Bits Bucket And Craigslist Finds For February 25, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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My parents are putting my late grandmother’s house up for sale. This is in Maryland. Its a well-built house, custom made back in the 50s when they did it right, admittedly, on a nice lot with close access to amenities. But the rental eqiv. value is on the order of $2000/month. Its owned by my mother and aunt. Based on rental value, I said I would bid $275K for the property. Its listing around $400K.
So unless you’re gonna live in it, there’s no way to make money on it as a rental.
in my hood 22151 the most rentble place on earth w bus access to Pentagon rents have gone up 20% while prices have more than doubled- it’s goofy
110xrent or bust
In Australia, the paradigm since the mid-90s has been a thousand week’s gross rent. That’s about 230 months. Advertisements trolling for investors trot out this ratio as if it’s good.
from caveman to 40’s 100x rent
add hud-mort deduction-fmn-fre and you get 110 x
then lower rates from 90’s level and you get 130 x rent, tops
where’s the rest coming from ?
I can only assume expectations of continuing price appreciation. These tend to be self-reinforcing if enough people believe, and Australia has the highest proportion of direct RE investors in the World. Something like 3% of the entire population.
We also have some rather strange tax laws, which do support highly geared RE investment. Even so, I wouldn’t consider buying back in at more than 150 months rent. (I sold my 2 investment properties in 1991, just about at the peak of the last bubble here.)
Without appreciation a single family rental in most area’s makes absolute no sense….Its a loser….When you buy investment real estate, you buy the income stream and not the building…..Even though a appreciation component is factored into a overall capitalization rate, an argument can be made that appreciation is not necessary for the property to be a good investment…For instance, the purchase of a very large distribution warehouse in lets say, Fernley Nevada,,,The land is very cheep…The building is just a box with lights BUT, the lessee is Costco with a long term lease….The value of this property far exceeds the value of the land & building component…
In Arlington, VA, most properties are selling for 275 to 325 times monthly rent, clearly insane levels not supported by fundamentals. I just don’t understand why “investors” think a 2 or 3% rental yield makes a great investment. Hmmm, 5% risk free, passive CD’s or 2% risky, non-passive rental properties?
Today’s r/e investors are going to learn the concept of margin of safety the hard way.
Now that we are well into the implosion of subprime lenders, lets take a look at what we can expect in the housing market this year. My guess is that we will see the median price of a home fall 5 to 10% by year end. That is on a national level. Foreclosures underway by the end of the year will set all-time records. Sales of homes will fall considerably even from the slow rate we are seeing now. There will be bankruptcies this year among the large homebuilders.The economy will be clearly in recession and heading toward depression by year end. Automobile and boat re-possessions will rise sharply. Unemployment, even by the fudged numbers the government reports, will be in the 10% more or less range by year end and bankruptcies will soar. Abandoned condo towers will be sprinkled around many recently hot real estate markets such as Miami and Las Vegas. Vacation homes will become plentiful and cheap. Auctions will become popular as a way to sell a home by a desperate owner. Prices in formerly hot markets will plummet. Some will be down by 50% or more by year end. The cycle that carried housing prices higher and higher will now go into reverse and carry them lower and lower. The government’s effort to inflate its way out of this mess will not succeed and we will be on our way to a deflationary time by year end.
Tough times ahead, folks.
Ah, but this creates so many job opportunities in collections, the law, repossessions, etc. One enterprising lady started a business up in Michigan where she contracts with banks to secure and maintain foreclosed homes.
This is what I PRAY FOR each day here in the big apple
I would love to work 50-60 hours a week as a paralegal doing this work, but it seems the bubble hasnt busted here yet.
Wish me luck!
“My guess is that we will see the median price of a home fall 5 to 10% by year end. That is on a national level.”
A national 10% drop would be absolutely disasterous. I think 2006 has shown us how sticky prices can be on the way down. My guess is 5% or less, but definately a drop, measured either by the NAR median or by the OFHEO.
“Foreclosures underway by the end of the year will set all-time records.”
Of this I have no doubt. California NOD’s are well on pace to bust their 1996 record. The foreclosure scene will be a debacle. Did you see the latest Congressional CYA? They think MORE guidelines are needed, on top of those passed a few months ago. Just wait until Alt-A starts taking its inevitable hit, and prime defaults jump past the historical trendline. More fear, more tightening, more defaults, some more fear.
Recession? Good chance, huh? But with consumer spending so heavily weighted in GDP, the number won’t go negative until the consumer weakens, and it hasn’t happened yet, and I’m now of the opinion that I’ll believe it when I see it.
Depression? Many, many people would need to lose their jobs, and there seems to be too much chugging along in other countries for that to happen any time soon.
If the housing market contracts severely, why wouldn’t there be a lot of folks without jobs? Once the ripples spread, everyone will be laying off people.
I don’t doubt that many jobs will be lost, perhaps 1 million this year, maybe another 1 million the year next. Who knows?
But Great Depression-level job losses? That would require 10 million, no?
already started- when 1099 RE types get jobs so they can eat ,it cause hiring numbers to improve. The dif is they’re making 20k instead of 80k. The illegals are transparent.
I sell to service contractors and wow, biz scks……..
I think you hit on something here. A laid off construction worker loses one highly-paid full-time job thus must seek two or more lowly-paid part-time jobs in an effort to maintain his income. Plus he has to put his wife to work.
This acts to buff up the employment statistics and gives a false sense of prosperity to the folks who decide how to run this fair land of ours.
We have a way to go. Even as home building slows, commercial construction is still strong. Many believe there is a workforce crisis in the construction industry. William Koertner, president and CEO of the MYR Group, a Rolling Meadows, Ill. based electrical transmission contractors said “work force is the major problem”, in an ERN interview (2/19/07) about the surge in building new electrical transmission lines. “We’re working really hard to bring new people into the craft…”.
The New York City Metropolitan Transportation Authority’s Capital Construction Co. will seek consultants, contractors and labor from around the globe to handle its upcoming wave of mass transit construction, according to its president, Mysore Nagaraja (ENR 2/19/07). He says they could import labor foremen and superintendents and enroll experienced foreign workers in New York City-area training programs.
Construction rose 4.8% last year to reach $1.198 trillion in new work, according to McGraw-Hill Construction. Some of the strongest markets include year-to-year gains of 52% for lodging, 20% for manufacturing, 18% for office buildings, and 16% for private health care work. There was a 12% decline in residential construction.
Signal International, LLC has launched a new “guest worker” program at its shipyards in Pascagoula, Miss., and Orange, Texas, to fill a labor shortfall with welders and fitters from India. Almost 600 workers are involved, working under federal H2B visas.
Union construction laborers on tunneling projects in New York City currently earn about $55 an hour in wages and benefits.
“Union construction laborers on tunneling projects in New York City currently earn about $55 an hour in wages and benefits.”
And what does it cost for these workers to live there in the NYC region?
Electric transmission & distribution construction is a narrow specialty, one that has had a shortage of qualified lineman for years.
I think you hit on something related, though - the Great Depression saw huge public works programs, and many of our great infrastructure additions (roads, dams, power lines and power plants). A severe economic crisis may ironically provide an opportunity to make some much-needed improvements. The environmental and NIMBY lobbies are likely to have way less relative influence when people are screaming for jobs.
“Guest workers” for labor shortfalls, eh? Let me guess… rather than increase wages, and let the market work, we… import cheaper labor from overseas.
Guess these were the famed “jobs Americans won’t do!” More like jobs American firms won’t pay for.
RE prices have been sticky in 2006 and so far this year, but they won’t be much longer. As the inventory grows and grows, the pressures to sell rise. Notice the auctions rising around the country. And each time a sale occurs at an auction that is considerably lower than asking prices for similar homes, the comps move against the holdout sellers. Sometime this spring, I believe that holdout sellers will begin to cave in large numbers. RE prices won’t be sticky much longer.
And the stock market makes new highs……… something doesn’t make sense then with your prediction.
Or with the stock market
The first part of this article is interesting. It puts the chance of a recession at 51.9% It also mentions inflation is too high.
http://www.safehaven.com/article-6988.htm
I think things get bad but not for at least 3 years. I bet a soft recession with above trend inflation this year 2007, then a lost war in the middle east in 2008-2009. After that probably pretty ugly…….
Depends which way you look at it. It NPV $’s, it has not. ($ has depreciated significantly since 2000). The nasquack is not part of this and is bumping up against it’s fibanacci retracement levels.
The US indices that have risen are tied to high financial and energy exposure : Easy credit & commodities boom. Both influenced by $ being ultra cheaper and also the commodities are coming off a 20 year bear market. (For fundamentals, I’d invest in the latter).
The cheaper - in real dollar terms -of US stocks, could mean the US stocks are subject to buy outs by foreign companies. Witness speculation of bids from Aussie miners for Alcoa though don’t expect politicians who preach free trade, to go along if that free market is led by Johnny foriegner.
The stock market has been rising strongly, according to the DJIA, since mid-2006. That rise has been the subject of much concern among market professionals. Many of them accept as fact that the Plunge Protection Team, fueled by freshly printed dollars, has been seeing to it that the government can report a “strong market.” The market has been up without a major correction for almost a record period. Given that the economy has been “growing” by borrowing rather than by earning, it isn’t hard to conclude that we will see a market crash before long. My guess is that it will happen this year.
dawnal,
Where did you buy them rose-colored glasses? You optomist…you..
As equity evaporates more and more highly leveraged sellers and their lenders are going to be frozen out of the market. As prices fall and the number of equity rich sellers decrease so will sales transactions. The entire REIC is heading into a slow painful spiralling lock-down. Selling opportunities are approaching the event-horizon for most of the GFs and FBs of yesteryear.
Link: http://en.wikipedia.org/wiki/Event_horizon
IOW, Serfs up!
report from sunny florida. the complex that i am visiting is about thirty years old, direct oceanfront. units went from $300k to over $600k in a little over three years. current inventory is about 30 units, all priced from $600-$700 k, absolutely no traffic. neighbor slashed price $150K to $475k to get some action, not a single bid still. we are definitely on the plataeu of denial.
There does appear to be a ‘permantly high plateaue’ in denial. Most home owners in the D.C. area believe prices will not fall.
untill the gop grows some b-lls that may be so-
DC area only came off 10% in the last bust 1990-1995
Ford vetoed 51 spending bills in 2 years, wow did I misjudge him
Fannie Mae Foundation is closing up shop by end of April, and FNM will be concentrating charity in DC and New Orleans.
are they in the mort biz ?
Freidman was right
report from sunny florida. the complex that i am visiting is about thirty years old, direct oceanfront. units went from $300k to over $600k in a little over three years. current inventory is about 30 units, all priced from $600-$700 k, absolutely no traffic. neighbor slashed price $150K to $475k to get some action, not a single bid still. we are definitely on the plataeu of denial.
Plateau? That indicates room to stand around, camp out, move from side to side. I say you are at the pinnacle.
That is one of the scariest things that I’ve heard. Even if prices were, say, headed down from 650k to 300k, one would think a seller at 475k would own the market, considering that everyone else is still pricing in the 600s. You would that there would be someone, somewhere, out there that would consider a unit that is priced 25% lower to be a good deal.
As bad as FL is, this (and some of the auction bidding) is the worst that I’ve heard of. Figure 200k when this bloodbath bottoms out.
The Automobile industry and Housing industry are already in a recession. Few first time buyers will be willing to buy a $400,000 house during the recession. This will make the recession and Housing sales worse.
I keep seeing articles written on sub-prime that say it only took up about 10 to 15% of the market? I cant help but believe it took up a much greater portion than that. I’m sure traditional Arms, teaser ARMS and 80/20’s took up a large portion as well.
I’m led to believe that fixed rate mortgages took up only a very small number of all mortgages. Not many people that I know could afford a traditional 300,000 or 400,000 house with taxes and insurance with a fixed.
I do think it would be lot more telling if they would report on what percentage has the 30 year fixed with 20% down where the people actually put the 20% down.
I agree, and for a blog where we debunk a lot of the crazy mathematics from the bulls, I can’t believe that so many people have over the last week conflated the deposit percentage with the likely price drop percentage.
Suppose last month you could get a 100% Option-ARM based on 40% of your income at a 4% teaser rate. That means you can borrow 10 x income, so if you earn 40K you can get a loan for 400K.
OK, you’re absolutely betting the farm on price appreciation, but if you want in you can get the money.
Now suppose that today you have to get a 90% loan with the same 40K income. Does that mean you can automatically get a loan for “only” 360K?
Not at all!! Even putting aside the possibility of less ‘generous’ teaser options, your limit is now constrained to 10 x your savings (plus CC advances :)). For many people this will be a very much smaller sum than merely 10% less.
ajh,
I’m having trouble following what you mean here. Why are loan amounts now constrained to a multiple of ones savings?
Because a downpayment is REQUIRED. (One can only dream)
If I make $40k, and can only scrape up $2k from my child’s college fund for the down payment, In this world I can then qualify for a $20k house.
This realization hitting may be when the bulk of the population suddenly realizes just how expensive housing has gotten. From my own memory of 17 years of renting and saving while watching price appreciation go by, I would say that first time buyers expect houses to be expensive. So when a (trusted) banker says, “Yes it’s expensive but you can do it!” - here’s the money, they go for it. When the banker says “Yes it’s expensive, and NO WAY are you getting the loan!” THEN the realization of how expensive it really has gotten will sink in.
Wait a minute - I have to learn to save?!? DUDE! No one ever told me that! Wait a minute. I need to save ONE YEAR’S INCOME to buy a house? DUDE!
As soon as Joe Six Pack runs into this roadblock after years of conditioning that “housing only goes up” and “renting is throwing money away” is when the sh** will hit the fan. Anyone not historically qualified who somehow missed out on the foreclosure express will go ballistic. It may take them a year or two of yelling to realize how lucky they were.
Ahhhh. Now I get it. Thanks for clariying.
It’s exactly what I’ve been saying all along — but in different terms. Until maybe 10 years ago, the real barrier to buying a home was not the monthly payment, but the down payment. Without down payments being necessary, the sky was the limit for home prices. If down payments are going to be required again, home prices will ultimately regress to the mean.
However, those prices will not drop as quickly as some think (like 30% by year’s end). There are still many buyers who are trading up from home they bought 5+ years ago. And because they have equity in their homes, they are already planning on using much of the profit as a down payment.
It’s going a be years-long downward trend.
Ahhhh. Now I get it. Thanks for clariying.
It’s exactly what I’ve been saying all along — but in different terms. Until maybe 10 years ago, the real barrier to buying a home was not the monthly payment, but the down payment. Without down payments being necessary, the sky was the limit for home prices. If down payments are going to be required again, home prices will ultimately regress to the mean.
However, those prices will not drop as quickly as some think (like 30% by year’s end). There are still many buyers who are trading up from home they bought 5+ years ago. And because they have equity in their homes, they are already planning on using much of the profit as a down payment.
It’s going a be years-long downward trend.
The next post down shows a nice little house for $20k, so perhaps all is not yet lost!
http://www.tumbleweedhouses.com/houses.htm
The problem with buyers trading up in the current market and increasingly in the market we will be seeing, is that their equity in their present home is shrinking as prices fall and they are finding it difficult to sell the present home in order to buy another one. The buyer pool is shrinking due to several factors. Investors have left the buyers pool for the most part and will continue to do so as prices continue to fall. And they have joined the seller pool further exacerbating the problem. The affordibility gap remains but the ability to finesse it with toxic loans is diminishing and will soon disappear. Meanwhile the economy is slowing and unemployment will rise as the RE related jobs disappear along with retail jobs, auto jobs and other shrinking industry jobs. So there may not be so many buyers who bought 5+ years ago willing or able to trade up.
my impression is that the move-up chain doesn’t start unless a new buyer appears, though I guess this new buyer can be someone looking to downsize, so the chain is really a trading cycle.
“I keep seeing articles written on sub-prime that say it only took up about 10 to 15% of the market? I cant help but believe it took up a much greater portion than that. I’m sure traditional Arms, teaser ARMS and 80/20’s took up a large portion as well.”
15% is what the Economist says. Their way of phrasing it is that the industry came up with three innovations to deal with unaffordability - risky products, risky customers, and finally risky products to risky customers. Risky customers are 15% of total mortgage financing in 2006, risky products are 25%.
Raw numbers are 3T total mortgages, 0.6T risky customers, 0.75T risky products.
Cool site that gives rent comps:
http://www.rentometer.com/
When the recession hits, the McMansions built by Toll brothers will be replaced by the modest (tiny) houses madeby the Tumbleweed Tiny House Company:
http://www.tumbleweedhouses.com/houses.htm
that rentometer’s cool
The tumbleweedhouses seems kind of silly and are too small for most people, but I wish there was an innovation in lifestyle movement in the US; more people thinking of alternative ways of working and living then the rat race b.s.
I have a crazy idea where my living space is a 3×3x3 cube. I sit in the center segment and it raises and lowers the others to fit my needs. . . kitchen segment, TV segment, computer segment, etc.
I actually quit liked the tumbleweed houses. Each to their own.
From beautiful Downtown Mesa:
“Regulators have shut down Mesa-based Eagle First Mortgage and its more than 75 Valley branches, citing illegal lending practices.”
“A consent order from the Arizona Department of Financial Institutions cites reasons for shutting down Eagle First.
http://tinyurl.com/395qtx
I read that article this morning. I couldn’t get over it…75 offices in the Valley? Who were they lending to???
Try “se hable espanol” . . . .
Hi all -
I’ve been doing some reading lately - The Great Bubble Boom by Harry Dent and America’s Bubble Economy by several authors including Eric Jenszen from iTulip. I seriously thinking about rejuggling what little investment we have away from stocks into something less bubblish.
Are there any websites or authors that can make any serious counter claims against the bubble evidence in the stock market that don’t amount to “it’s good now, so it will be good forever” or if you hang onto a stock for 100 years it always comes back? I can see some flaws in Dent’s book especially, but mostly when he predicts the bright bold baby boomer future in the middle of a depression. (hint to Mr Dent: a bobo is derogatory term.) I’m good with the suggestion in the Bubble Economy, but I felt it needed more detail.
Any thoughts,links, or book suggestions would be very much appreciated. Thanks in advance.
swz,igd,
pid when there’s a correction
canroys when oil comes down
pgh,pwe,pvx
“I seriously thinking about rejuggling what little investment we have”
I’ve been reading Chris Browne’s ‘Little Book of Value Investing’ and it reminded me of two things: 1) Investments in stocks, over a period greater than 10 years, usually outperform other investments; 2) It’s very hard to time the market and you probably will lose money if you try.
I tried to be a market-timing genius this month, moving my 401K from 100% cash to 100% equities. Daily losses of $25, $50 and $100 spooked me out of the market. I sold on an up day so was only out $80 for my adventure. Market’s gone down more since so I guess I’ll just stay out now.
How long does it take for a stock market to come back after a crash? In the crash of 1929, it took 25 years to regain the Dow level before the crash. This one could be worse.
That’s precisely the hole in the argument anything that anything longer than 10 years is “okay” for stocks that I’m worried about. In 29, you had to hang on until about 53 or 54 just to *break even*. I’m only 33 and could outlast it - but it’s not exactly like I’m getting a return on the investment in the meantime.
GaveKal - Louis Gave, Charles Gave, Anatole Kaletsky, Steve Vannelli - are Long term bullish but are more literate than the ‘brutal scoffing ignorance’ of the usual bullish commentators than appear on CNBC or Fox. They are claiming we are going through a global revolution on many fronts.
I borrowed “Our Brave New World’ which can be read in a few hours but I didn’t necessarily agree with it. (Made me think though so it served a point.
http://gavekal.com.
John Mauldin may be someone else to read for some degree of neutrality (he has a free newsletter http://www.2000wave.com/gateway.htm ).
One of the best hands on investment level sites you can look at is http://www.streettalklive.com/ . Produced by Lance Roberts, a Houston CPA with his own radio show. He sends out a free newsletter on the markets and is big on capital preservation. (I learned about bond laddering from this show).
Houstonstan -
Thanks for the links! I already get John Mauldin’s newsletter. It’s a fun and informative, although he has some serious blind spots (hedge funds and republications: all good).
I will take a look at the links. I’d like to try to make some decisions soon. Thanks again!
Why not read his amazing predictions in his book “The Roaring 2000’s”. In that book he said that the Dow would be at 25,000 and the Nasdaq at 40,000 by 2008!
Your question makes me want to share my lazy Sunday reading:
“There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.” - Ludwig von Mises, in Human Action, Regnery, 1966, p. 572.
“Not at all!! Even putting aside the possibility of less ‘generous’ teaser options, your limit is now constrained to 10 x your savings.”
Good point, ajh. The way subprime lending standards have changed in just the past few weeks, the entire U.S. population of illegal immigrants have been effectively blown out of the home buying water. They’re done. That market helped keep home resales from tanking even worse in 2006, and they won’t be around to help in 2007. Bush’s master plan has suddenly evaporated.
My sister. I love her dearly. A few months ago, she said “but the NAR said that housing has bottomed”. I told her to never believe anything the NAR, or the U.S. Government, says. Instead, look and see for yourself. And what we’ll see in 2007 is YOY declines in both sales and prices, but the NAR will say “Look! The YOY decline in sales was only “x” when last year it was “2x”. We’re stabilizing!”
Of course, everybody here will know better. The salient point: The decline continues. The steady march down. This will define the 2007 year, as will our constant derision of Lereah when he, without fail, announces a bottom each and every month.
It won’t be over until the last of the resets gets their foreclosure notice.
Since I am Australian I am certainly not in a position to buy into any of the illegals/minorities debate, but it does seem that any sudden mean reversion in mortgage qualification standards is going to have consequences.
Speaking of Lareah, I wonder if he’s got his spin rehearsed for Tuesday’s release of January EHS. While I know the raw January Sales numbers get a big seasonal adjustment boost (quite validly), the prices don’t get adjusted and the regional data for places like CA indicate there may be YOY declines again.
maybe a double post
kkr and gs are spinning the deal as a “green deal”…..
the spin doctors have made a comeback….
http://immobilienblasen.blogspot.com/
TUCSON, ARIZONA MORTGAGE FRAUD??
My wife and I were looking at MLS listings in the area where we would like to eventually buy, and I saw a listing with “subject to bank approval” in the description. The “bitter renter” in me thought “OH BOY, SHORT SALE!!”, so I looked up past sale info to see how much of a loss the bank was going to take, and found the bank would be losing $100k before selling costs if it sold at the asking price. And that it was less than 6 months from purchase to foreclosure (actually trustee sale). And that the purchase price was $200k+ (or about 66%) over previous sale price, only one year before that. And that the per square foot price at time of purchase was about 75% higher than comparable sales in the neighborhood. D’OH!!
So I looked further, and found that the buyer of this house purhcased 5 houses in less than two months, each one for WAY over comparable sales. Three have already gone back to the bank. One is listed as a short sale (”subject to bank approval”) at a price representing a more than $100k (more than 20%) loss for the bank (before expenses).
All together, if all houses sold at asking price, lenders would be have losses totalling more than $300k before real estate clerk fees, closing expenses, legal fees, etc.
What should I do? I have zero tolerance for cash-back mortgage fraud, and I suspect that is what is going on here. I bet my wife that there has to be at least one person (besides buyer) in common in all of these deals (e.g. loan pusher, real esate clerk or appraiser), but I don’t have any way to find that out. At the least I will probably forward my findings to the lenders who took the houses back via the trustee’s sales. I’ve also thought about monitering the houses until they sold and then notifying the IRS that they should be expecting a bunch of relief of debt income from this person on their next return. given the knowledge and creativity of this community, I’m sure there are many more possible courses of action!
I would appreciate the advice of the community greatly. I shudder to think how prevelant this might be in Tucson if I could find all this just by checking out the details of what appeared to be a short sale on the publically accessable portion of the MLS.
P.S. I will be away from the computer all day, but would appreciate thoughts, suggestions, etc. and will be following up this week. I’ll let everyone know what I decide to do in a future thread!
tucsonguy,report this to Pam Crowley at MortgageFraudWatchlist.org,You can also contact her on Appraisers Forum.she has the resources to discover the parties involved and will report them to the lenders.paladin is doing something similar.If everyone on this blog reports the frauds they run across in their lives without looking for them,it will make a difference.if you want to spit coffee across the room,go to craig’s list and check out the cash back deals.
Is this in Vail?
One of the 5 houses is in Vail, but the rest are in central tucson.
Tucsonguy, you can call the Tucson office of the FBI and report what you have found. There is always a Federal violation of some kind in fraudulent mortgages. It takes a lot of investigative time and effort to put one of these cases together but they are very solid cases in the end due to irrefutable paper trail. The Fed. have limited manpower so they often times set minimum loss limits before they will get involved. However, in growing fraud problems like this, they like to set up Task Forces to get the help of other agencies and to coordinate and tie together multiple cases.
Try these sites. PaladinReports.com is so overwhelmed with overencumbered loan transactions in California, it is impossible for me to get them all in the next couple of months (but I will.)
http://www.flippingfrenzy.com/
http://www.irs.gov/newsroom/article/0,,id=118224,00.html
http://www.mortgagefraud.org/
The simplest process for you is to write up what you know and take it into the FBI office in Tucson, if there is one. If not, mail it to the nearest FBI office and follow up with phone calls.
If you report the fraud to the IRS, they will pursue it. I believe this is one of the most effective ways to put pressure on the fraudsters. Additionally, the IRS is kind enough to send you 15%-30% of what they collect, as a reward. Don’t expect anything to really come your way though. In talking to 3 diiferent sub prime lenders who have been victims of fraud, they lament that the fraudsters never have any “assets”. The expensive cars are leased, the cash is stashed, and the rental deposits and income are squandered. They generally live life on the run.
I do believe the sub prime lending meltdown has ended much of this stuff. If you read the latest press release from First Franklin, they have stopped “waiving in” all the sub prime junk. Now that they are taking losses, all of the sudden credit and appraisal quality matter. Hilariously sad commentary, since it did not matter when they could pass the losses off on MBS bagholders.
We are in the final stages of mortgage fraud winding down now. I predict 20% down payments will be the norm again in 12 months.
Everyone,
Thank you very much for the advice. I’m going to write up what I found and send it to the IRS and the FBI. I’ll let everyone know what happens!
Here is a question for all of you — back in 2005, there were a few stories about how folks were using the house ATM to pay off credit cards. My feeling then was that once the ATM well went dry, credit-card debt would take off again. It appears the upswing in credit card debt may be starting:
http://www.federalreserve.gov/releases/g19/current/
But given the swiftness with which the subprime spigot is being turned off, and the lending industry’s jitters, I am wondering if tightening on credit cards can be that far behind. For years banks have made money extending credit to the most risky consumers — sort of a micro version of the subprime mortgage market. Could the credit-card ponzi be the next spigot to shut off?
I have seen an open credit limit, get pared down without warning before. I also had a card where I “opted-out” from a change in terms… and the card issuer dropped me rather than keep me under the old agreement.
Since the same banks holding MBSs also issue consumer credit, I bet they will be following the dots and reigning people in.
Thanks Mozo - I think you may be right — and if this happens I can’t se how a recession could be avoided.
Do credit-card companies ever not drop you if you opt out of their agreement changes? I’ve never tried, because I always just figured they would. If the agreement changes in a way I don’t like, I just cancel the card…
I think the way it works, is if you don’t accept the new changes, the account balance gets frozen at the old credit T&Cs. IF you use it after that date or if you don’t meet payments, you’ll accept the new T&C’s by default. That’s how it was to worked on a Discover card (I never used it again) that I keep open only because it is my oldest cc.
Another instance was when my credit union Platinum visa card platinum was sold on to MBNA. I told the CU that I didn’t accept the new company (I’d a bad experience of MBNA monkeying me around before) and that I could have a loan at the last rate. Was low, so I accepted. The CU officer told me that I was the second person to not want to switch because on MBNA.
I detest cc companies with a passion. Always monkeying around trying to stiff you with hidden charges. The latest gimic is increasing the ROI surcharges for using the cc cards when abroad.
Still the good thing to look forward to is the FB’s shafting them when they max out for the last gasp. As unsecured debt, they will be last in line. Previously it was saved by the HELOC.
I watched the Rah Rah on Fox network’s Saturday business about Bank Of America’s giving credit cards based on Tax ID number and 3 months (was it?) of checking account history.
Nowhere did the commentators challenge the assumption that the credit cards would make money. The consensus was that the program was not illegal, was slightly sleazy, but certain to be a money maker. Apparently they felt that charging illegal aliens the same formerly-usurious credit card rates they have heretofore charged U.S. residents would be enough to guarantee profitability.
I can’t help but wonder if they really should put on another layer of risk premium here however. (Which would perhaps be using illegal criteria.) One more example of banks ratcheting up the risk in their portfolios? (Of course it will perhaps turn out to be less risky than sub-prime lending
)
If all you have to do is get a TIN as an illegal alien, why can’t you get 6. Then get small checking then credit card accounts at 6 different bank branches and revolve through them every three months. Or charge up a cash advance (and abandon the account) to fund your vacation back home every winter? Removing the “Identity” requirement for credit cards strikes me as just as ominous as removing the down payment criteria for home lending. Maybe BA is intending to require fingerprints
Congressman Ron Paul hammers the Fed:
http://www.youtube.com/watch?v=A4kxTkhwR_Q
–
I like Ron Paul. He has been hammering at the Fed for a very long time, but the Fed is un-hammer-able and truly above the law. Fed is the #1 perpetrator of the current Housing Bubble.
Only the Greater Depression, baked in the cake by Fed’s actions for the past 15 years, will lead to any change. There will be wholesale changes in the system AFTER people suffer.
Jas
Fed is the #1 perpetrator of the current Housing Bubble.
Honest Question: did the Fed start allowing these IO and subprime suicide loans? Did the Fed drop tax rates 2-5%, freeing more income for investment? Is the Fed responsible for our $800B/yr trade deficit, much of which comes back to us as foreign asset purchases and consumer credit lines? cuz that’s the causes of the bubble.
Federal Reserve Notes, or notes from the Fed Reserve Bank, are not only used in the US, but as the world’s reserve currency. It is done by formal decree in the states, and done more by a unwritten decree in the world (if you use any other currency to trade oil, we will use the military to stop it).
With no competition to this monopoly, it has allowed this one bank’s set of notes to be created on an enormous scale ( in the form of credit). What you talk about above are symptoms (I/O, low rates, huge trade deficits). The cause is different than the symptoms.
–
“Honest Question: did the Fed start allowing these IO and subprime suicide loans? Did the Fed drop tax rates 2-5%, freeing more income for investment?”
Honest Answer!: Fed’s #1 job IS controlling Private Credit, or Private Debt. Tax rate changes were far less important to the Housing Bubble than the “emergency” Fed Funds rate of 1%. No?
“Is the Fed responsible for our $800B/yr trade deficit?’
Yes, it is the result of the Debt Bubble (some call it Credit Bubble!. Again, borrowing on homes to spend on other things played a big role.
Jas
Starter homes:
http://louminatti.blogspot.com/2007/02/starter-homes.html
Good one Lou…I am still laughing…The “Backyard Retreat” was hilarious…..
I think the WSJ site spiked the kooladie a little too much. The bulls are really spewing sh!t. Check this post out.
I heard some say prices have gone up so much in the last 5 years. They are worried about buying at the peak and overpaying for a house. You may consider buying a home that’s a fixer upper. Let us say the asking price is $675,000. What should you do?
First of all, remember, you cannot overpay for a house. In fact, as I proved previously, the more you pay for the house the more money you’ll earn in the long run. I know some deluded renters are screaming at their monitors right now “that’s the stupidest thing I ever heard!” Here’s the proof. Let’s say you buy that house for 675K and we’ll be very conservative and assume only 10% yearly appreciation instead of the industry standard 20%. After 10 years you’ll have a little over 1 million in equity (even if you negatively amortize a few hundred thousand you’re still sitting on a mountain of cash). Now, let’s say you aggressively bid 750K on your home. After 10 years at ONLY 10% appreciation on the higher price you’ll have over 1.2 million in profit. That’s right, you made an extra $200,000 by “overpaying” for that house. As the math above proves you can not make a mistake of overpaying for a home.
I would love to see this troll post this here and defend the argument. Remember I did not wright this trash I just find it funny that some one could wright this let alone Belive it! Will this stuff Ever End!
“Let’s say you buy that house for 675K and we’ll be very conservative and assume only 10% yearly appreciation instead of the industry standard 20%. ”
I just vomitted on my keyboard.
Wow. And that, my friends, is the the best example I’ve seen of the mindset that contributed to this speculative bubble. That’s what happens when Joe Six-Pack and his 9th-grade math knowledge combine with greed.
“Let’s say you buy that house for 675K”
OR
Let’s say you think about what’s really important in life, quit your B.S. job, do something you really love that doesn’t pay all that well (at first) and spend more time with friends and family.
arlingtonva;… I have successfully gotten two of my three children to see it just the way you suggest…Still working on the third one….
Do you have a link to that quote? Thanks!
What if you looked at it from the perspective that the dollar is losing 10% purchasing power a year?
Thats just a silly troll post…….. even the most ignorant can’t beleive that…….. hahaha .
Why do we need troll comments? Would it not be better to educate me? TJ & the Bear posted a comment on Shadowstats.com. There are other sites that reference high inflation which means depreciation of your dollar. Getstucco & Mogambo Guru have posted on expontial growth/ loss. Old economics books stress central banks must manage inflation expectations. Let say inflation is at 3.5% how long does it retake to regain a 50% loss? Maybe money never flows back into housing. Maybe rents never go up. My current outlook is that we will go through a deflationary period with many defaults but there is also a great chance even with that the powers that be keep everything together. Where will you get ripped off the most/least in the long run? I do not have the answer but to me it is an important question.
My apologies to anyone I offended. There is a lot of irony regarding my own shortcomings in my post. I forgot the ancient dictum “Better to be thought a fool on a blog than to post and remove all doubt”
taken verbatim from the satire site thereisnohousingbubble.com
Well, even if it is satire, I actually know someone who was spewing that exact rationale for the past 5 years. And she’s otherwise a very, very intelligent person.
Diemos beat me to it. Internet connectivity issues here.
Here is the link to the archive of there is no housing bubble blog.
http://thereisnohousingbubble.blogspot.com/2006_02_01_archive.html
Funny report from an otherwise very nice neighborhood in NYC. All I can say is that the Rolling Stones were right!!! Bonus points to whomever gets that reference, btw.)
http://youtube.com/watch?v=40qihGbngJg
Not exactly housing related, but readers might be amused by the Washington Post’s story of the Smithsonian’s Inspector General audit of Larry Small, the head of the Smithsonian, and former CEO of Fannie Mae before Frank Raines. The funniest bit is in the middle of the story - his billing for a ‘hypothetical’ mortgage that never “hypothetically refinanced” into a lower rate. http://www.washingtonpost.com/wp-dyn/content/article/2007/02/24/AR2007022401510.html
Also, did anyone notice on nationalmortgaenews, http://www.nationalmortgagenews.com, that HUD is finally planning to take action on “non-profit gift down payments,” only 6 years after the IG uncovered problems with them, and only 2 years after a fairly damning GAO report on the huge number of foreclosures associated with them? Who says government moves slowly?
The Smithsonian has been a joke since the the tenure of Samuel Pierpont Langley, 1887–1906. Watch Langley’s GF & FP (F***d Pilot)fall off the end of Langley’s houseboat two months before the Wright brother’s first flight.
http://upload.wikimedia.org/wikipedia/en/thumb/7/71/Samuel_Pierpont_Langley_-_Potomac_experiment_1903.jpeg/180px-Samuel_Pierpont_Langley_-_Potomac_experiment_1903.jpeg
February 25, 2007
In the Region | Westchester
A Thaw in the Housing Market
By ELSA BRENNER
WHEN it comes to home sales in Westchester, spring seems to be arriving earlier than usual this year, according to brokers and others who monitor the residential real estate market.
After a November and December that were more sluggish than usual, phones are jangling again in real estate offices throughout the county and attendance at open houses is swelling, they report.
Usually, the spring selling season doesn’t start to warm up until mid-March, and its early arrival this year may indicate that an upswing in the market is finally under way, according to Greg Rand, a managing partner for Prudential Rand in White Plains, and other brokers.
This does not indicate that residential sales prices will be climbing, however; on the contrary, median sales prices may drop even further before stabilizing, Mr. Rand cautioned.
For the first time in an October-December quarter since 1994, when the Westchester-Putnam Multiple Listing Service began reporting statistics on a quarterly basis, the median price for a single-family home in Westchester dropped from the same quarter a year earlier. The median as of Dec. 31 was $630,000, down 3.4 percent from $652,250 at the end of the fourth quarter of 2005.
http://tinyurl.com/yqqq3m
The developer of Emerson Hills, a 35-unit condominium building on West St. Paul’s South Robert Street, had no luck luring preconstruction buyers last year. So the developer, Minneapolis-based Sherman & Associates, sounded out the city about converting the homes from owner-occupied to rental units.
No way, said city officials, who have invested $1.3 million in upfront tax-increment financing for the project. The money will be repaid through future property taxes on the development, which may eventually include nine new town homes between Bernard and Haskell streets.
“When we redeveloped that block, we met extensively with neighbors, who said, ‘We have quite enough rental, and we’re not interested in having any more,’ ” West St. Paul Mayor John Zanmiller said. “We’re not interested in revisiting the rental issue, because we promised people, and we’re going to keep that promise.”
Full article at
http://www.twincities.com/mld/twincities/news/local/16770314.htm
That is hillarious. They are trying to sell condos on the West Side of St. Paul. That’s where that really is. That area just plain out sucks. You had better no how to speak Spanish if you are going to live there. Thank you for making my morning. This just gets dumber all the time.
“You had better no how to speak Spanish if you are going to live there. Thank you for making my morning. This just gets dumber all the time”.
NYC Boy - YOU had better KNOW how to speak ENGLISH if you are going to live HERE. Thank you for making my afternoon. This just gets dumber all the time.
Private boat docks on a lake stocked with walleye, hiking trails, trophy home designs with some lots nearly the size of football fields. What’s for the wealthy not to love about Spring Lake Estates?
That’s what Toll Brothers is trying to figure out.
The Horsham, Penn.-based builder of mini-mansions said Thursday it wrote down $96.9 million of inventory in its first quarter ended Jan. 31.
About one-third of that was land options it won’t buy; two-thirds was property it can’t profitably develop, primarily in Florida and Minnesota with one condo conversion project in Maryland, executives said.
Toll Brothers Inc. won’t say whether it will pull out of the 120-acre Spring Lake project it opened last March with Edina-based Arcon Development Inc. Toll, which owns 42 of the 120 lots there, has sold just five homes. Homes range in price from $545,000 to the $1.4 million estate house with a wine grotto, an individually vented cigar room and a resort-like stone spa off the master bedroom.
By MetroStudy’s calculations there’s still correcting left to do in the Twin Cities, particularly at the high end. There are 4,479 newly finished homes sitting empty, far more than the 3,000 that there probably should be, Jones said. And while housing starts have dropped sharply, the bulk of the pullback has been in homes under $500,000, he said.
Full article at
http://www.twincities.com/mld/twincities/business/16770718.htm
A housing melt down article. Bad recession predicted ahead.
http://www.safehaven.com/article-6994.htm
still making me laugh:
http://www.flippernation.com/
From Craigslist SD -
A victorian money pit. Purchased at the height of the market in Oct. ‘05 for the current asking price of $1,150,000. Remodeled with the usual granite, new kitchen, stainless steel and landscaping. Conveniently located next to Albatross St.
http://sandiego.craigslist.org/rfs/284284053.html216 West Robinson
Let’s try that link again…
http://tinyurl.com/you3ex
Just want to share this with you. CFC REOs increased by %14 during last three weeks. Tsunami is here, watch out.
http://spreadsheets.google.com/pub?key=pOSu8I1YrtgD6YqtUVBaINg
Waves of condo/coop foreclosures in ‘91. Could happen again.
http://newyork.craigslist.org/que/rfs/284468190.html
Sing along ! (Americans and Europeans and other bubblicians)
…And we will aaaall go dooooown together!…
EU experts: Economy faces major slowdown
25 February 2007 By David Clerkin
“The economy is at risk of an imminent and ‘‘very serious’’ slowdown due to high wages, an overdependence on construction and a potential collapse in consumer spending, a top European research agency will warn in a major report to be published this week.
The report, by the Munich-based CESifo Group, warns of a clear risk of ‘‘a significant reversal’’ in construction activity.
Combined with the impact on exports from declining competitiveness, this could lead to a sharp fall in growth rates, it says.
CESifo is the leading German institute which publishes the IFO Business Confidence Index. Its reports on EU economies carry considerable weight: they are written by an advisory group of senior economists from across Europe.”
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS-qqqs=news-qqqid=21320-qqqx=1.asp
Inflation: A lose-lose proposition for the Fed.
http://www.321gold.com/editorials/schiff/schiff022307.html
I think we are fast approaching the time when the markets will actually force the Fed to show its cards. If gold prices continue to surge (up another ten bucks so far this morning,) and long-term interest rates finally follow suit, the Fed will be forced to make a very uncomfortable decision. It will either have to raise rates aggressively, and let the economic chips falls where they may, or fold its hand by leaving rates unchanged. Either way, we are in big trouble. If the Fed does the former, stock and real estate prices will fall, dragging the economy and the dollar down with them. If it does the latter, the dollar will collapse, long-term interest rates will soar, causing stock and real estate prices to plunge, and pushing the economy into recession. It’s the ultimate catch-22. When it comes to the Fed raising rates, we’re dammed if they do and dammed if they don’t.
The insanity in Los Angeles is over the top. Was reading the RE section of the LA Times today and featured is a full page ad for those loser lofts scattered throughout dismal downtown LA. The downtown loft area boundaries are landmarked on the North by the Men’s Jail; to the east the railroad yards/LA river dumping basin; to the west is the Harbor freeway; and to the south is the east-west corridor of the Santa Monica Freeway. On pg K4 is a full page ad featuring the “Downtown Living 2007 Weekend” where a potential buyer can register at their website for VIP shuttle transportation and tours of their featured lofts. About 14 loft buildings are highlighted with prices starting from the low $300’s to almost $5 mil. There are “for sale” signs all over downtown for these condos. But I got quite a chuckle when I turned to page K12 which is the “Southland Home Prices” by zip code and it showed only 1 sale for the 90015 zip for $485,000. 90015 is one of the downtown LA zip codes that has more than its share of lofts available for sale.
For the first time in easily 20 years, the LA skyline is filled with construction cranes. All that seems to be on the drawing board (other than LA Live - an additional entertainment/ hotel/ condo/ theater/ whatever-whatever adjacent to the LA Convention Center) are high-rise condos made of concrete and metal with floor to ceiling windows. I can’t understand who in their right mind would want to live in downtown LA. It’s filled with the homeless and businesses lock up after the business people leave. At night time — it’s just downright scary. So who wants to walk their dog after sunset?
On a side note — Donald Trump is coming to town as a headliner for the Learning Annex Real Estate and Wealth Expo. The Donald is going to reveal the “5 Mega Trends — that Can Make You Rich”
Trend #1 - Residential Real Estate Will Come Back Strong - ha ha - not for several years.
Trend #2 - Commercial Real Estate is Booming - Then why do I see so many for lease signs on commercial buildings?????
Trend #3 - The Boom in Baby Boomer Real Estate - won’t we all be trying to sell our houses at about the same time to fund the retirement we haven’t been saving for????
Trend #4 - A Vast Migration to the Far Suburbs (now called the exurbs) - Isn’t that where real estate is going to crash the hardest????
Trend #5 - Immigrant Home Buying is Exploding with No End in Sight - a small percentage of immigrants come to LA wealthy enough to purchase RE, however, the majority I see are part of the unwashed masses struggling to make ends meet. They’re trying to pay rent and put food on the table. They are not looking to bail-out a granite-top installing flipper.
What do others see happening in LA????
Casey’s site is down again. Maybe he didn’t pay his web hosting bill.
Fink, Chip, and other floridians…
Can anyone give scoop on Stuart/Ft. Pierce foreclosure opportunities? Wife and I are looking for a nice bank-owned condo. Thoughts on the area in general? I insist on being north of WPB and close to beach. Thanks!
dd
UH OH!! THIS IS THE BIG ONE