“Numbers Shouldn’t Have Come As Any Great Surprise”
The Press Herald reports from Maine. “A mortgage broker recently left a message on Jennifer Richardson’s home answering machine suggesting it was time to refinance again. This time, she didn’t call back. Since she bought her one-level ranch in Lewiston six years ago for $73,000, she has refinanced five times and has incurred $58,000 in fees and penalties.”
“She said she now understands that brokers sometimes give people advice that is not in their best interest. ‘I have been misled and taken advantage of,’ said Richardson.”
“Since the housing market began to decline last year and the number of defaults has risen, investors have begun to lose interest in risky loans. The industry has begun rapidly tightening credit standards.”
“Several states, including Massachusetts, Rhode Island, North Carolina, New Mexico and Ohio, have recently imposed ‘onerous’ new restrictions on loans, and that has also hurt the subprime market, said Jim Demers, president of the New England Financial Services Association. He said the Maine Legislature has to take a ‘balanced’ approach so that lenders don’t abandon the subprime market.”
“‘Your highest risk people,’ he said, ‘are going to find less credit options available because lenders won’t make those loans.’”
The Concord Monitor from New Hampshire. “A cooling real estate market, rising energy prices and stagnant wages have pushed more homeowners into foreclosure in the past year. The number of foreclosures nearly doubled last year in Merrimack County, jumping from 56 in 2005 to 100 in 2006, according to Merrimack County Register of Deeds Kathi Guay.”
“The numbers aren’t looking too good so far this year either, she said. As of mid-February, 29 foreclosures had already been recorded in the county. (In all of 2004, just 32 foreclosures were recorded.)”
“Adjustable rate mortgages with a fixed payment for the first two years looked attractive when the real estate market was still booming and interest rates were low. But now that those fixed rates are ending.”
The Taunton Gazette from Massachusetts. “Have we or have we not hit bottom? That continues to be the real estate question of the hour. Asked to predict when the market might hit bottom, the symbolic point when sellers’ asking prices have fully adjusted to market conditions and begin to rise again, (broker) Gail Carter refused to speculate. ‘Oh boy, I have no idea,’ said Carter, in Assonet.”
“Massachusetts Association of Realtors president Doug Azarian said regardless of the drop-off in sales and selling prices last year things could have been worse. 2006, he said, turned out to be the third best year for sales recorded by MAR.”
“But the record sales pace of 2001 to 2004, he cautioned, should be considered a thing of the past. ‘I suggest that the seller price property to the current market, and not be concerned with what they could have gotten a year ago,’ Azarian said.”
The Connecticut Business News Journal. “When it’s completed, the 310,000-square-foot structure along I-91 in Wallingford will be a showpiece. But in the first weeks of February, workers took down signs trumpeting the future owner of the building; Middletown-based Mortgage Lenders Network (MLN).”
“Even as hardhats braved freezing temperatures, Mortgage Lenders filed for bankruptcy, then revealed its intentions to liquidate.”
“Poor underwriting and risky financial moves have added to the woes of many mortgage lenders, says Allen Puwalski, senior financial analyst at the Center for Financial Research & Analysis in Maryland.”
“‘It’s a combination of a lot of competition in the sub-prime lending space during 2005 and ‘06,’ Puwalski says. ‘They started loosening their underwriting standards - the kinds of loans they were underwriting became dependent on home prices appreciating at a pretty rapid pace. When that stopped, the underwriting issues came back to haunt many of the players.’”
“One former employee, who asked not to be named because he’s still looking for a job, says the company’s problems were evident much earlier. ‘They just played with the numbers - that’s the feeling I got,’ says the worker, who began working at MLN in 2005. One sign of trouble, he says, was that MLN could close only on a very small percentage of the prime mortgage applications he submitted.”
“For homeowners, the failure of firms like Mortgage Lenders Network means it’s going to be that much harder to buy a house if your credit is less than stellar. ‘It’s going to bring some pricing power back to the larger remaining lenders,’ says Puwalski. ‘It’s going to cost more for the sub-prime homeowner to have a mortgage.’”
The Nation News. “An unusual housing crisis is affecting Barbadians in New York, often causing them to lose homes they bought less than two or three years ago. According to mortgage brokers, court officials, elected representatives and real estate agents in the city, Bajans and other West Indians are among the hardest hit.”
“Take the case of a Bajan who was on Cloud 9 in New York two years ago. She had just bought a multiple-dwelling house, a ‘real bargain”, complete with rental apartments, low mortgage payments and a two-bedroom unit into which she moved with her children. ‘It was my way of living the American dream,’ she said recently.”
“Now, that dream may be turning into a nightmare. The adjustable mortgage rate she negotiated with the bank allowed the financial institution to change it in two years, but when that happened the rental income was so low that it hardly made a difference now that the monthly payments have skyrocketed. ‘I am in real danger of losing the property,’ she confided.”
“That story is being heard repeatedly in New York City these days. ‘It’s a real crisis in our community,’ said New York state senator John Sampson of Brooklyn. ‘Real estate agents and some mortgage finance companies are taking advantage of the desire among West Indians to acquire a piece of property.’”
“A city court officer who requested anonymity because he wasn’t authorised to speak on the matter, said that foreclosures were a serious problem in the Caribbean immigrant community. ‘We see them almost every day,’ he said. ‘It’s something that needs attention. It’s at crisis stage. People are losing their life’s investments.’”
The Asbury Park Press from New Jersey. “Homeowners who had been using the rising equity in their homes as the foundation for building wealth couldn’t be too happy with the new quarterly report on home prices in the Shore area.”
“The median selling price for homes in the region that includes Monmouth and Ocean counties fell 4.2 percent in the fourth quarter of last year, according to the National Association of Realtors. That’s the biggest dropoff since 1991.”
“Fourth-quarter numbers compiled by the Otteau Valuation Group for Monmouth and Ocean counties were even worse than those provided by the Realtors association.”
“The numbers shouldn’t have come as any great surprise. The softening of the market had been apparent for months, a fact underscored by the epidemic of ‘For Sale’ spreading throughout many neighborhoods in New Jersey. Many of those signs have faded with age.”
“Has the market bottomed out? Most analysts believe the worst is over, even though the unsold inventory of homes remains high. ‘The positive may well be that people are finally reducing the prices in order to sell their homes, and ultimately that’s going to set the stage for renewed expansion in housing,’ said economist James Hughes at Rutgers University.”
‘Jeff Hauschild, a senior at Norwich Free Academy, has his sights set on a business and finance degree at the University of Connecticut. But the 18-year-old Franklin resident, who leads NFA’s student community service program, isn’t so certain he will stay in Connecticut after he graduates.’
‘In recent years, Connecticut has lost 30 percent of young adults ages 25 to 34, according to a University of New Hampshire Carsey Institute Report. During the same span, Rhode Island and Massachusetts each lost 20 percent of their young adults, while Vermont and New Hampshire each lost 27 percent of their youths. Maine suffered a 29 percent hit.’
‘Besides wanderlust, young people are leaving because of a lack of affordable housing, the region’s high living costs and a lack of good local transportation, said economist Peter Gioia.’
Where are they going?
Lack of good local transportation? Pshaw. I’ve never heard a Vermonter complain about the lack of local transportion. They don’t take busses, they’ve got their Subarus and Jeeps.
This stat may or may not matter. How many of those young are just switching states in NE or going to NYC? For instance are those kids from NH or VT going to Boston or NYC?
Cool Interactive Map
NOTES
This map displays county-to-county migration data for 2000-2005 from the U.S. Internal Revenue Service. The IRS estimates are based on year-to-year changes of address on U.S. tax returns. All figures include only include people listed as exemptions on returns, so totals will be less than population. Because the IRS does not disclose small county flows because of privacy concerns, the county-to-county details will not add up to totals. Published by Charlotte Observer & Star Telegram.
casey, thanks so much for posting that link! I had been looking for something like that for awhile.
“This stat may or may not matter. ”
If they are going to new york city that would support the stat, as new york is not one of the states losing population.
I’m from there … people are (reluctantly) leaving in my age bracket. I did, and I’m not the only one. Where are we going? AZ, FL, CA … wherever the jobs are.
lack of affordable housing, high living costs are true. also sometimes it is hard to get jobs because you’re competing with older people’s resumes. however, lack of good local transportation is total bullsh!t. you can live quite well car-free in most of Mass except for the rural hicktowns or sprawl like Chickopee where there aren’t really lots of jobs anyway.
Gainesville, FL has great transportation and it’s in the SE, but it’s an exception. It’s WAY easier to get around in the NE corridor, especially from PA to Boston (local trips and intercity).
Neh. Every time I think we’re on to something here a twin sells for 400,000.
A twin, a 1300 sf twin.
/Goes off to drink more coffee
“She said she now understands that brokers sometimes give people advice that is not in their best interest. ‘I have been misled and taken advantage of,’ said Richardson.”
Gee, ya think?
No, it’s obvious that thinking is not your strong suit.
Well said.
Oh come on, after this lady has refinanced 5 times you would think she would get a clue .Jennifer starts out with a cheap $73k house and within 5 years they milk her for 58k in fees .
In truth, I think that is exactly what happens when you make these toxic loans to people who can’t afford the adjustments and need money yearly .
Every time the loan adjusts up these borrowers refinance and take out a chunk of money in the process and the sub-prime lender takes their pre-pay penalty and loan fees . Boy that lender knew they had a sucker ,but no question she got rewarded by chunks of money yearly .
I don’t know how much equity this lady has left but its clear she can’t manage her money if she refinanced that many times so she should get out now before the sub-prime lender takes every last bit of equity she has before she goes into foreclosure .
Check out how many toys she bought with each re-fi.
waaaaaaah waaaaaaah waaaaaaah … I can’t buy any more
toys.
welcome to McMortgage can I take your order. A 125% pay option arm, would you like a Beamer with that.
I just reread this and got more pissed at this so called “victim”. She bought a house for 73,000. In 2001She could have gotten a nice mortgage for around 600 PITI fixed for 30 years. It seems to me that she got a very affordable house. She is part of the problem, not a victim. When I read about people like this I think of the scene in Airplane where they all line up to calm the passenger down and wish these winers were in that seat.
I agree jtcc that this women is not a victim .Apparently she got a house at pre-bubble prices and wasted that good fortune by pulling out money repeatedly.
Refiance…. The pimps hooked the homeowners on easy credit knowing they will in place of lowering their arm for the injection, use it now to sign the “new” papers for another “fix” hoping it lasts for a little time longer. The homeowners, in name only, our at the mercy of the pimps and the pimps know it. What a way to go. Nothing more to say.
“When it’s completed, the 310,000-square-foot structure along I-91 in Wallingford will be a showpiece. But in the first weeks of February, workers took down signs trumpeting the future owner of the building; Middletown-based Mortgage Lenders Network (MLN).”
Wonder who did their mortgage…
“…‘They started loosening their underwriting standards - the kinds of loans they were underwriting became dependent on home prices appreciating at a pretty rapid pace. When that stopped, the underwriting issues came back to haunt many of the players.’”
Wrong! It did not come back to haunt many of the players. The business model these guys used is very evident. Party, profit, and lend until the music stops. When it stops head straight to bankruptcy court and lay down the prepackaged protection documents. Thereafter, wait for the music to start again and limbo like Bernie from ‘Weekend at Bernies.’
“The Taunton Gazette from Massachusetts. “Have we or have we not hit bottom? ”
what bottom? here in MA housing is still overpriced. wages here are more than most other places but housing is ridicilous and many new graduates cannot afford to live here. MA will be empty soon if housing does not become affordable.
The local politic’s crow constantly about “affordable housing” which is nothing more than lip service to an unsolveable problem.
The desireable land around the economic center of Beantown got parceled out years and years ago to beneficiaries of King George who turned to the rebel cause in a nick of time, and to the men of Washington’s army who re-upped at Trenton and got a 100 acres for their service.
Then came the age of sail merchant marine profiteers taking up the second ring.
The WW II middle class generation and their older boomer grabbed up what was left on the outer burbs, and that’s the ballgame.
Plus any town with a decent school system wants to keep out the riff-raff so they don’t have to deal with special ed costs. Zoning will keep out all but the most well-heeled johnny-come-latelys.
Mazz is old, old money…no affordable housing solutions here.
Mass has crashed, and crashed hard, twice in the last 30 years.
It’s doing well now because of the war. The war can’t go on forever (we’ll run out of money if nothing else).
When Johnny comes marching home … Massachusetts will be FOR SALE.
“‘Your highest risk people,’ he said, ‘are going to find less credit options available because lenders won’t make those loans.’”
What a novel idea.
“Has the market bottomed out? Most analysts believe the worst is over…”
Explain to me how they can believe the worst is over. I’m not seeing any real dramatic change in home prices in my area. What, just because the appreciation rate isn’t skyhigh anymore, things are improving? That makes no sense to me. As long as first-time buyers still can’t buy, the worst is definitely not over.
It makes more sense if you apply the following to the text before you read it:
believe = hope
jb
analyst = spokesman
“‘Your highest risk people,’ he said, ‘are going to find less credit options available because lenders won’t make those loans.’”
…oh, that’s alright, most all of them already have been given loans at this point.
I agree. I’m in Boston and I haven’t seen dramatic price decreases. There are many new waterfront luxury projects coming online which is affecting the median prices though. These seem to be selling as empty nesters move in town from the burbs. I’ve herad of several that have bought new luxury condos without selling their suburban house first. (oops) It may take a significant number of foreclosures to really get this thing going. I’m 48 and have lived in Boston since 1985 and remember the last painful decline in the early 90’s. There were many properties that went back to the banks and that’s when things really got ugly.
I have an acquaintance who is an auctioneer- he looks around the room, smiles, and says, “The more you bid, the more its worth…’ Right?
“For homeowners, the failure of firms like Mortgage Lenders Network means it’s going to be that much harder to buy a house if your credit is less than stellar. ‘It’s going to bring some pricing power back to the larger remaining lenders,’ says Puwalski. ‘It’s going to cost more for the sub-prime homeowner to have a mortgage.’”
So, I’ve been waiting a year and a half now for this thing to blow up so my husband and I can buy a house. We have excellent credit and plan to put at least 20% down. I’m expecting prices to drop some and interest rates to stay relatively the same to the bottom. If there are less players, buyers who can qualify for a loan and lenders who can withstand the market downturn, will we still be able to get a great rate with excellent credit? Or will the pricing power of larger lenders squash the ability to get a better rate?
Would it be better to buy before the bottom, at the bottom or after the bottom (assuming you can determine the bottom)?
I was in a similar situation two years back in Philadelphia area when I brought my current house. We purchased a very modest 250K old house and did some renovations worth 30K. I did anticipate back then that prices would come down; however I am looking to save a good 200K when I buy my next house which is currently prices at 600k.
So you could grab a less expensive home in Atlanta area for 200K and wait until you get your dream house for the price you want. This way, you will get the tax advantage and be able to live in a house.
It’s true that we would get tax advantages, but unless I was able to get the old house under market value for the area, I don’t think I’d come out ahead when I had to resell. Being a buyer who doesn’t have to sell a house is another plus in negotiations.
Jo,
If you are counting on the price of your dream house being reduced what on Earth makes you think your 200K house lose value while you are waiting in it?
And Jo,
What are you expecting to sell your 280K house for when you move up?
This is a calculated trade off/loss. I expect my 280K house to go down to say $240K. Proportionately I expect expensive homes around 600K to come down to $400K. It is happening here at least - 600K houses are now being brought down to 525K and the downfall has not even yet started.
This will work if you plan to buy an expensive house later
Expensive homes come down fast but in the under 300K range, there is not much to go down. Again, numbers are region specific but you get the idea.
But what is the sense of buying your 280k house if you expect to lose 40K on it? You could have rented for 2 years.
What is the square footage of your current house?
I think it’s a safe assumption that a higher priced home will lose a much higher dollar figure in the downturn, so your loss exposure is likely limited in a less expensive place… as long as the location of your less expensive place doesn’t turn into the next slum. Then, all bets are off. And don’t dismiss this potential outcome because this downturn could get very ugly and your cute $280K could easily become a $50K albatross.
Exactly. Two years ago 250k didn’t buy much. I’m betting it turns into a 130K property real quick.
I expect my 280K house to go down to say $240K. Proportionately I expect expensive homes around 600K to come down to $400K. It is happening here at least - 600K houses are now being brought down to 525K and the downfall has not even yet started. This will work if you plan to buy an expensive house later. Expensive homes come down fast but in the under 300K range, there is not much to go down.
I comPLETEly disagree. If you think that homes in the Philadelphia area (my area, too) that are currently ~ $250K will barely see a drop in price, then we are back to all first time home buyers being priced out around here. So all you people with $250K homes will be sitting on them. Forever. The end.
Whichever way you look at it, all I am talking about is proportional loss. 6% on 250K is 15K/year and take the tax break of 25% you are at 11.25K which is not different from rent.
Now if 280K goes to 50K, 600K comes down to 200K and we are all in the same boat.
Huh? So you got it figured that you mortgage with the tax deduction is close to what you would pay in rent?
What about the extra 30K you put into the place?
And how do you figure you will be ahead after your expected 40K loss when you sell?
And does that 40K include the 12K real estate comission?
If you go underwater at your first place, you can’t sell it, and you will be stuck.
You might be thinking you’ll sell it if it approaches underwater, but if that happens the market will be so bad you’ll be lucky to sell it in less than a year.
what mnakes sense is to buy at bottom or shortly after bottom when things are still flat, but in many cases you could not determine when bottom is beforehand.
All I know is MA is overpriced like unbelievable, sellers are still shooting for the moon. I know some houses being on sale for about a year. For sale by owners are the worst, they usually have no idea about a realistic price.
I don’t think you need to nail the bottom. If this bubble really collapses, it will probably take many years before people start ‘investing’ in real estate again.
In the Netherlands we had a housing crash in 1980, minus 40% within 1.5 years. If you were looking for something special, 1980 was probably the best time to buy. But for the more ‘average’ homes is was better to keep renting for another ten years, rates and lending standards were high and homeprices went nowhere until about 1990 (so those who purchased in 1980 effectively lost money). Of course that is nearly one generation ago, hardly anyone remembers (certainly not all the young people who are hunting for trophy homes) and realtor and government home price statistics happily start in 1985 or 1990.
I do believe I found the perfect example of how 100% financing en masse can trigger general price inflation and seller expectation.
in May/June ‘06, 4 homes on Table Rock Ave in Chula Vista (bordertown in San Diego) were purchased for the mid $700’s.
this reset the comps for the entire street to the mid $700’s. especially in the eyes of the sellers and agents alike.
the problem is… the 4 that were purchased were ALL zero down/100% financed AND one of them is already going thru 1st payment default and slated for auction later this month.
one can infer that this was happening all over during the boom, thus significant amount of the gains were driven purely by funny money.
check out the post at Bubble Markets Inventory Tracking
How are these comps calculated? Based on asking prices?
the new comps were set when the 4 homes were purchased for mid-$700’s. the new sellers are now basing their asking price on these mid-$700 purchase prices. Not knowing, and not wanting to know, that these purchase prices were all resulted from funny money.
How convenient! (sarcasm added)
I think comps are based on the sellers wishing price from what I can see.
Case in Point:
2755 KOBE DR., SD - Mission Valley, CA 92123**
List Price: $510,000 - $565,876
Bedrooms: 3
Full Baths: 2
Partial Baths: 0
Square Feet: 1,234
Lot Size: 6,098 Sq. Ft.
Year Built: 1960
Listing Date: 02/16/07
On Market: 4 days
Type: SFR
Status: ACTIVE
MLS #: 071013480
Description:
Complete home makeover! No money spared in remodel of this classic on a canyon! Completely renovated w/too many upgrades to list. You won’t find another home in this condition for this price in this great area. Appraised @ 530k dec 2006 before remodel. Close to everything san diego has to offer. See suppl.4 more
I call total BS on the $530,00 appraisal before renovations. This place was a dump and sold for $360,000 in late December 06. Most of the properties sold here lately have been under $500k for decent property and fixers have generally been going for between $360k to $400K.
We’ve brought this up before.
This is certainly one of my biggest uncertainties (= risk) about buying. The comps themselves seem at best biased by toxic financing, and at worst distorted by fraud. Now the MLS sales have been infected with a “comp virus” and it’s unclear how widespread it is and how they can eliminate it.
So not only is the REIC word suspect, their data are as well. Once the data are corrupted, almost all statistics and inferences are problematic.
The premium for this increased risk from my perspective is a much reduced price offer and the passage of a good amount of time.
Read your stuff about “Fraudera Ranch” and your other posts. Nice job, keep it up.
ocrenter ….So true , your post is exactly what happened IMO.
The Nation News. “An unusual housing crisis is affecting Barbadians in New York, often causing them to lose homes they bought less than two or three years ago. According to mortgage brokers, court officials, elected representatives and real estate agents in the city, Bajans and other West Indians are among the hardest hit.”
“Take the case of a Bajan who was on Cloud 9 in New York two years ago. She had just bought a multiple-dwelling house, a ‘real bargain”, complete with rental apartments, low mortgage payments and a two-bedroom unit into which she moved with her children. ‘It was my way of living the American dream,’ she said recently.”
“Now, that dream may be turning into a nightmare. The adjustable mortgage rate she negotiated with the bank allowed the financial institution to change it in two years, but when that happened the rental income was so low that it hardly made a difference now that the monthly payments have skyrocketed. ‘I am in real danger of losing the property,’ she confided.”
“That story is being heard repeatedly in New York City these days. ‘It’s a real crisis in our community,’ said New York state senator John Sampson of Brooklyn. ‘Real estate agents and some mortgage finance companies are taking advantage of the desire among West Indians to acquire a piece of property.’”
i see signs saying something like you don’t have to pay a lot for a house in some ethnic neighborhoods. i was around 12 when park slope gentrified in the last downturn. maybe i’ll see something similar in action this time
This isn’t too surprising anymore. New immigrants are very vulnerable in a new land and they get taken advantage of way too often. Sadly, all too often it is by someone in their own community, looking to make a buck or two “the American way.”
I’ll be volunteering at a legal aid session in two weeks, helping people who have been in the country long enough to start filling out their paperwork to start the process of becoming a citizen. I expect to see a decent percentage of people who are fully qualified for citizenship but are going to be permanently barred because they trusted someone in their community way too much and gave them money for their “assistance”
PS - there are plenty of apple pie americans out there that will take advantage of an immigrant if given the chance. I’m not suggesting that it’s only immigrants taking advantage of other immigrants. I’m just saying that when you are a stranger in a new land, you tend to seek out others just like you and place a little too much trust in them simply because you have the same heritage.
‘Real estate agents and some mortgage finance companies are taking advantage of the desire among West Indians to acquire a piece of property.’”
Right, why should the West Indians be left out of the party? What a bunch of political pandering baloney. I guess it doesn’t matter to State Sen. Sampson that latinos, and anglos, and anyone else that could fog a mirror was a potential lending “scam victim”.
Please. Prior (legal) immigrant communities were able to use real estate as part of their wealth accumulation strategy. Practically every old Guido I know has a revenue stream generated by apartment rentals. And Greeks, and Lebanese, and Eastern Europeans, Asians… Certainly there are a few West Indians out there who know the difference between an income producing property and a dog.
No one ethnicity was targeted to the exclusion of anybody else. Ben’s post starts with the sad tale of Jennifer Richardson, sounds pretty white-bread to me. Poor Jennifer. She thought her house was an eternal ATM but instead she ends up as her Mortgage Broker’s Personal B!tch.
Every old Guido…
ROTFLMAO
My grandparents were from Italy/Sicily.
My, how times have changed -
Guidette from Birth
“I have to start by saying I am a NJ guidette to the fullest. I live in North Jersey and all everyone ever calls me is a guidette. My friends my family even co workers. I guess you could pretty much say it’s written all over me, I’m Italian, about 5′4 olive complexion, natural D cup, I must emphasize natural because amongst my fellow guidettes implants have become very popular. Also I have big curly brown hair, of course the nails, and the car to complete, a silver 2001 Mitsubishi eclipse convertible.”
Of course.
Imploder wants to see the D cups.
Bajan needs to get off her posterior and find some tenants. If she can’t get tenants to meet the cost of her financing, she is sunk. Since she knew for two years that she needed to meet the coming adjustment, how can she be unprepared for it?
She makes Casey Serin look sophisticated. He had a stupid business plan, but at least it was a plan!
Having had to work with West Indians, this story makes me very happy. Their arrogant know-it-all attitudes would get them to over-estimate their investing prowess.
“‘It’s something that needs attention. It’s at crisis stage. People are losing their life’s investments.’”
Her opinion is that the dumb-ass that bought a home that he could not afford should somehow be rescued?
Of course they are going to be ruined - if they somehow offer aid to these dumb-asses, then they would need to offer aid to those that can actually qualify for a loan but are priced out of the market.
- Perhaps the goverment would donate 25% of the purchase price if you lived in the home 7 years….bankruptcy in reverse.
I lost 25% of the value of my stock portfolio after the downturn in 2001. Mavbe I’ll contact my congressman and see if I can get a rescue.
Seriously though, why is it that so many people buy real estate as an investment and are shcoked and are asking for help when it doesn’t work out. It’s an investment, therefore you may lose money. Get a clue….
Sh*t, they wouldn’t even raise the capital gain loss limit of $3k/yr to a proposed $10k/yr.
I doubt many “invested” any of their own money. No down financing for the most part, I bet.
Your highest risk people,’ he said, ‘are going to find less credit options available because lenders won’t make those loans.
not a sign of that yet in Europe; despite slightly increasing rates and hardly increasing incomes, homeprices keep advancing at a healthy pace. Some towns in my area have already crossed the 1000% average appreciation mark. It’s only possible because of ever more leverage and easy money. And of course, as soon as there is any sign that the ‘high risk’ people are having trouble buying a home, politics will come up with new solutions to help them get the loan they want. After all, every voter is entitled to a home that is far above average, isn’t it?
If you think this isn’t possible, just look at what they do in the Netherlands to keep homes ‘affordable’. If you add up all the housing subsidies and tax cuts here, it’s the second largest category of government spending (far more than education or healthcare, to name a few).
OT (originally published in the WSJ):
The Myth of ‘Superstar Cities’
“Over the past 15 years, it has been opportunistic newcomers — Houston, Charlotte, Las Vegas, Phoenix, Dallas, Riverside — that have created the most new jobs and gained the most net domestic migration. In contrast there has been virtually negligible long-term net growth in jobs or positive domestic migration to places like New York, Los Angeles, Boston or the San Francisco Bay Area.
“What as much as anything distinguishes elite places — what Wharton real-estate professor Joe Gyourko calls “the superstar cities” — are their absurdly high real-estate prices. New York, Boston, San Francisco and Los Angeles have long been more expensive than, say, Dallas, Houston or Phoenix — but in recent years the difference in price, he calculates, has increased beyond all reason. San Francisco prices since 1950, for example, have grown at twice the national rate for the 50 largest metropolitan areas.
“This is good news for those who hold property, but has been less than a blessing for those middle-class families who might want to enter these markets. In some superstar cities less than 10% of households can afford a median-priced home. Nationally the average is about 50%.
“Mr. Gyourko traces these surging prices to two basic causes. First, there remains in superstar cities a remarkable concentration of very high-earning families who can bid up real estate. The second factor lies with the regulatory and tax regimes, which greatly limit the production of housing and job opportunities, particularly for middle-income families, not only in the city cores but in surrounding areas….”
“Mr. Gyourko traces these surging prices to two basic causes. First, there remains in superstar cities a remarkable concentration of very high-earning families who can bid up real estate. The second factor lies with the regulatory and tax regimes, which greatly limit the production of housing and job opportunities, particularly for middle-income families, not only in the city cores but in surrounding areas….”
A total MORON, who clearly doesn’t understand that cheap lending standards have driven the markets.
If there were no CHEAP money (short term) no one would be buying and the prices would collapse. There simply aren’t enough “rich” people to support the price levels.
Uh, in Boston, the factor of regulatory control driving up the cost of housing is a fact.
Until recently, developers had huge hurdles to go through to build any housing. Rental property (other than a two family) was impinged by the lack of development as well as the highly favorable bias towards the renters.
With the evolution of condo development, the involvment in development by MANY political players supply has increased significantly at least in this regard. Consequently, the supply of housing in Boston has (for Boston) grown significantly. This change is putting pressure on the pricing for moderate single family homes in and around Boston for the first time since the 90s debacle.
Of course cheap and easy money drove prices even higher here. But before that prices (and rents) were held up because supply was artificially restricted by various government policies. This isn’t a great secret, anywhere. Thomas Sowell has written extensively about the regulatory problem as it relates to housing supply.
Now would Boston (and anywhere else) been better served over the years if reasonable development had been allowed? Had it been encouraged as prices escalated wouldn’t that have kept something of a lid on prices? Maybe not. Maybe there would have been tons of speculators here as in FL.
Kotkin may be “an idiot” but his point regarding regulations inhibiting development leading to suboptimal supply and (ultimately) inflated pricing is valid.
Kotkin may be “an idiot” but his point regarding regulations inhibiting development leading to suboptimal supply and (ultimately) inflated pricing is valid
I disagree. There are a lot of housing regulations in the cities - moreso than in the outer areas. Yet cities have been dealing with development for so much longer that the process is more consistent. As a developer you know exactly what to do and what to expect. It’s not anything like that in the outer areas. Unless you get lucky and they roll over for your new subdivision, you have no idea what to expect as you go through your permit process. I can remember a couple years ago reading an article about Toll Brothers. The guy was bragging about how huge the legal department was at Toll Brothers and how they were always able to find a way to get their developments approved. That is certainly not an indication that building regulations in the suburbs make development easy.
There was massive middle class building in New York City after WW2. Marina City in Chicago is just one example of a successful middle class development in another “superstar city.” It is still more than possible to have middle class development in the city, but Kotkin has convinced too many people that it’s not.
He never misses an opportunity to take political shots in his writing, so perhaps he has a political agenda as well, but it’s clear that his main goal is simply to make sure as much construction work as possible happens - and that means constantly building infrastructure along with your houses. Sprawl.
“There was massive middle class building in New York City after WW2″…..
Okay, and what happened for most of the next 40 years? Nothing because of rent control and other crap that limited development. Same thing in Boston.
The fact is if you had anywhere near the supply that met the demand prices of property wouldn’t go up much faster than inflation, now would it? Not without massive immigration or population growth.
Last I saw, at least until recently, Boston and NY population was flat to down. Again, I don’t know the guy’s political or business agenda but basic economics (both observed and implied) are demonstrated by the pricing history in most of these “superstar” cities. Can there be other factors, sure but politics has been a MAJOR factor (at least until recently) in the inflated city housing prices.
Now, at least in Boston, the supply has finally caught up to natural demand. Its exceeded it in fact. Prices are coming down not only because the financing game is up but because there are rising numbers of empty houses, condos and rental properties. They’ll keep falling until a semblence of affordibility returns.
“The guy was bragging about how huge the legal department was at Toll Brothers and how they were always able to find a way to get their developments approved.”
I know of one town in New England that thwarted Toll by dragging the whole process out until the market turned downward and Toll withdrew. The town council knew they couldn’t win just on the merits of the law alone, so they never challenged Toll directly, just kept asking for more paperwork, continuing meetings, etc. Smart folks. Don’t ask me for the name of the town. I won’t even narrow it down to the state. I have family living there and am considering a move myself, or at least a summer retreat.
Joel Kotkin (the author of this piece) is a pro-sprawl mouthpiece funded by very conservative thinktanks. He is almost universally ignored by the planning community because pretty much everything he writes can simply be boiled down to “Support the construction community by maximizing the amount of construction needed. Oh, and the liberal elitists are wrong and the lack of insane growth in their cities proves it.”
I always find it funny that he never fails to take a political jab at liberals, as if housing in this country is a left vs. right issue.
“Adjustable rate mortgages with a fixed payment for the first two years looked attractive when the real estate market was still booming and interest rates were low. But now that those fixed rates are ending.”
But part of the problem was created by these morons who purchase on ‘How mucha month it a’gona cost me’ and when the payment was low just went out and bought cars, plasma tv’s, etc with the same mentality with whatever income they had left to spend.
“The worst is over.” Makes you wonder how many times that phrase was spoken during the many other booms and busts over the last few hundred years when there was still a looooong way to go before the bottom. Then it makes you wonder how many times, in a continuing bust, the phrase, “I’m amazed at just how bad, how deep and how devastating this bust has been but I think we are seeing some light at the end of the tunnel.”
The carnage from this mess has barely begun. On saturday, I saw a young latino family standing outside a house for sale in Thousand Oaks, ca, being given a sales pitch by a snake oil realtor. The husband was listening intently to the realtor (bad practise) who was probably telling him, “Now is a great time to buy. In 12 months this house will cost $100,000 more than it does today.” I felt like winding down the window and shouting, “Don’t listen to that douche bag! Wait another year or two at least when you can get it at 50% off!” Of course, I didn’t but it looks like the real estate blood suckers are still out there spreading their poison.
First time poster, long time lurker…
Professor Irving Fisher, one of the first celebrity economists, said a few days before the stock market crash in 1929, “Stock prices have reached what looks like a permanently high plateau.”
I’ve been expecting a real estate crash since 2001. We paid off our mortgage that year, and luckily we were already living in our dream home. It’s not an ATM to us, but we know plenty of folks who think of it their homes like that… more realistically, maybe I should say “their houses”, not “their homes”.
No kidding. As someone who has worked a lot with forecasting and modeling I can tell you that forecasting of turning points is notoriously difficult to do. I’m shocked that there are people calling a “bottom” on such little evidence. There are always pauses, short term up ticks, etc. on the way to any “bottom”. As long as the underlying fundamentals are so bad anyone calling a “bottom” this early in the game is either a fool or someone with an agenda.
“We see them almost every day,’ he said. ‘It’s something that needs attention. It’s at crisis stage. People are losing their life’s investments.”
What ‘investments’? These people are buying with nothing down which makes them ‘renter-caretakers’ of the bank’s property and they don’t own an ‘investment’, they own a liability!!
Yes, essentially they are renters and the bank is their landlord. When they aren’t able to pay their “rent”, they will be evicted.
exactamundo - my thoughts exactly when i read this.
dd
‘It’s going to cost more for the sub-prime homeowner to have a mortgage.’
Uhhhh… It’s supposed to work that way. And about time too. That should clear the table of around 40% of the competition which, once prices crater 50%-60%, might get my interest level back up again.
I’m with you AZ. I view the sub-prime collapse as the faulty foundation this house of cards has been built upon. The repercussions of loose lending standards are upon us…look out below!
Yes…….but this will ruin Bush’s “ownership society” that he boldly bragged about a few years back.
I remember him saying that under his watch, more people owned homes than ever before…….I nearly puked.
by the way, I’m a registered Republican, so this is not a Bush-bash……just an observation of stupidity.
The northern New England economy is running on fumes.
All the light manufacturing companies which were the lifeblood of so many small towns and villages have packed up and gone to the Dominican Republic, Mexico, or China.
Due to the onus of being the big business whipping boy and poster child for adverse influences on the environment, all the paper companies have sold off their land holdings to Plum Creek, cut their labor force by 2/3rds, or simply closed shop and filed for
bankruptcy.
Dairy farmers got wiped out in the Ice Storm of ‘97. Fish are gone.
Shell harvesters trashed by recurrent red tide outbreaks.
Canadians are supplying all the timber because local contractor’s can afford the worker’s comp premiums.
Tourism pays dogshit wages with no health insurance and is subject to the uncertainties of the economy and weather.
It’s 2 bad years now for the snow related industries.
Plus obese America ain’t too keen on outdoor activities anymore.
Most with their fat-f*ck, lazy-azz kids would rather go off to Disneyland to eat and roll around in the Tea-cup ride than hike, raft, ski, or bike or anything that has to do with physical exertion.
Jobs left?
Wal-Mart, Micky D’s, telemarketing, and public sector social welfare jobs paying half what people were earning in manufacturing.
Can an economy really be viable when everybody is working for the government, while the remainder are on SS retirement, disabliity, or welfare?
The gal with the 5-refi’s is simply a reflection of the state of the average American who has borrowed the crap out of their home equity to finance a declining standard of living in an state devoid of a normal economy. Maine was 49th in a measure of business growth for ‘06, one step ahead of Louisiana which was dealing with the aftermath of Katriana.
Abandon hope all ye who enter here.
Can you repeat that? I wasn’t paying attention - WalMart just lowered their prices by 3 cents.
“WalMart just lowered their prices by 3 cents.”
What happened did WalMart fire their lazy, pampered overpaid $4 a day workers in China and hired new $3 a day workers in Vietnam? I bet if they can get access to the $2 a day workers in North Korea then it might be another 3 cent drop in their prices. I wonder what its like, waking up every morning and going to Wal-Mart headquarters and everyday your job is to find somehow to drive workers wages down even lower?
Too bad those employees are forced to work at wal-mart. Man, if they could only quit…
You know, if demand for the jobs was low enough it might even send management a lesson. Don’t you wish the world worked like that?
Actually, they aren’t going to Disney[world] either, and haven’t been for years. Orlando is sh***ing itself right now.
““The numbers aren’t looking too good so far this year either, she said. As of mid-February, 29 foreclosures had already been recorded in the county. (In all of 2004, just 32 foreclosures were recorded.)”
So, on pace for 251 foreclosures for 2007, a 150% increase over 2006.
That sounds about right.
YAY!!!
The Asbury Park Press from New Jersey. “Homeowners who had been using the rising equity in their homes as the foundation for building wealth couldn’t be too happy with the new quarterly report on home prices in the Shore area.”
I’d add in that the common phenomena we’re seeing is that volume is way down and while the same dollar values may be shuffling, the house you’re getting is QUITE superior. Going on, at the time per market (I’m not aggreing with pricing), “REASONABLE” asking values, I’ve seen homes drop 15% and they’re still for sale. On the other hand, new listings coming on seem to be completely out of whack, in some cases fantastic homes which have been dropped over 100K with 5 bed 3 bath that have listed for a year (nothing wrong) have new competition from 3 bed 2 bath that are more? expensive. I presume realtors and/or sellers are brain dead.
“Several states, including Massachusetts, Rhode Island, North Carolina, New Mexico and Ohio, have recently imposed ‘onerous’ new restrictions on loans, and that has also hurt the subprime market, said Jim Demers, president of the New England Financial Services Association.
Anybody know what he is talking about? I have not heard anything about new subprime laws or regs. Good news, if true.
Read about the new Ohio laws a few weeks back, cannot remember exactly what they were but remember thinking “Good! that’s a start anyway!”
Don’t remember hearing about the other states mentioned here but if the Prez of the N.E. Financial Services Assoc. says it’s so, then maybe it’s so.
That’s a big maybe BTW. If there’s anything we’ve learned over the past year and a half, it’s that these guys with fancy titles do not know what they are talking about more than half the time. Too bad Jim Demers, Prez, didn’t provide a link- lol.
I hate the way the media is presenting all these FBs as victims. Sure, 5% of them are probably victims of predatory lending, but most of the FBs are victims of their own greed. The more the media writes about victims the more it gets accepted, and the more likely it is we’re going to bail them out with our tax money.
” It is time for the State to protect their citizens who do not have sufficient experience, education, or understanding of the mortgage and real estate process to make a decision” as one poster wrote in response to that Maine article
The bottom line is: morons need to be protected so they can continue to be morons