today, the opposite might happen - prices decrease and demand decreases, too, because some buyers wait for even lower prices.
Not entirely true - if prices fall significantly below the medium term amortized cost of renting, people will buy even if prices continue to fall - because it will make financial sense.
I think you mean “quantity” demanded….
Demand is a constant thing, unless of course you change the fundemantal assumptions, and shift the demand curve.
I think the demand curve has shifted, why?
credit tightening (removing would-be players from the game)
and not only that, a double whammy, as the supply curve continues to shift (as the supply pipeline of “new” homes continues to vomit out houses) creating an enormous of whats known as a SURPLUS.
No, no, no — The buyers are not sitting on the sidelines. The buyers are sitting within their McPrisons trying to figure out how to make the next house payment.
I guess if I was just out partying, and some jack-a@@ said to me, wanna do a 400k deal? I would absolutely jump right on it. right
Still coming back to greed.
Wong place.
Wong time.
With sign on back that reads “MARK”
Watch your back…. You never know when the birds of prey are circling.
If you look around the table when you close a deal, and you can’t spot who’s getting screwed, check a mirror.
“‘There’s no way I should have been approved,’ Falk said. ‘Someone fixed this. Someone had to. This isn’t my signature.’ Falk says that someone had to be Jesse Holliday.”
Wow, this guy really got “Falked”
We’ve had quite a few news stories in the Twin Cities about fraud in mortgage applications. In many few cases the real estate agent intent on selling a sucker a home s/he couldn’t afford apparently faked corroborative documentation to go with the loan app, documents that the borrower never saw. Thus the loan for a too-expensive home got approved, the borrower ran into trouble, and only then discovered that documents such as fake gift letters from fake relatives had been submitted to substantiate nonexistent assets. And again, the authorities declined to investigate, saying that without being able to prove intent to defraud, they couldn’t prove a crime.
It has been very, very frustrating to read accounts of people finding themselves the victims of various real estate scams here over the past several years, and to have no one pay much attention. Until now, when the sheer number of frauds has finally forced people to look at the problem. A pity - had they gotten tough earlier on, the con artists wouldn’t have found the real estate fraud racket so risk-free.
I question the premise that people just “find themselves the victims of various real estate scams”
If these “vicitms” had taken the time to figure out if they could actually make monthly payments on the loan, they could have kept themselves out of trouble.
I have a Woody!
market forces eventually will make it too expensive for inappropriate products to be sold to inappropriate borrowers.”
now that would be GREAT - but still a long way to go before we are there
“That realtor is Mickey Wong. It sounded like a very sweet deal. He’d get $4,000 just for signing his name.”
Just imagine. You’re at a party. Someone offers you $4,000 for nothing. Oh, you’ve got to “pretend” to buy a condo. Don’t worry, we’ll transfer it into someone else’s name. You really have to ask myself how this guy, who presumably walks and talks and has a job, could NOT have seen that this had the potential to blow up in his face. And then to go public with his problem. WOW. Or rather, WTF!
Gee, I just never get invited to these parties. I feel so left out…
Maybe he can go into business with Casey Serin!
“That realtor is Mickey Wong. It sounded like a very sweet deal. He’d get $4,000 just for signing his name.”
Oh, and I’ll bet it WAS his signature on the application. All he saw was an easy $4,000. Not so easy now pal, is it?
‘Once it started adjusting it’s like a snowball going downhill, it just gets worse and worse and worse.’
Ah yes, the miracle of compound interest works both ways! I’d like to see an analysis of the difference in lifetime spending between two typical families at the median income.
The first lives real cheap at first, pays cash for their car (s), puts down a big downpayment, and gets a 15-year fixed. The second borrows for everything, and gets an interest-only mortgage with 100% financing, moving into a house much sooner.
I imagine the diversion between interest earned and interest paid would be significant over 50 years.
This is my first posting, but I love this blog. I come look and become soothed. One thing I have not seen mentioned here often is the significant cost to the environment and the public health and safety problems that this housing/lending bubble has produced for communities and individuals. I lobby for a coalition in WA state mostly concerned with water quality, farm land preservation, and wise community planning and I see, every single day, the most awful land use– residential, commercial, all of it—the most awful projects you can imagine. I mean, utterly crazy ideas, in the pursuit of more more MORE money. Where I live the easy stuff is all built out, so what’s left often has multiple encumbrances like wetlands, streams, steep slopes, etc. But you can always find a wetland/hydro-geologist/stormwater etc., consultant who will massage their findings and let you jam in as many houses as possible, just like you can always find a broker who will qualify you for a loan for one of those houses.
I talked to a legislative subcommittee on Monday Feb 5th about one of many of the bills sponsored by realtors, who are out in major force this session promoting ‘affordable’ housing in Washington state. I asked some committee members how many examples of harmful or potentially harmful vesting/building results they’d like, and if I should color code by wheelbarrow load? Perhaps a green wheelbarrow for projects either vested or approved for development in wetlands or wildlife habitat, blue for development vested or approved in aquifer recharge areas that provide drinking water for the cities, brown for stuff in floodzones or landslide zones…after the hearing I got into it with a builder rep when I asked him to define ‘affordable’. Like, ‘affordable’ for a year, before your rate resets and you get foreclosed on? An ‘affordable’ house, until it gets washed away in a flood, because the developer broke down the project into smaller parcels in order to avoid the environmental/safety review a big project would trigger? ‘Affordable’ like that?
It was rather unproductive dialog. But fun. And then I came right home and looked at this blog and sighed with satisfaction.
Well, that’s enough ranting. Thanks.
OlympiaGal
We used to talk about that here. There was a guy who was an environmental engineer but he was also kind of whacky and finally got booted for his political rantings (Lingus).
Nobody cares as long as they get their GI Joe with the Kung Fu grip. They just don’t.
My dad is a farmer. I wish I could convince him to go organic. Unfortunately, modern farming is not much better than a shopping mall as far as land preservation. In fact you could argue that capping over the land with pavement helps keep the crap out of the groundwater. Farm runoff is a major problem in many waterways. Moder shopping malls have storm sewers and detention ponds.
Your point is well taken with me, though. It would better to invest in more worthwhile things than bigger houses, more shopping centers and bigger cars. My wife thinks I’m nuts. Maybe I am.
OlympiaGal
Are you in the city of Olympia? I lived there from 1970 to 1987. Granduated from Timberline HS. Is it raining?
A state dumb enough to elect Jesse “the body” Ventura governor has plenty of potential for stupidity.
——————————————————————————
Not as stupid as CaliforniA - we’ve got Ahhnold!
At least Ahnold is smarter than the rest of the Californians. He opposed all those bonds that were passed last election. The masses voted to put the state deeper into debt by spending more money they don’t have.
smarter???? HA!
Ahnuld took his slate of initiatives to ‘da peepohl’…and they shot him down on every one! Which of his brilliant handlers thought his plan should be to take on teachers and prison guards and nurses — simultaneously?!?
California has a proud history of telegenic Idiot Wind politicos *coughReagancough*….
ot- just heard anna nicole smith is dead in florida
Maybe she died trying to swallow a condo.
LMFAO!
Good career move.
this is one tough room
I mean, who cares. What a worthless piece of human trash.
What will they say about us when we are gone?
Wow, txchick57, you are vicious. Trust me, I have little respect for Anna, but I think she led a pretty sad life. I have pity on her for the most part.
So is the real estate market
Main Entry: shee·ple
Pronunciation: ’shE-pl
Function: noun
1) an usually gullible person ; usually submissive to suggestion and easily led.
2) One who behaves like a sheep ready to be sheared.
3) Jon Falk.
The home prices listed on zillow are crap? So far from reality. Good site for sellers to go to for some consolation. After all the prices listed there are 20% above the current maket value… Good luck sellers… keep dreaming.
Zillow high? Indeed, but… not as high as some sellers are. I was looking at some listings posted at work today from people wanting to sell, as well as friends of my co-workers, apparently so desperate they want people here to put their flyers out in our breakroom. So I looked up a few of those places on Zillow.
Some of these sellers are pricing their houses at roughly 20% *above* Zillow!! Incredible! Only one was listed below Zillow price. Maybe that’s the only one that might eventually sell. Hmmmm…
Anyway, I tracked down one of these friend-of-a-friend postings, and the reason they are asking for 20% more than “Zillow value” is because they are selling to buy another house, and the house they want is in a really expensive area! And so it’s not what the market will give them — it’s what they “NEED” for the new place! Bwaahahahahaha! Goooood luck!
Zillow is a good source for historical data and mapping. Their analytics should be taken with a grain of salt. What I find laughable is Zillow’s “Make Me Move” feature. That is soooo 2005.
http://www.redfin.com/stingray/do/home?
more evidence r/e agents are a dying breed.
OT, but I just gotta rant. A local real estate agent has just started a blog with the mantra, yes of course, you guessed it, now is a great time to buy rather that wasting your rent. I’m so sick of this kind of crap. Of course he even cites what “local experts” are saying as part of his reasoning. He welcomed debate - I already left my 2 cents and if anyone else would care to add theirs: http://reno-tahoeproperties.blogspot.com/
That whimp is “moderating comments”. I guess he’s really confident about his position on the hot, hot, hot Reno RE market.
Bantering - Thanks - your statements were so much more eloquent than mine. I guess I let my “emotions” come out just a bit.
Well I did try to post this but it didn’t take
Even if there is no appreciation for me it is still better to own than to give an equal amount of money to pay for someone else’s investment. Well possibly, all things being equal — but are they? Since it is half to a third less to rent a comparable house rather than buy then your *example* makes no rational sense…. duh, let me pay twice as much to my banker for a house I could rent. So unless you illustrate rent equal to buying costs you are spinning.
Talk about a snowball going down hill…………….
New Century Financial Corp……………..
http://www.marketwatch.com/quotes/new
“the most awful projects you can imagine.”
Oh I know…especially those freak boxes along I-90. Of course, someday it could be cheap housing for people transitioning to a nicer place.
Then I think of all those lahar hazard zones around Rainier. Is it wise to develop rural areas around Orting, etc? Development shouldn’t be rushed through that could have huge consequences someday. Just look at what happened to the Kalapana development on Hawaii.
Hail Mary!
It happened sooner than later, Anna Nicole Smith croaked. Money can’t buy love and it most certainly can’t buy life.
Didn’t your mother tell you not to talk ill of the dead?
Then why are we dissing this market?
Because it doesn’t want to die - yet.
(Thanks for your funny comment.)
Anna Nicole Smith was “dead” a long time ago, just like all other self-absorbed and corrupted individuals.
Who is Anna Nicole Smith? A RE cheerleader who got kicked off this blog?
Who will reform the banking/loan industry? It seems —just like the S&L collapse –the banks will transfer the burden to pay back this clandestine thievery to taxpayers. Greenspan must have foreseen this and just didn’t care, while the working class become the poor class.
Who will reform the banking/loan industry? It seems —just like the S&L collapse –the banks will transfer the burden to pay back this clandestine thievery to taxpayers. Greenspan must have foreseen this and just didn’t care, while the working class become the poor class.
Bubble in Kalamazoo!! Damn, is there a bubble Sheboygan, Chillicothe and Fond du Lac too!?
Fantastic!
Actually, there may be somewhat of a reason for this. I read that an anonymous benefactor has pledged to pay in-state college tuition for anyone who graduates from the Kalamazoo school system. It is prorated for how many years the student lives there (i.e. someone who came up from kindergarten is going to get more than someone who just went to high school there). I also seem to remember reading that builders were building houses in anticipation of the people who would be moving there to take advantage of this deal.
What I don’t know, though, is what kind of jobs exist in Kalamazoo. I know Kellogg is nearby, and there are a couple of colleges; but I don’t know what else is there.
Pharmacia-Upjohn was large there; they were bought by Pfizer who just decided to close much of their operation in Kalamzoo and Ann Arbor - black days for Michigan.
I think everybody needs to realize that the Fed is not an agency to protect the people, but a private business set up to protect the banking system, its constituency. Like everybody else in our new “extreme capitalism” system, spin and lying are acceptable business practices, especially to get taxpayers to protect bank profits in a downturn. That is why Greenspan promoted variable rate mortgages at historic lows in the interest rate cycle.
I don’t think all the morons who got an ARM when the Fed rate was 1% actually listened to Greenspan. They were too busy watching MTV or Survivor or American Idol. I bet that most of them haven’t ever heard of the Federal Reserve
Has anyone seen this?
http://tinyurl.com/ysn3ls
Despite having read this blog for the last 2 years I am still amazed at how far reaching all of this is.
What do you call a lot of snowballs going downhill? Avalanche.
“‘The average buyer has twice as many houses to look at as he did two years ago,’ King said. ‘The problem is, they’re not looking at as many houses.’
The problem is that an earthquake in the subprime lending sector made the demand curve shift 15% to the left, and nobody gave the sellers (who determine supply curve prices) the memo. Hence the inventory glut.
“Pat Martyn of the Minnesota Association of Mortgage Brokers, and others say foreclosures are costly to their industry, about $50,000 per home by some estimates, and that market forces eventually will make it too expensive for inappropriate products to be sold to inappropriate borrowers.”
Wow, that last bit…shouldn’t regulations and common sense keep inappropriate products from being sold to inappropriate borrowers?! As someone who works in the brokerage(stocks) industry, I have to ask, where the hell is the oversight, ala NASD, SEC, etc.?
On a side note, today was a great day for my short portfolio! I eagerly anticipate more news along the lines of what we got from HSBC and New Century.
‘Even by my worst projections we will do better this year than in 2002 (when 4,443 units sold), and that was a really good year,’ said associate broker Woody King.”
Woody King was the name I used when I was a porn star!