“Something Had To Change” In California
The Union Tribune reports from California. “San Diego County’s resale home prices remained relatively steady last month with the median price of single-family houses unchanged at $540,000 for the fourth straight month, DataQuick Information Systems reported Monday. The overall median stood at $480,000, down 5.9 percent from February 2006.”
“There were 2,863 sales last month, a decrease of 5.7 percent from February 2006. There were 1,461 resales of single-family homes, down from 1,636 in February 2006.”
The Orange County Register. “The subprime game is a mess. These loans proved riskier than promised. As a result, numerous subprime lenders are, at best, up for sale.”
“What will subprime loans look like once the angst subsides and the ownership musical chairs end? Will folks with less-than-perfect credit histories still have a shot at buying a home?”
“It’s no small factor in the real estate puzzle. While these riskier loans tend to be refinancing deals, LoanPerformance’s estimates show that subprime mortgage dollars funded roughly 1-in-5 home purchases in Orange County in 2006. That’s on par with the national lending pattern.”
“The most aggressive 2006 use, with roughly four out of every 10 loan dollars to buy a home being subprime, was in three California cities (Stockton, Modesto, Merced). The Inland Empire ranked fifth.”
“Towns with the heaviest subprime usage, by LoanPerformance’s tally, tended to have bigger mortgages. The 66 places with the highest concentration of subprime dollars, the top fifth, had an estimated median subprime loan amount of $131,000.”
“That’s a surprising 40 percent more than all other subprime purchase loans made in metro areas. I fear that aggressive subprime lenders in some markets may have helped hyper inflate prices.”
“San Francisco’s $392,400 average subprime loan in ‘06 was the nation’s highest. Santa Cruz, at an estimated $352,100, was next in line. Orange County’s typical 2006 subprime home purchase was financed with an estimated $312,400 loan.”
“LoanPerformance analyst Mark Carrington says it’s unclear if subprime lending’s turmoil is truly a negative for the market. What was obvious, as loan losses mounted, was ‘that something had to change,’ he said.”
The LA Times. “California’s housing bubble and housing slump share a root cause: easy money. And the particular category of easy money that sustained the bubble for so long, so-called sub-prime mortgages, may also prolong the slump.”
“They make it easier for buyers to break into expensive markets such as Southern California; since 2003, 15% to 25% of the mortgages originated in California have been sub-prime.”
“But these loans have a dark side: The size of their payments can increase, sometimes steeply. In the fourth quarter of 2006, default notices rose to almost 40,000 — their highest level in eight years. The pain could spread if rising defaults beget stricter lending practices and demand for housing slips, driving prices still lower.”
“Economists from industry groups say the sub-prime crisis doesn’t necessarily spell doom. Another view is that the housing market was in need of a correction and that a tightening of credit is just what the broker ordered. Either way, wobbles from large sub-prime lenders, which include Irvine-based New Century Financial Corp. and Santa Monica-based Fremont General Corp., could put a damper on the local economy.”
The Valley Voice. “A promising start to the new year in the resale market in Visalia has turned quiet, reports several realtors, while home builders appear to be slowing their appetite for construction of new homes in Visalia at least until they reduce their existing inventory.”
“The total value of all building permits so far this year in Visalia has dropped by 53 percent from the same two month period in 2006, reports the city of Visalia. So far this year homebuilders have taken out permits for 134 new homes compared to 246 the first two months of 2006.”
“A Centex official says that some 50 percent of new buyers of an entry level new home subdivision in Tulare are Hispanics who speak no English.”
The Press Enterprise. “With concern building over troubles in the mortgage industry, a think tank on Monday said the federal government should take new steps to protect low-income homeowners at risk of foreclosing.”
“‘Congress can’t wait for that many families to foreclose,’ said Almas Sayeed, who wrote the report for the Center for American Progress. ‘The economic impacts for communities and for the country could be devastating.’”
“During the housing boom that ended in the second half of 2005, lenders relaxed standards, extending credit to ’subprime’ buyers with poor credit histories, or to people who could not document their income.”
“Mortgage defaults, the first step toward foreclosures, were up sharply, about 150 percent, in San Bernardino and Riverside counties in the fourth quarter of 2006, according to research firm DataQuick Information Systems. There were 8,169 defaults in the Inland area. For Riverside County it was the most since 1998.”
Interesting that as cries for a bailout begin, Centex, one of the biggest homebuilders in the nation, has apparently lost their mind.
‘Gov. Schwarzenegger’s ambitious plans for his second term may crumble if the state’s nonpartisan legislative analyst is correct with her numbers. Elizabeth Hill estimated that due to slower-than-expected revenue projections, Schwarzenegger’s plan would leave the state with a $726 million shortfall for fiscal 2007-08.’
‘The troubling aspect of all this is that last year there was a windfall of more than $8 billion that was spent. Yet a potential shortfall this year should’ve been anticipated. The housing boom led to the windfall, but real estate analysts warned that the market was moving at an unrealistic pace. When are we going to learn to keep some revenue in reserve for a rainy day?’
Here’s some Dataquick tables for San Diego.
I couldn’t find a link for this from yesterdays Fresno Bee:
‘Eight of the 16 houses that real estate agent Jim Phillips is trying to sell are vacant, a sharp departure from two years ago when someone could list a house for sale today and sell it tomorrow.’
‘With more than 3,200 houses for sale in Fresno and Clovis and the number of foreclosures rising, some real estate agents and professional “stagers,” who prepare houses for quicker sale, say they are dealing with more empty houses, particularly from families who were unsuccessful in selling one house before buying another.’
‘An estimated 40% of the houses for sale could be empty, the Fresno Association of Realtors reports.’
‘The ones I’ve staged recently are people who bought another house,’ said Christine Grooms of Staged to Sell. ‘They were banking on their house selling sooner.’ ‘Agents who have never used my services before are calling. Everybody is a lot more open,’ Grooms said.’
‘Fellow stager Pam Milam of Reinvented Rooms estimates her business has climbed 30% in the last four months, mostly from ‘panic-stricken’ new home buyers terrified at the prospect of paying for two mortgages.’
‘panic-stricken’ new home buyers terrified at the prospect of paying for two mortgages.’
—————————————————
the boat has left the harbor- subprime is soooo 2006, down payments now required, most of these houses will not sell for an amount that will allow the sellers to remain in the new home
Now in their indecision, is that one or two homes that will be available for us to consider buying once the price is sane?
Got popcorn?
Neil
My panic would set in not only about 2 mortgage payments, but about owning 2 rapidly depreciating assets AND making full payments on them.
Pass the popcorn, Neil
Staging a house… throwing good money for bad.
Stage the price instead.
Staging a house… throwing good money for bad.
Yup, they’d also be better off if they had done without the granite counter, the faux finishes and the marble entry.
Honestly, we’re talking fresno here…
So would a perfect staging event for the area be beanie weenies and velveeta cheese dip and chips?
A couple of keane’s flanking the plasma tv and a kinkade in the master bedroom.
I really can’t wait for the major haircuts to begin in my home town. There are very very very few people there who earn enough to buy a $250K house, let alone the $500-600K monsters that have been popping up like mushrooms in a forest after the rain.
Staging a house… throwing good money for bad.
Stage the price instead.
As a blanket statement, I have to disagree. The amount for a reasonable staging would go unnoticed as a drop in the sales price. So many here have laughed at $5K price drops. If it’s priced right, staging gives it more appeal than a non-staged home. In CA you can spend $1,500 to $2,000 to paint a few rooms or fix some landscaping. Sure you can spend thousands more for staging, but smart shoppers can get the benefits of staging at a much lower cost. I can paint a room in no time with great results. My skills with interior design are laughable. I hire a pro where it makes sense.
Price gets someone in the door. The staging only helps once they are inside. To reject it out of hand is pretty short sighted.
I have been going to open houses and tracking prices in a few zip codes near me for well over 2 years. You can smell a staged house the instant you walk in the door. Does that The staged houses I’ve tracked just seem to move better than non-staged homes.
A question for the brokers out there:
This is shown under “Adjustments” for a loan on the broker rate sheet:
Rate = 0.0
YSP = 0.75
Margin = 0.25
Does the YSP signify that there is 75 basis points *LESS* for the broker, or is it a 75 bps *INCENTIVE* for the broker?
It looks like the broker would get a 0.75 bps rebate by adding .25 bps to the margin on the loan
It is a charge to the broker
“It is a charge to the broker”
– uh uh; YSP is a KICKBACK to the broker.
http://en.wikipedia.org/wiki/Yield_spread_premium
YSP is incentive
Margin or the spread is what the lender charges you over whatever index he’s using to price his product.
Example if COFI is at 6.5 then the bank charges you 6.75 after the margin.
The broker gets additional rebate by adding more to either the rate or margin. So lets say a person qualifies for a 6.5 rate on a 2 yr fixed with a 3.0 margin, the broker would get a pretty hefty check on the back side by charging the borrower 7% with a 4.0 margin. The broker could also get a larger rebate by getting the borrow to sign for a longer prepayment penalty.
I think it is illegal for the broker to claim the YSP from escrow unless the borrower has signed a Good Faith Estimate with it on there. This is easy for the broker to get around, because escrow will have them sign new ones at the close.
When closing at escrow, it is important for the borrowers to look at the HUD1 statement which summarizes all of the numbers. The rebate will be shown as either a POC (paid out of closing) or YSP (Yield Spread Premium).
I spent 5 years working for a subprime lender up until 1999 when I got laid off after the market took its first crap due the the LTCM and Asian currency crisis. A lot of these tricks that I see on this blog are nothing new and I’m glad that I now work in a different field (IT). I am really amazed at how far all of the loose lending practices went in the last few years and a reversion to better lending standards is much needed no matter how much pain the FB’s will have to go through.
tenquick-
Those are Mortgage Banker tricks. The average mortgage broker wouldn’t get away with that especially the disclosure slight of hand with the HUD 1’s. Most banks send out a TIL separate from the brokers 3 days after acceptance and you only get paid on spread with option arm’s. I have yet too see where you get paid on spread and rate.
‘Fellow stager Pam Milam of Reinvented Rooms estimates her business has climbed 30% in the last four months, mostly from ‘panic-stricken’ new home buyers terrified at the prospect of paying for two mortgages.’
Yeah, staging is going to sell the house, NOT. The last time I checked, people were looking at buying the structure, not the furniture. This crap is all hyped up because of HGTV. The people I know who buy houses, would actually prefer to see all of the walls, corners, flooring, etc. to know what they’re purchasing. Paying for staging is stupid. Lower the price and sell the house you turkeys.
All part of the state of deep denial that sellers find themselves in. Kinda like a deer caught in headlights; and we know what happens then. Noone will believe that it was known already 2 years in advance exactly how it would all play out.
Chuck Ponzi
http://www.socalbubble.com
I was reading an MLS weekly booklet available to the public last week, and there were numerous full-page ads from these house-staging companies, it seems like it’s become a really lucrative specialty for some interior design firms. I have to believe these people will be the first to go when the market here tanks, they are the only ones that I can think of who contribute less value to the transaction than the RE agents themselves. Couldn’t happen to a better group of people…nothing annoys me more at an open house than having the fireplace on (when it’s 90 degrees outside) and listening to that phony balone jazz music these people always have playing in the background as you try to see the actual house past all the monochromatic staged furniture.
Paying for staging is stupid. Lower the price and sell the house you turkeys.
“Stupid” is in the eye of the beholder, I suppose. Personally, I wouldn’t respond to a staged house (at least not in the way the seller would WANT me to), however, I am not your average buyer.
And regardless of whether or not staging actually works, the stagers themselves seem to be making money hand-over-fist from desperate FBs. So, I applaud stagers for profiting from others’ greed and Pollyannaish false hopes.
Staging only makes sense if the cost of staging is more than offset by the gain in the sale price that results. If sticking a couple of potted plants out on the back patio costs under $100 and adds over $1000 to the resulting sale price, then go for it!
Stucco, if you can’t sell it you may as well try anything.
The problem with staging is that any person with half a brain, or more, will see that a staged house is completely unlivable. All of the people with less than half a brain have already bought. Those of us with excess gray matter aren’t going to be buying some POS McMansion because of an angled couch or an art deco nudy lamp.
Got money? Bwahahaha. Bye bye subprime buttholes.
I have never been to a model home in a new housing development that wasn’t fully staged. Rooms can be made to look enormous by having the right sized (ie very small) furniture and the right paint colors.
We staged when we sold. It was more like a service to move our furniture and consult on what needed to go away. Sometimes it’s important for an outside set of eyes to look at what you are selling. It was well worth the money we spent. House sold quickly, with multiple offers.
Did we make our money back? Who knows, there’s nothing to compare it with. I understand that it’s become more expensive in the past couple of years.
With an empty house, simple staging makes sense. Lots ofd people don’t have vision and can’t see how big a room is or how what it might be like with a couch or a painting on the walls.
But if the buyers were the bottom feeders from this blog, staging would be pointless….Too smart.
Backstage,
I suspect that if the average person were as smart as the average person on this blog, we would have bypassed the housing bubble entirely.
However, we do know that the average person is ruled by emotion and not logic. It is exactly for these darwinian lessers that stagers were designed for.
Chuc Ponzi
http://www.socalbubble.com
You got it Ponzi! Staging is not for people who understand why staging is done. It’s for average the average Joe.
When the ‘broad masses of the people’ go to Crate & Barrel, or shop Pottery Barn, or look at a clothing catalog, or buy most any non-necessary thing, why do they do it? Why does any average person need a lime zester or a specialty cornish game hen boning knife from Williams Sonoma? They want to believe that these things will fill a void or make them better than the next door neighbor or the guy at work.
House sellers are selling LIFESTYLE! Used and new homesellers do it. For the 10 minutes you is in the home you want your life to be simple, elegant and uncluttered. Maybe having this home will give that to you!?
My point on staging is that it’s an emotional pull to make your house evoke a stronger emotion or create a longer lasting memory that the next one. How much is that worth? $2k? $10k. For us it was worth it, every penny we paid.
During the bubble run-up (SoCal) it would have been impossible to tell whether the staging actually helped or not, becuase everything was selling so fast and inventory was low. I laugh at the Flipper T.V. shows that were filmed in late 04 early 05…most of those homes could have been flipped without doing ANY improvements because the GF’s were out in mass continuously bidding up prices. In the current market, if there are four similar homes in a neighborhood and only one is staged, why would a buyer pay more for that? Any buyer with even a small amount of gray matter between his ears would buy the similar house down the street that has the lowest price. They could use the staged house as an illustration of what they could do to one they are getting the better deal on.
The house behind me was staged. Fat lotta good that did. It didn’t sell for five more months, and, yes, the seller did have to drop the price.
It sounds like the seller was trying to sell it for above market value. Staging can only do so much to increase the value of a home up from 80% of last year’s market value, where the comps currently reside.
Paying for staging is stupid. Lower the price and sell the house you turkeys.
I dunno. Obviously, price is king. However, in a market like this, only the NICEST of homes will sell at all. It’s the converse of what happened in the boom where people would buy half-renovated crack homes.
I actually LIKE “sell this house”. And it is remarkable the difference pre and post, and they often spend less than $1,000. And they usually say at the end of the episode if the house sold or not.
The typical episode has a house sitting w/o offers for 2-4 months, then they stage it and sell it that week.
It clearly works.
But it’s gotta be priced right too.
Those prices paid to upfit these homes for sale are a joke. If I used their costing method I could buy a brand new Cadillac for the cost of raw steel used to build it, $1,200.
All construction labor, design, time invested… everything but the fabric and lumber are ZERO.
Anyhow, I think staging is just an outfit that brings furniture in to make the house appear as though someone is living in it. I bought furniture from one of these outfits in 1992, towards the end of the last RE downturn in AZ. Nice stuff too, that was acquired in estate auctions when everyone was going broke.
Realistically most people have no idea how to present or control their environments. Fancy pants staging that most people are objecting to makes no sense, but actually have someone honestly say that the carpet stinks and has to go along with the nick nacks and the custom wallpaper edging that is starting to peel. Except in very special circumstances actually seeing a place left the way people live in it is a huge turn off. This kind of basic staging should usually only take some time with friends for advice and a few hundred bucks for basic materials.
When we sold my mom’s place, our realtor told us what to replace, repaint, etc., and kept it to a minimum. The house was empty when we sold it. Staging?….we put new matching electical outlet covers on the walls. But this was in Aug, 2005. Multiple offers, well over asking price, but none with any cash. I’m not sure what we would have to do to sell it today.
I wouldn’t pay a stager, but when I sold a trashy little house in Maine last May, I was told by the broker (who showed my house full of nice antiques) that the new owner, upon taking occupancy, looked disappointed when she looked again at the inside of the trashy little house as nothing more than a trashy little house.
Staging is a big LIE.
Small bed room? no problem, the stager will install a child’s bed with an adult bed spread, no dresser and a big plant. I guarantee the room will look larger and sell for more.
WOW this living room is gigantic, untill you actually sit on the reduced size couch.
The builders do it too. WOW all the bathrooms have a bathtub! You will only get in that tub once, then find out that adults can’t fit into those reduced sized tubs.
I know someone that went from advertising producer to home stager. Claims she’s in the dough. She also invested in 4 out of state properties… about 2 years ago. Bought them online.
Sounds like perfect disaster brewing but what do I know… I’m only imploder.
LOL @ imploder!
The stager we used is a personal friend. She’s made a HUGE income in the past few years. She and her staff were so overworked that she was going to sell the business. Her accountant said she should double her rates. She did! Now she’s just as busy, but has more staff and fewer “bargain basement” clients.
She owns one home, and drives a Honda Accord.
I’ve seen a few of those staging shows on HGTV. In each, the most important thing the stagers did was to remove clutter. Only the most unnoticeable furniture remained, so as not to distract potential buyers from the house itself.
‘Eight of the 16 houses that real estate agent Jim Phillips is trying to sell are vacant, a sharp departure from two years ago when someone could list a house for sale today and sell it tomorrow.’
Man you should have seen that city. Like tiny ants building their hill only to have the wave of foreclosure come along and wipe them out. Now they must grab a twig or leaf and float along waiting to get deposited somewhere dry. I traveled alot through north Fresno area and I would just shake my head as the illeeg’s would be a framing sun up to sun down 7 days a week and the earth movers were trashing grape vineyards and walnut orchards one after another. God what mess and just wait till all that shoddy construction starts rearing it’s ugly head.
Tell me about it. It’s sad beyond belief. Believe it or not, Fresno used to be a gorgeous city way way back in the day. But miles of uprooted orchards replaced with cookie-cutter tract homes as far as the eye can see does a lot to bring down the value of a place.
On another note, I just found out my BIL in Fresno worked until Christmas (when he was laid off) for the now-defunct mortgage company MLN (#19 on the implode-a-meter). He hadn’t been paid by them since October anyways so I guess he’ll be better off without them.
CA did the same thing with all the cap-gains taxes they were getting from the tech boom. STUPID guvment politicians make a parabola out of the ‘gains’…and just extrapolate the growth outward.
The subprime fallout is ONLY THE BEGINNING!! That said, I did my first post in a series with an ‘inside’ look at the subprime industry…complete with actual rate sheets, flyers, and marketing material. I will show you how standards left the market…and alt-a and a-paper is next.
Stay tuned…
SoCalMtgGuy
forgot the site link….
http://www.housingbubblecasualty.com
Excellent. excellent. Will read this with joy.
Excellent info, SoCAlMtgGuy.
Forgive me if my question is stupid, but let’s say you have a loan with one of these companies that are going down. Who do you send the payment to if the company shuts down suddenly? Isn’t this also going to create all kinds of nightmares for people who want to keep paying their mortgage?
You keep sending your payment to the same place until you get a letter instructing otherwise. Whichever creditor/purchaser buys up the loans might move it, but, trust me, NO WAY are they going to let an income stream wander into the wilderness
See this site:
http://money.cnn.com/2007/03/01/pf/saving/toptips/index.htm?postversion=2007030112
I absolutely agree with you SoCalMtgGuy! The story above says that sub-prime loans have a darks side because the payments can increase steeply; but that wasn’t unique to sub-prime loans. Lots of people were doing adjustables!
Not everyone who paid way too much for a house had bad credit! This is absolutely feed on itself and lots more loans are going to go bad.
The ‘investors’ who bought the worst loans may actually come out better since those loans failed first and they could force the originator to buy them back. In another year I’ll bet a lot of the lenders decided to close their doors so they don’t have to buy back the garbage. Then the ‘investors’ will be stuck with a basket of non-performing loans, and no buyers.
“revenue in reserve for a rainy day?’
unfortunately, rainy day revenue doesn’t get people elected. Over spending on the popular problem d’-jour does.
The answer to your question, Ms. Hill, is never.
“A Centex official says that some 50 percent of new buyers of an entry level new home subdivision in Tulare are Hispanics who speak no English.”
And have no green cards?
Seriously, Mexican immigrants (over or under the table) are easy marks for real estate scams. Since in the old country only those *born* rich own their own house & land, buying instead of renting is a point of pride for new immigrants. And if their English (the business language both here and internationally) is none too good, they can get scammed with “creative” verbal translations by the Realtor/lender/con man.
Being stupid can get expensive
[quote]Being stupid can get expensive [/quote]
This is also applicable to a large majority of English speaking Americans who got a subprime loan in the past 3 years
That is a real interesting and true quote.I’m sure the lenders could totally screw over these vulnerable,uneducated people with a lot of bullsh@t fees. If you do not understand what you are signing do not sign. I think there is a bumper sticker floating around that says something like “Think education is expensive, try ignorance”.
I’d like to follow this story a bit and find out who or what companies made loans to these people. Someone on this blog hinted that Mexican gangs might have a hand in some of the mortgage lending to Mexican immigrants, both legal and illegal. If so, there might be a totally new business model for the collection/foreclosure process on those Centex homes.
We have friends that bought a house in Farmersville about 5 years ago for $98k and they didn’t realize that they were essentially the token non Hispanic family in the neighborhood and almost nobody spoke any english.
They bailed @ $187K, with multiple offers, a few years ago.
- Hispanics who speak no English
Bank of America will provide a English primer for them!
BofA will gladly give them a credit card to help them make their new house payments.I’m sure they are high margin customers who are treated with lot’s of repsect.
From the BA brochure “Todo que deseaste siempre saber sobre los Real Estatos”:
Fixed rate = muy costoso
Adjustable rate = muy bueno
110% loan to value option ARM = mucho major
Documentation = papeleo inútil
6% commission = donación a la caridad
I am not sure if the Centex official has a good command of the language either. ‘No English’ is not a language. It should read “A Centex official says that some 50 percent of new buyers of an entry level new home subdivision in Tulare are Hispanics who do not speak English”
Seriously, Mexican immigrants (over or under the table) are easy marks for real estate scams.
Scam the Mexican immigrants? They are not the ones being scammed, do you think they care about their credit rating?
I haven’t decided whether these immigrants are incredibly smart or incredibly stupid. On one hand they’re getting into something they really can’t afford and will destroy their credit rating in the future. On the other hand they can move into the place, not make a single mortgage payment, and live in the place rent free for at least six months. After the six months are up they can either go back down to Mexico or just assume a new name and either fake social security number or new working permit. Wash, rinse, repeat.
Seriously, does anyone realize how difficult it is to verify a social security number and id? Do you realize that even questioning the validity of social security numbers and ids is illegal if the SSN and ids pass an initial visual test and opens employers up to liability? And even if you do try to verify the SSN, chances are you get someone on the other end of the line who will give you the run around and be no help whatsoever.
“Seriously, does anyone realize how difficult it is to verify a social security number and id? ”
A friend of mine is a Bank of America manager. People come into his center all the time with fake cards. Some are so bad, they just hand-write “Legal Resident” of something on a piece of paper and laminate it. For those, he just shakes his head, says no, and the customer tries it at another center. But if the SS card looks remotely legit, they can do business.
The Real Id Act should slow these guys down for a while but I’m sure they’ll find a way around it eventually.
http://en.wikipedia.org/wiki/REAL_ID_Act
It used to be a lot easier. There used to be a program whereby employers could, with one phone call, verify the social security number of an applicant. Verifying was free. At the request of the US Chamber of Commerce, President Bush shut it down by executive order in early 2001.
Closing that down was the USCOC’s #1 legislative priority for the new administration. It was one of Bush’s first acts as President. Come on, you can’t ask honest, hardworking American businessmen to follow the law, can you? Anything that undermines plausible deniability must be suppressed.
–Shannon
The innocent citizen will have to pay for the SCAM
“Scam the Mexican immigrants? They are not the ones being scammed, do you think they care about their credit rating?”
Maybe I’m just a little silly, but don’t you need a SS# to even have a credit rating? If I were an illegal alien, I would have happily signed on the bottom line for my zero down, zero risk, new home. Then, I would have ridden the gravy train of appreciation all the way to the top. If there was none? No problema! I’ll just sit right here till the constable shows up, free of charge. Credit rating! What stinkin’ credit rating?!
No, to answer your question. what a lot are doing now is using the TIN’s very easy to get over and over again.
You’ve got it, BanteringBear!!
Must admit, they’re going to be on the winning end of this credit bubble implosion.
Lenders (including those of us with retirement funds in these investments) will lose money.
Taxpayers will lose money as we bail out the lenders and/or the FBs (God help us!).
FBs will at least have a foreclosure and dinged credit report (we can hope, right?).
But illegal aliens will have had cheap rent in a nice house — free, as they will likely stick around through the foreclosure process. And a dinged credit report on a false SSN.
Welcome to the U.S.A., where it pays to be a criminal…
It looks like they’re ending up with a piece of the American Nightmare.
Welcome to the “you’ve been owned society” I mean “the ownership society”
As coined in another thread…they’re just “buying homes Americans won’t buy”!
They will learn that The Man in good ol America is just as devious, cunning, arrogand and rapaicious in screwing the average Joe Six Pack and Jose Cerveza alike as did El Hombre back in Mexico.
Only difference is more paperwork and much better propaganda.
There, you knew it when you were getting screwed.
Here they make it seem like you’re getting blown but really you’re being ….. well you know.
“Mexican immigrants (over or under the table) are easy marks for real estate scams.”
You’re underestimating these folks. Check out yesterday’s thread on the Mapula’s. Bought a 700k house on a no-doc liar’s loan, and committed fraud by, among other things, listing non-existent assets.
When the house failed to appreciate, they got a lawyer and sued for 250k and unloaded the house scot-free. You’ve got plenty of illegals who are grifters and skilled hustlers gaming for everything they can grab.
spike66: You’re underestimating these folks. Check out yesterday’s thread on the Mapula’s. Bought a 700k house on a no-doc liar’s loan, and committed fraud by, among other things, listing non-existent assets.
When the house failed to appreciate, they got a lawyer and sued for 250k and unloaded the house scot-free. You’ve got plenty of illegals who are grifters and skilled hustlers gaming for everything they can grab.
The salt of the earth immigrant (legal or otherwise), whose only defect is that he doesn’t speak English, is a myth. One of the long-running scams among immigrants who don’t plan to settle stateside is to apply, after several years in-country, for multiple credit cards amounting to tens of thousands of dollars (these days, $100,000 is easy if you keep your nose clean), run up charges maxing out these credit lines and then return to the old country, never to be seen stateside again. One particular scheme involved selling charges on these cards for 50 cents on the dollar. The mortgage scheme is much more ambitious - it involves fraudulently borrowing money in order to generate gains in the hundreds of thousands of dollars. If they make money on the speculation, they stay in the country. Otherwise, they return to the old country - but not before going charging up a storm on their stated income credit cards - bills that will never get paid.
Watch your local news very carefully. Look for stories in which a map of the US is displayed, perhaps some story illustrating outbreaks of disease, state by state, or a story about a company that operates in different states. You might find, as I did recently, that the map is a combined US/Mexico map, with no border and the Mexican states delineated just like the states of the US. It gave me quite a turn, I’ve never seen anything like it on TV in Florida before.
What that suggests to me is that illegal immigrants are about to get as big a shock as we are, at least those who are planning to return to the “old country” with ill gotten gains.
Think it is tin-foil hat? I don’t know. But I do know that one think lenders want is their dough and I would suggest that before the non-English speaking 50% of that Centex development bought, the lenders must have had some idea of cross-border recourse, beyond just the property. Centex didn’t lose its mind, it just provides the boxes. The lenders, who provided the mortgages, might have, however. Given the recent subprime meltdown, that could be the case. Given the recent contraction, however, other factors might be at work.
“With concern building over troubles in the mortgage industry, a think tank on Monday said the federal government should take new steps to protect low-income homeowners at risk of foreclosing.”
Most of the persons in trouble got into this mess because of greed! I do not want our taxes used to bail out these greedy people. If they had made a ton of money, which many probably did, whould they have shared their bounty? Of course not; they would have laughed at the rest of us who decided to stay away from these mirage.
I am highly doubtful some no-name think tank will be able to to convince a broke congress to do much more than propose some bandaid. If past busts are any indication, some scheme to line the cronies pockets with the scraps is more likely. That said, we should remain vigilant and keep our hands on our wallets.
Ditto on the tax bailout — I pay WAY too much in taxes already and absolutely don’t want anything to go to some greedy FB because they sobbed on CSPAN in front of Nancy Peloisi or Barney Frank. Yes, this is hard on them but, come on people, these are adults who signed contracts. I’m preaching to the choir here but how is it now my problem that you signed something you didn’t read or understand?
Well, lets be sure to remind congress that they can go ask Centex for the money first.
Maybe some of the big Wall Street investment banks who were the kingpins behind the subprime loans could chip in a few nickels?
I can’t state enough my dislike on any such bail-out. It would reward greed; it would penalize those of us who stayed out of the mad market by missusing our tax money; and it would make it harder for us to buy a house at a reasonable price because they bailout would propup unreal prices.
Right, Peter, that last point is my main objection. My tax money is already used for zillions of things I don’t believe in, but to use it to keep house prices out of my reach would be to add another injurious insult.
A bailout would injure FBs by stealing from them the financial education that they so desperately need.
It will be a cold day in hell before I bail out anyone from their greed and ignorance!
not being nasty or attacking you,,,,
but what makes you think you will have a choice?
Having a backbone does wonders.
Guns trump backbones.
Did we have a choice with the RTC in the late 80’s? Nope.
Let’s remember that powerful rich people who lost money will get bailed out, not Joe Subprime. Look what happened with the S&L’s: people who made tons of money investing in crap kept most of it. Same principle will undoubtably apply here.
Some hedge fund & banks with lots of Senators invested in it? bailout “for the sake of the global financial system” yadda yadda.
The pen is mightier than the sword, the blog is mightier than the gun? At some point many of us may have to be willing to sacrifice ourselves to save the nation and I do not mean armed rebellion. Live free or die may wind up not being a choice.
Edward Abbey said it well:
“There is no force more potent in the modern world than stupidity fueled by greed.”
What we’ll have once this all drops to the floor is the powerful and mighty fighting over the carcass. How do we insulate ourselves from getting caught in the carnage?
Neil Bush got paid Handsomely from the S & L crisis.
Hey tg you first, i will be right behind ya buddy.
The Declaration of Independence does say a revolution now and then is healthy for a society. No bailouts and I, for one, will figure out what part of my taxes are bailing out FBs (if that happens) and I will find a way to grab that money back. Don’t be a sheople and allow any bailout to fleece you.
italics off…
If there’s a bailout, it won’t be the FB’s who get it. It will be the banks who loaned them money they could never repay, relying, just as the FB’s were, on appreciation to save them. It’s nice to be able to foreclose on a house that’s worth more than you loaned out. Except when you can’t.
If it comes to a showdown between Joe Sixpack and James Champagne III, Esq. guess who’s gonna win?
–Shannon
First and foremost, how “quick” do you think congress could come up with a plan, and then how “quick” do you think they could implement such a plan, assuming of course they even had the money. By the time they got around to doing anything, the market will be laid to ruins.
I’ve thought about that before. It takes a long time to put something like that together, and right now it’s just a think tank or two making noise.
Executive orders take about a day to put together. Congress doesn’t have the willpower to stop any such order from potentially occuring. Those dogs don’t hunt.
The Federal Reserve Bank has previously worked on the plan. Published Federal Reserve Minneapolis October, 2000 - a result of the stock Market crashing.
The gist of the Federal reserve was the implicit ‘To Big To Fail’
The FDIC did a better review in their report in March 2006
titled ‘Scenarios for The Next Recession’ (St Louis) in that they expect 10% of all homeowners to lose their house. They gave various suggestions for a bailout.
Moody’s investor service did us no favors by changing their rating system. According to Moody’s used to mean something , now one of their criteria is ‘to big to fail’. This raised Citigroup to the highest rating. S & P has not decided if they will change.
Never the less, the biggest reason that the US may no intervene is because of foreign dollar holdings. from asia times.
“In past crises, such as the 1987 stock-market crash or the recession in the early 1990s that sank the administration of president George H W Bush, the US could depend on the munificence of strangers. In particular, the world’s sole superpower attracted enough money from risk-averse investors to refloat its economy. That time has, however, come and gone as developing countries no longer “need” to buy US government bonds.”
http://tinyurl.com/2pe9zk
Santacruzsux: I agree that an executive order could be done quickly, but technically any bailout would need to come from Congress, as the Constitution requires that spending bills originate in the House and be passed by both houses and then signed by the President.
Now, considering that Bush seems to have little regard for the Constitution, I wouldn’t say that he might not try something like an executive order. I’m hoping that he won’t, though, and I actually don’t think he would, as I don’t think that it will do anything to help his legacy, and that’s really all he seems to care about at this point.
at most, I think it would be a window dressing bailout..
I hope I’m right…
“we should remain vigilant and keep our hands on our wallets.”
Testify!
Bailout will probably be limited to funds owed to depositors in federally-insured (FDIC) lenders that become insolvent. The feds are not going to start buying houses at summer ‘05 prices from anybody.
It isn’t “federally-insured”. It is the Federal Deposit Insurance Company. According to their website, they are an “independent agency of the federal gov’t”. That means they were given a charter by Congress to instill confidence in the US banking industry, at least that is what they say. As part of that confidence, the inclusion of the word “federal” does a good piece of that work. It convinces a lot of folks. Same as the Federal Reserve. Because they were created by Congress, it technically makes them an “independent agency”. They receive no money from the Treasury, only what they make from their premiums, which they loan out for investment. That means they are operating very similar to any other bank. They loan out their premiums to turn a profit. Can you see how this is a vicious circle? Lending institutions gets rich while the credit expansion is ongoing. When it reverses, they just go out of business. The depositor is left with no savings.
They have 49 billion to insure 3 trillion worth of deposits. That means that there is 1.6% of reserves for the total. How’s my confidence when looking at the credit debacle facing us? About 1.6 %.
They will print/click more money into existence whether paper or electronic.
Jerry,
I agree. If they don’t, we’ll have deflation, and a lot of those FDIC insured deposits will be gone.
There will be many borrowers who would be capable of making the payments on a conventional 30-year mortgage when their loan resets, but will be unable to refinance because they are underwater. For this group of borrowers, I suspect the government may institute a “loan guarantee” program similar to what they did for Chrysler in the 80’s. It would be in both the bank’s interest and the borrower’s interest to make the loan and have the borrower continue to make payments, and some banks will do this on their own (or be forced to in a “cram down“); however, many other banks will not, so a government program may become necessary to prevent further disruption in the market. This won’t do much for those with stated income (liar) loans, negative amortization loans, and others who are unable to make the payments (which is probably most buyers over the last 2-3 years). I don’t see the government getting involved in debt forgiveness or paying off the banks losses: It would be too expensive at a time when tax receipts will be down.
Your idea has a great deal of merit. There are plenty of subprime borrowers at 9.5% interest that have no problem paying their loan, but because of the new subprime regulations they are not able to refinance and their credit is not good enough to receive expanded approval status. When these subprimes recast to 12% or more, what are they supposed to do.
Hoz,
This is the only area where I could see the government doing something of value without costing too much money.
Off topic: Did I see on one of your posts that you are in Northern Wisconsin? I went to high school in Central Wisconsin, and my golf coach was nicknamed Hoz. Couldn’t help wondering…
A wonderful game golf! Alas I haven’t shot in the 70’s in 15 years and now feel lucky if I can get my ball off the tee. Northern Wisconsin is not located on any maps, a hideous place - so for your own safety stay away. And if I did not have kids and grandkids in Chicago - Milwaukee corridor, I would never leave.
My secret plan is to build a house on a lake in the Woodruff/Minocqua area and spend my summers there. It is so peaceful. I’ll try not to let out the secret. Maybe someday…
‘The economic impacts for communities and for the country could be devastating.’”
So they go back to renting, how is that devestating ?
“a think tank on Monday said the federal government should take new steps to protect low-income homeowners at risk of foreclosing.”
Eveyone seems to believe in a “free” market until it’s their market being affected, exactly who is funding this “Think Tank” and why don’t they bail out these poor souls themselves instead of asking us for a bail out ?
Looks like a bunch of Clintonite Democrats, two quick examples:
President and CEO - John Podesta, Clinton’s White House Chief of Staff 1998-2001
On board of directors: Carol Browner, Clinton’s EPA chief
Frankly, I think the biggest danger to California is real estate prices staying this high - if they don’t go down, even more jobs and people will leave.
This is just pandering for votes in the 2008 cycle. Nothing will come of it.
I’m a dem, but watch out for Hillary on this…she has already made “bailout” remarks during her recent tour of New Hampshire.
And Dumbocrap Jesse “shake down” Jackson has also called for bail outs. Okay. Which Repugnants are calling for Bailouts?
“The most aggressive 2006 use, with roughly four out of every 10 loan dollars to buy a home being subprime, was in three California cities (Stockton, Modesto, Merced). ”
Ah…the Central Crater, formally known as the Central Valley. 100 miles north to south, sixty miles wide. I swear, when the fun starts here the Book of the Dead will be written.
This may be the first time the entire Central Valley goes underwater since the flood of 1862…
Nice.
That was a good year. Pretty much all of OC was underwater then, too.
This is very disturbing and certainly should give pause before buying in an area with buit in overhang. I thought this would take 15 years to unwind now I think it may be 20 years.
Hoz,
So correct, Never will living in an established neighborhood have the cache, it’s going to have in the near future, vs ghost towns.
About 10 years ago I went over to my friend’s house in Palmdale. He’d bought in 1990 for like $118k and we drove to his house and he pointed at nearly every house on the way and it’s story, foreclosed here, foreclosed there, of the 25 or so houses around him, a whole 6 had people in them. Palmdale was kind of unique, in that it was about as far out, as they built in those days. A Ghost Town for it’s era.
There’s easily 1,000 new Palmdales, maybe 10,000? coast to coast.
“During the housing boom that ended in the second half of 2005, lenders relaxed standards, extending credit to ’subprime’ buyers with poor credit histories, or to people who could not document their income.”
And I’m supposed to bail these guys out for poor business practices while the CEO’s, Brokers, Etc. all prance away with millions in Pay, stock grants, bonuses, fees, commisions ?
Amen!
Let the fools who caused this credit bubble bail themselves and their FBs out.
I’m a fairly liberal, economically, but am 100% opposed to any kind of bailout — either for the lenders or the FBs.
“This is also applicable to a large majority of English speaking Americans who got a subprime loan in the past 3 years”
Word.
Most of the people I know who got into houses with sub-prime, exotic loans know damn well what the loans entailed….they were simply foolish enough to think the prices would always rise. I will not bail out their sorry asses becuase they got greedy.
I think all of us readers of Ben’s blog can now oficially say (to all of the articles now beginning to describe the bubble and its demise) in perfect ValleyGirl-ese:
Well, like, duh!
For sure, like totally!
DUUUUUUUUUUUUUUUUUUUUUUUUUDE! Like we, like never saw, like these overinflated prices, like going back down, like. As if! Everyone knew, like what goes up has to come down, like gravity, duuuuuuuuuuuuuuuuuuuuuude!
Gag on this while we spoon
For shame, imploder!!! LOL!
It was ,like, unbelievable,dude. One day houses were selling like hotcakes and the next day it was like CRASH, KABOOM, and there were, like, no more buyers.
Dude even shyte would reach terminal velocity if ejected from a great height as friction warms it up it might catch fire.
“LoanPerformance analyst Mark Carrington says it’s unclear if subprime lending’s turmoil is truly a negative for the market. What was obvious, as loan losses mounted, was ‘that something had to change,’ he said.”
D’oh!
There is nothing really wrong with a sub-prime loan. The issue is the price of the house.
I bought my first house with an ARM in 1994. The price was $115K. Even then, I found out from Zillow later that my realtor let me overpay by about $15K.
Subprime is fine for first time buyers, but the current home prices make almost any house unaffordable for many.
If home pricing had stayed decent, we would not be talking about an implosion right now.
In principle you are right, but more specifically it was the loose standards surrounding the subprime lending practices that allowed people who would have not otherwise qualified for it.
Bingo! Subprime surely has it’s place in the world. But regardless of price, you don’t lend someone with a 560 fico score 100% of the purchase price with no income or asset documentation, period! Heck, you shouldn’t lend someone with a 700 score 100% with little or no verification deemed necessary. Before 2000, this was unheard of in this sector. It was hard to find interest only deals in subprime before then, let alone NegAm. No, it’s the fact that subprime took it’s traditional underwriting guidebook and tossed it out the window - that’s the problem here. (Oh, and by the way, Alt-A and A-paper tossed their guidebooks too. So look forward to that hitting your local neighborhood soon.)
Right, right, I keep shouting that it’s not the credit scores that matter: it’s the LTV (or how much hard cash down payment the borrower has parted with). To my clientele, a down payment of $15K folding green is a big deal, and they don’t walk away. (so far)
As long as we are talking FICOs….
nnvmrtgbrkr what should be IYO the minimum FICO for a 100% ND loan?
Also, how frequently do you see people with say, a FICO of 827, walk into your office to get a loan?
Very curious…..
Got 10% down?
Like az_lender said, it’s not so much fico that matters, but the ability to repay. Of course, fico should be high, but limited doc type loans shouldn’t exist here. Income should be scrutinized with debt-to-income ratios being far tighter than some guy coming in with 10 or 20 percent down. Also, assets should be verified to the tune of 6 months reserves. You don’t like it, then go save some friggin’ money and quit asking for something for nothing.
Exactly, nnvmtgbrkr!
We’ve long had HUD/FHA loans which required much less down and were designed for low-income buyers. However…they would go through your finances with a fine-tooth comb and you actually had to qualify in some way.
Personally, I think we ought to have a certain number of these kinds of loans per region (per year or month), so as not to flood the market with less-qualified buyers at any given point in time.
Didn’t the homes have to meet certain requirements as well (like a % above/below median or demographic requirements, etc.)?
And these subprime buyers showed up in droves, competing for housing with the prime borrowers, and often bidding up the price of said housing. I, for one, will be much happier when I go to purchase a house (2010?) and I’m not competing against a bunch of people that haven’t shown any ability to save or to maintain credit: in other words, people that shouldn’t be buying a house to begin with.
IF you were a flipper, with financial means, the smart way to go would have been with an Option ARM, as your payoff was the sale of the flipped property, so I disagree that it was all subprime buyers. It was also GREEDY buyers.
Subprime has a place, but it is much easier to deal with a bank with a potential $20K debt (with reasonable prices) than a $200K debt that most people have no chance of paying off.
The credit bubble to a very large degree created the real estate bubble. Prices exploded due to cheap money and low credit standards. Any idiot could get a loan, and not even need a down payment, make up their income if need be, delay paying principal for few years or even borrow more via negative amortization
In a similar way (though on a different scale) college tuition and fees have followed the same pattern, with direct governmental loans and other cheap money/easy payback sources - helped to push the price of college tuition up way beyond any rational level related to inflation or other costs
Absolutely. And everybody’s being “insured” for medical expenses has made it impossible to pay for one’s own medical care.
I used to run a flood restoration company many years ago. Insurance rates were MUCH more expensive than pay as you go folks and drove up prices. The problem is no one has a stake in the matter. Show up at the hospital pay your $100 deductible and thats it. Same with houses. Even with subprime, 20% down would have put enough of a wedge to keep out those too weak to really afford their homes and would have kept prices reasonable.
When costs for education and health care deflate, or access to them is dramatically reduced, you will know the US is undergoing a major transition in its history, imo. OTOH, things will likely have reached a true crisis stage for that to happen. This housing bubble fiasco is just a warmup. All things considered, I’d have rather been in my parents’ generation. They’re well into their 70’s.
All things considered, I’d have rather been in my parents’ generation. They’re well into their 70’s.
—————————
Totally agree.
I told my parents last time I visited them in the UK they lived the prime of their life during the best time in history to be alive. I really think people just cannot comprehend the mess we are in today, and the fact that the medicine will be brutally painful to many, especially those heavily in debt or just poor.
“That’s a surprising 40 percent more than all other subprime purchase loans made in metro areas. I fear that aggressive subprime lenders in some markets may have helped hyper inflate prices.”
Yet another MSM discovery of a prediction made ages ago on this here blog.
Sorry if this was posted already. I can’t believe it…
L.A. home prices post another record high
By Annette Haddad, Times Staff Writer
11:28 AM PDT, March 12, 2007
Los Angeles County home prices continued to show resilience last month, reaching a new median record even as sales declined for the 16th consecutive month, data released today showed.
In February, the median price of all homes sold in L.A. County rose 7.8% to $528,000, according to La Jolla-based research firm DataQuick Information Systems. It was the biggest year-over-year percentage gain since July.
At the same time, home sales fell 11% to 6,300, the fewest transactions for a February since 1997, DataQuick said. The rate of decline picked up from January, when sales fell 6.9% from a year ago, but was an improvement over mid-2006, when sales were falling at a 25% year over year pace.
L.A. County’s median price — the point at which half of all homes sold for more, half for less — had been virtually flat since June, when the median was $520,000.
“We still see L.A. as a market in transition and it’s important not to read too much into a modest price pop early in the year,” said Andrew LePage, a DataQuick analyst.
Because Los Angeles is the largest housing market in the state, prices appear to be holding up better than elsewhere. But the county also came later to the state’s housing boom that began nearly seven years ago and now is one the last to lose steam.
One of the first to lose momentum was San Diego County, which spent a year clocking single-digit price gains before turning negative in early 2006. San Diego’s median price is now declining at about a 5% rate year over year.
Data for other Southern California markets are expected later this week.
January and February are typically the slowest months of the year for real estate transactions. Analysts are more interested in seeing how well the next three months perform before drawing conclusions about the health of the Southland’s housing market.
The outlook nonetheless seems hazy. Tighter lending standards and slower appreciation will probably keep many would-be buyers on the sidelines, even if interest rates remain steady and the economy continues to produce jobs.
“This spring we’ll find out just how much demand is left out there at today’s prices,” LePage said.
‘This spring we’ll find out just how much demand is left out there at today’s prices,” LePage said.’
Sounds like some fear at DQ. How much was Compton up this month?
Couldn’t find the updated zip code price breakdown.
Compton probably up 20% YOY. Buy before it’s too late!
Everyone who’s thinking of buying in Compton should certainly be wary of being “Price Out Forever.”
http://pricedoutforever.com/learn.html
nice link, thanks!
Zip chart comes out this weekend.
Good point about Compton. There are homes selling in Santa Barbara that are cheaper than some homes in Compton.
How do you say stupid f##ked buyer in ghetto/gangsta rap lingo?
Just so everyone can have a good laugh:
Compton, Ca Jan, 2007 median home value $415,000
Compton, Ca 2005 number of murders 65
Compton, Ca 2005 population 93,000
Garland, Texas Jan, 2007 median home value $117,000
Garland, Texas 2005 number of murders 7
Garland, Texas 2005 population 215,000
that should suck in a few more FBers
My rational mind tells me that sales at -11% frome last years dismal rate is good (-25% from *hot* 05 to *not hot *06 notwithstanding)
My rational mind also tells me that the median price bump just means that more expensive houses are selling, not that prices are really going up.
My rational mind looks at asking (and selling) prices of newly listed homes, listens to my friends and neighbors saying that L.A. won’t fall too far… and becomes COMPLETELY IRRATIONAL!!! WTF?!?! Please, someone tell me some gloomy stories! mrincomestream? Anyone? I need schadenfrued!
May I suggest any of the following:
calculatedrisk.blogspot.com
ml-implode.com
wallstreetexaminer.com/blogs/winter
wallstreetexaminer.com/blogs/krowne
or especially the latest Fleck: tinyurl.com/2fzuk3
Where he talks about how the housing market will totally seize-up in the next 3 months. Or you could just look at the NEW chart.
If you’re still upbeat after all of this then you have definitely taken the blue pill.
Oh hell… I’m not upbeat at all
Problem is, everyone around me still is (or seems to be…) Waiting for the L.A. city market to turn is veeeerrrryy frustrating!
Yes…I’m with you….frustrating it is.
Hey, Santa Barbara County is taking a giant-sized dump. Come up to Santa Maria for the weekends and bask in our crapulance. That should hold you over until L.A goes tits up.
Sorry, it should be spelled crapulence, just looked it up in Webster’s.
“crapulence”
isn’t this the new hair coloring product that Sherryl Crow’s been selling….
I think that LA is lagging two years behind San Diego and one year behind Sacramento. Last year at this time, prices were still rising in Sacramento, and sales had begun to fall.
Hell you are too rational. What are you, an Objectivist?
DataQuick and the newspapers are happy to trumpet the year over year while they still show gains. When June rolls around and the year over year numbers are showing big losses June 2006, these scoundrels will undoubtably switch to last month comparison. Housing always goes up, assuming you keeping switching comparison points. At some point they have to switch to multiple year comparison. Look, look, Housing is up 300% since June 1985, buy now, or be forever priced out.
I’m so tired of ” wait until XXXX. Then surely things will show prices falling!” ARGH!!!!!!!!!!!!!!!!!!!!!!!!!!!!
What choice is there? I agree this train wreck seems slow, but given it took 7 or 8 years to get here, expect 7 or 8 on the way down. True to form, with credit standards tightening, prices will have no choice but to fall. I feel your frustration though. It makes me mad as hell that I earn a top salary as a software engineer and cannot afford diddly squat here in San Diego, but that does not mean I am going to make the biggest mistake of my life and but into this messed up market.
Same thing happened in Sacramento (YOY median price increases last month.) But if you dig a little deeper into the report, you’ll see that volume is terrible and the volume is really terrible on the lower-end stuff. Only the truly expensive houses are still moving, which of course skews the median upward. We’ve talked about this time and again but we won’t get dramatic downward median prices until the lower-end stuff moves in serious volume. We all know when that will happen: when REO’s are being dumped via fire sales. By then, it will be much too late for the average sucker to realize he’s been duped. Meanwhile the rich continue buying houses at the same rate as always and could care less about the housing bubble. Medians sure do suck.
Readers here need to learn to ignore the month–month number. Now that subprime borrowers are removed from the equation by the reintroduction of actual lending standards, sales will decline and median sales prices may indeed rise because the greater portion of them may be at higher prices. Big deal! The crash is here and the foreclosure tsunami will hit all price ranges.
“L.A. County’s median price — the point at which half of all homes sold for more, half for less — had been virtually flat since June, when the median was $520,000.”
If anyone wants to know why LA medians still show puzzlingly 7.8% yoy gains read this:
Warning: THERE IS RAMPANT MORTGAGE FRAUD RUNNING IN THE INNER LA HOOD DISTRICTS. I did a 1-HR casual check on RECENT zillow sales in zip 90011, which is an LA slimezone area which makes Compton look like Paradise. Here is what i saw:
1. 282 E 46th st 3/1,1120 sq ft yr 1913. sold 8/25/06 for $330,000. sold again on 2/15/07 for $600,000. +270,000 increase in 6 monthes.
2. 306 E 35th st. 3/1, 1500 sq ft sold on 6/19/06 for 305k. Sold again on 9/13/06 for 415k. Sold yet again on 1/26/07 for 580k. increase of $275.000 in 8 months thru 3 nearly consecutive sales transactions.
This is just thru scoping an hour om zillow just on LA ZIP 90011. Saw several more likely fraudulent transactions nearly in same area of LA zip 90011.
BTW: LA 90011 IS EASILY THE NASTIEST DECAYED IMMIGRANT-IMPACTED RUN-DOWN ZIP IN ALL OF LA, AND MAKES COMPTON LOOK LIKE BEVERLY HILLS. IF I SPOTTED HALF-A DOZEN FRAUDS LIKE THIS IN ONLY AN HRS WORTH OF CHECKING IN ONLY ONE LA SLIMEBURG ZIP, IMAGINE THE 10′S OF THOUSANDS OF MORT FRAUD CASES ONE COULD SPOT ON ZILLOW IN A WEEKS TIMES. THERE ARE 20-30 LA ZIPS ALMOST AS BAD AS 90011.
If possible i will attempt to provide links to zillow for these showcase examples of rampant LA mortgage fraud, hideous and out in the open.
“If possible i will attempt to provide links to zillow for these showcase examples of rampant LA mortgage fraud, hideous and out in the open.”
I have provided zillow links to some recent sales of homes in LA Zip 90011. These sales raise gigantic red flags as they show increases of $200k-300k just in several months on 3/1 full lot 100 yr old decayed victorian SFH’s in a virtually 100% immigrant impoverished zone just south of LA DWTN. This is IMOH just the tip of the iceburg: other decayed LA zip areas such as Pacoima which i have perused also scream red flags.
http://www.zillow.com/HomeDetails.htm?zprop=20616742
http://www.zillow.com/HomeDetails.htm?zprop=20618353
w.zillow.com/HomeDetails.htm;jsessionid=E3F83E3893B5FE84607EFF260B787B92?zprop=20616742
http://www.zillow.com/HomeDetails.htm?zprop=20621744
http://www.zillow.com/HomeDetails.htm?zprop=20615563
BTW: The amt of gargage, trash,toxic auto fluids,broken discarded furniture,alley dumping which occurs in this district is appalling. Amazing that in an environmentally-conscious state such as California political correctness regarding illegal aliens allows the SCentral LA district to be a third-world environmental hellhole. Just get off harbor fwy and go east or west on Slauson for 3-5 miles and observe the environmental degradation.
The first zillow entry show that the value has increased from $98k to $600k in the last 5 years. That is nearly 6 times. Even know everything I know from reading all of these housing blogs, I can’t fathom how a lender could be stupid enough to lend that kind of money or justify that kind of increase.
If the government bails out these sleeze balls we should vote out any and all of the politicians who would vote for such a bail out. All of the honest hard working who did not participate still have to pay higher taxes on property and will pay higher taxes in general to bail out this mess. MY SOLUTION is let them eat cake!!!!!!!!!
I agree. Maybe we could have a Million HBBer March on DC.
Although I doubt there’s that many of us.
We’re in the minority, so who do you think politicos are going to pander to? Us or the screwed masses?
The FB’s are in the minority. Something like 40% of people own their home outright. 30% rent.
Ben,
Thank you for that comforting statistic. I didn’t realize that many people owned outright. I suspect FB’s are a small minority in most locations, but since markets are made at the fringes, they will still ruin prices. If they are a small minority, you will hear some pandering, particularly among the Democrats, but little or no legislation will come of it.
For what it is worth…
I don’t think there will be a wide-spread bailout..
why not?
Because, I think as dumb as the govt is and even if they had the money, they realize that this would be just be throwing good money after bad. Let’s face it..even if many of the problem mtges were to be re-written, the FBs are still F’d. They just don’t have the cash flow. In addition to the cash flow, they would need to have their equity position fixed, which I think is impossible to fix in the short term. I think there will be some localized bailouts by area banks, just for window dressing, but I think the numbers are just too BIG for a full scale bail-out.
Just my thoughts…..
More or less agree, but I also think the Fed would not go for that since it could lead to hyperinflation and they don’t want that…no matter how badly homedebtors would like for their burden to be inflated away.
I don’t see a system wide bail-out either. Is too large and will move too slowly.
I wouldn’t be surprised, however, if legislation comes out to wipe out bad credit as a result of being duped by a mortgage broker. Sort of like a big do-over. That way, without spending much Federal money, they would create a whole new batch of qualified buyers (wink wink). It would be totally unfair to several parties, but I wouldn’t put it past some liberal minded politicians.
They will try stealth inflation.
It is already happening.
A lot of markets are saying “whew, soft landing, our market only fell 1% in the last year”.
But with inflation, the houses are really losing 4-10% per year (depending on how you count “inflation”)
The gov’t will do what they always do: inflate. They will HOPE that some of this inflation will end up in worker’s pockets as wage increases. Of course this is not likely to happen due to global arbitrage, but it won’t stop them from trying.
Besides, wages have gone up somewhat the last 1 year. Not real inflation adjusted wags, just nominal wages.
Thus, they will hope to keep nominal home prices about where they are increase nominal wages, which will make the debt load easier on Homedebtors… at least in theory. Deftly and silently inflate away.
“Stealth inflation” as the plan.
I generally agree with this, which is why I find it hard to muster up the enthusiasm (glee?) for rate hikes… because I just don’t think ol’ Ben has it in him. Multiple years of stealth inflation, without a major crash of housing or the dollar, is what he’s trying to engineer.
So talk about vigilence on inflation is just that - talk. I think Goldman Sachs sees this and is partly why they said recently they expect two rate cuts this year.
At least 12 months ago, I thought there would be easing in late 2006 or in 2007, so I suppose I should expect it.
PPI and CPI. Figures don’t lie but liars can figure. True inflation running over 10% easy. Energy? Food? Housing? All not in CPI. Gone to a movie lately? Dry Cleaning? All way up!
I haven’t been to a movie theater in probably 5 years. I don’t think I’ve ever had stuff dry cleaned in my life, even when I was a chump engineer in CA. Food, energy, housing all up, of course. Health insurance and education way up.
I agree, but there is no such thing as inflation. There is just dollar depreciation as the amount of money is expanded. The reason I object to the concept of inflation it gives rises to the lie it is something not to do with the amount of money expanding faster than the amount of goods. It gives one the feel that because goods or labor are in short supply they force the costs of things up, Every month the government should be producing statistics how much the dollar “devalued” instead of the amount of “inflation”. The Dollar Devaluation Index or DDI.
Every month the government should be producing statistics how much the dollar “devalued” instead of the amount of “inflation”. The Dollar Devaluation Index or DDI.
—————————
Absolutely great idea, which is why the govt won’t do it.
Wiping out bad credit due to mortgage fraud is a possible, but only if coupled with a massive reduction in exotic loans. Sub-prime boondoggles gone, and it won’t matter if their credit is restored to it’s former 580 glory. The loans won’t exist to purchase anything with anyway.
“I wouldn’t be surprised, however, if legislation comes out to wipe out bad credit as a result of being duped by a mortgage broker.”
This isn’t something the government can really legislate. FICO scores are used by private lenders to make private loans.
One phenomenon I do see coming out of this is that these losses will not be stigmatized. It is like a “medical bankruptcy:” everyone knows our medical system is messed up, so if someone has a bankruptcy that is related to medical bills, lenders sometimes give these borrowers the benefit of the doubt. The same will become true of “bubble bankruptcies.”
It’s unclear there has been stigma attached to any financial blemishes over the last 4-5 years.
Staging: throwing good money after bad
I would not want to see a house that has been staged and have to try to imagine what it would look like with my junk in it instead
hmm..I wonder…
Does “staging” help cover up all of the flaws?
Does it act as smoke and mirrors?
I never really understood it.
Call me crazy, but I sort of think that houses look bigger when empty. I am told it is the other way around, though. Maybe there is a difference between a really well staged house versus one filled with just plain of stuff.
Yeah, I know that I’d always rather see a house empty. It hurts my brain trying to see past someone else’s junk; plus I don’t like guessing what’s under the area rugs or behind the humongous “entertainment center.”
When we were selling our last house (did that spring of 2006, and for a good price, thanks) I packed up and stored everything I could before we went on the market. This left the large family room empty; the realtor complained: “Buyers won’t know what this room is for, without furniture.”
For crissakes - it’s a big, empty room (with vaulted ceilings and hardwood floors) - if a buyer can’t figure out what they might do with it…please.
This was some of the “expert” advice that justified the 5%, I guess.
I think it all depends on how your eye is trained. I totally look past the new coat of paint and the furniture, but I find it hard to like a place when it’s all full of someone else’s clutter. It just turns me off and I want to get out.
I always detail my cars before selling them. Get all the junk out, clean it throughly, put seat covers on if the existing ones are wearing out, steam clean the engine, clean the crevices with Q-tips.
I see staging the same way. Get the “me” out of the house which buyers don’t want to see and show an immaculate, organized, clutter-free nicely furnished home. A nice looking house implies better care was taken with it.
Show me a home full of crap, kids pictures on the frig, dirty litter boxes, piles of boxes and junk around, and the house does not seem as well maintained. If I have to chose between a staged house that is immaculate and a house that is well lived in for the same price I will pick the staged house. I won’t pay more for it - but when I put my last two houses on the market they looked better than when I was living in them.
Best advice - rent storage and get rid as much stuff as possible. It does make a difference. And yes, the price has to be in line, but if you saw the exact same car for sale and was was dirty and full of trash and was was detailed and both the same price and mileage, etc. - which would you buy?
I pat us on our collective back for seeing this collapse two years ago. But it is SO damn obvious, we really aren’t that smart. Makes you wonder what other news stories are also really simple if looked at carefully. Like BUSH lied maybe?
Maybe.
Although you would have to think Mr. Bush was even dumber than you give him credit for, to intentionally lie about WMD in order to justify an invasion that would reveal the truth.
Thomas’ Rule 34(b): Things are never as simple as they seem. Things are never as complicated as they seem.
I prefer Occam’s razor: “All things being equal, the simplest solution tends to be the best one.”
Yeah, well, we disagree as to what the simplest solution is. Bush’s position on WMD in Iraq was consistent with the Clinton administration’s and most Congressional Democrats — and also with the consensus of most foreign intelligence services.
To make “Bush LIED” the simplest solution, you have to presume that (1) either all those other folks lied, too — kind of like the “OJ was framed” conspiracy theory, which would have required several dozen or hundred people to be in on the scheme — or (2) conclusive intelligence had been obtained since 2000 demonstrating that the former consensus re: WMD was wrong. Which would require you to assume the CIA is halfway competent, which is a bigger leap of faith than believing in the Easter Bunny.
I’ve always found a useful corollary to Occam’s Razor to be the dictum, “Never ascribe to malice what can be explained by incompetence.” Because true malice requires competence, which is not the natural state of humanity.
What, you mean the guys that missed out on the fall of the Soviet Empire? The guys that came up with the “Domino Theory” in SE asia? They got the Middle East wrong too? Shocking.
Almost as shocking as those Wall St analysts keeping a “buy” rating on NEW…
to intentionally lie about WMD in order to justify an invasion that would reveal the truth
They a) over-estimated their powers of BS, and b) figured removing Saddam & Sons from the M.E. equation was sufficient PR juice for asking for forgiveness instead of permission.
Feh. They believed it because they wanted to believe it, and they’re stupid to boot. I can’t ascribe to an “evil genius” theory about our gov’t, no matter who’s in charge. Anyone who does, has never been involved in gov’t.
Bail outs never bail out the little guy–if anything we will see our money going to a bunch of whiny banks and wall street guys or maybe a special tax break for those who lost money on their third vacation property valued over five million.
We KNOW that nearly everything is “Contracted Out” now in American Business.
I would be VERY curious to know to what extent local Banks are Contracting their REO’S and Short Sales out to their Favorite RE Brokers/Agents to hide their default FAILURES.
“A Centex official says that some 50 percent of new buyers of an entry level new home subdivision in Tulare are Hispanics who speak no English.”
LOL! NOT ANY MORE. Centex, better figure out a different marketing strategy, and fast.
Banco las Americas y Wells Fargo are their lenders
how do you say DOH! in spanish?
Bancos of Dubai.
George owes ‘em 1.
Hey Neil,
Got Nachos?
Eh Amigo,
Have I got an option ARM for you!
Habla Nachos?
Neil
What are the chances they will default on their loans? At least they don’t have to pay income taxes or auto insurance.
Or health insurance. Or Fico.
O.C.’s home price winning streak is over
February marks the end of a decade-long winning streak for O.C. housing. The median selling price, by DataQuick’s count, fell 0.4% vs. a year ago. It’s the first year-over-year drop since Nov. 1996. Sales volume was sluggish, too. February was the 17th straight month that buying activity failed to meet the previous year’s pace. February’s stats, by the slice:
Slice Price Vs. ‘06 Sales Vs. ‘06
House $675,000 -2.2% 1,480 -9.7%
Condo $457,000 -1.1% 649 -17.8%
New* $623,500 -1.0% 320 -35.9%
All $620,000 -0.4% 2,449 -16.4%
* Includes single-family homes, condos and recently converted apartments
Am I the first one that’s going to have to call BS to the overall drop here? If you took a non-weighted average, it would be an overall drop of 1.4%. If you weighted it it would have to be closer to the ‘house’ category of -2.2% since that’s the most volume and highest numbers.
Slice Price Vs. ‘06 Sales Vs. ‘06
House $675,000 -2.2% 1,480 -9.7%
Condo $457,000 -1.1% 649 -17.8%
New* $623,500 -1.0% 320 -35.9%
All $620,000 -0.4% 2,449 -16.4%
Can certain sales not get reported (ie one that would bring down comps)? Here, they can list a transaction at $1 so it gets thrown out. Prices here were falling since 2004 and realtors could ‘hide the elephant’ for a while until the sales price declines got too pervasive. For a couple years we showed moderate price growth, but anyone who was really paying attention knew there were big hits being taken.
Same here in San Diego. In many areas, prices have been dropping since fall of 2004, but the numbers didn’t show that until last year (and only single-digits, when the real drops were 10-20%).
IMHO, median price is indicative of what amount of money is available to “purchase” homes. It says nothing about the “value” of a house.
If the credit implosion contines as it should, those median prices drops should start looking might ugly come fall of 2007 — still not time to buy until **at least** fall of 2008, but I think 2012 would be best.
IMHO, median price is indicative of what amount of money is available to “purchase” homes.
——————–
When I wrote “money” I meant “credit”…
Yeah, I thought the same thing. How can declines of 2.2% for existing houses, 1.1% for existing condos, and 1% for all new homes (condos and houses) result in a combined decrease of 0.4%? Is this part of the new math?
I think it’s because the sales of SFH didn’t drop off as much as the sales of condos (which are cheaper). Just shows once again what a phony-baloney statistic the “median” is.
Santa Ana planners to review high-rise project
Residential towers, tucked between I-5 and 55 freeways, go before panel tonight after delay.
By AMY TAXIN
The Orange County Register
SANTA ANA – The city Planning Commission tonight will consider a proposal to build two residential towers in a swath of land wedged between the Santa Ana and Costa Mesa freeways.
The commission looked at the proposal for 1901 E. First St. two weeks ago and delayed its decision in order to review a development agreement between project proponent NDC Development and the city.
The proposed development would include two high-rise residential towers made up of 374 units, ground-floor retail, a rooftop swimming pool and outdoor rest areas.
The commission meets at 5 p.m. in the Council Chambers, 22 Civic Center Plaza. The City Council is to review the proposal March 19.
Banks foreclose on more OC homes
Bank foreclosures in Orange County rose for the third straight month in February, said DataQuick today. There were 164 foreclosures, up 7.2 percent from January and a whopping 1,071 percent jump from a year ago. They, however, remain well below levels seen in the housing slump of the 1990s.
Default notices were mixed. Banks mailed 811 notices of default, up 157 percent from a year ago but down 4 percent from January. Loans typically go into default after a borrower misses three or more monthly payments.
So what happens when the resets hit in mass? Uh Oh.
More foreclosures. Broker’s Outpost reports that Option 1 just announced stricter guidelines, including a max LTV of 90% effective immediately (including not funding previously approved deals - ouch). Implode-o-meter has reports/rumors of widespread layoffs at Countrywide (denied by a Countrywide employee).
the SD numbers aren’t that dramatic
they are when you take them into context.
Just 24 months ago SD had appreciation rates above 20% per year. Last year they were still at 6% positive appreciation. Now they’re at negative 5+%.
What has happened is that we’re seeing the rate of change switch. Kind of like a ball that you throw into the air.
It zooms up. then it’s velocity slows then plateaus, then falls back down.
The first few seconds it seems “not that dramatic” but then it keeps on going.
Another thing about SD Real Estate: it is so expensive that a 5% drop in RE values is 25,000+ dollars! Try telling someone who’s losing 2,000 bucks a month “it’s not that bad”
I have made predictions for the Irvine Housing Market.
* Median sales price will decline approximately 40% from near $700,000 to near $400,000 over the next 5 years.
* There will be a multi-year flattening of prices at the bottom.
* Sustained appreciation will not return until 2013 or later.
* Peak bubble prices will not be seen until 2027 (unless we get another bubble).
I would enjoy hearing your input (link below).
http://tinyurl.com/2penea
http://www.irvinehousingblog.com/
How much will someone need to make to afford a $400k house under “tighter” lending criteria?
Irvine,
I agree that price declines will be **at least** 40% and that the decline will happen over a number of years and that there will be at least a couple of years at the bottom.
Yep, your predictions look good to me!
Wow - the Irvine market is going to look just like the San Diego market!!!!
I’ve seen today on realtor.com a beach front home in northern California on over 5 acres with a price around $850,000. It was in the low $900’s for most of 2006. I’m keeping a watch on places there and also the central California coast. I’m a buzzard ready to swoop down on road kill with a bag of money! LOL
“With concern building over troubles in the mortgage industry, a think tank on Monday said the federal government should take new steps to protect low-income homeowners at risk of foreclosing.”
“‘Congress can’t wait for that many families to foreclose,’ said Almas Sayeed, who wrote the report for the Center for American Progress. ‘The economic impacts for communities and for the country could be devastating.’”
What a surprise that a far leftie socialist group like the Center for American Progress - would suggest such a solution. Bailout “low income homeowners” - who would have thought of such a simple solution.
So I guess nobody is looking out for the middle-income FB’s.
If you’re rich or big business, the Republicans look out for you. If you’re on welfare or uneducated, the Democrats look out for you. The stupid middle class continue to vote for these slobs.
So Dems no, Repubs no. Who would you suggest… La
Rouche?
I’m talking about people who vote based on the party instead of the person. People who proclaim to be a “Republican” or “Democrat” and are blinded by ideology. Voting for the best and most honest candidate is the proper thing to do. What if the parties were abolished and people had to run on their own merits and ideas instead of having an R or D next to their name? All the braindead goose-steppers on the right and left wouldn’t know what to do.
It isn’t that simple, but I agree with you that it should be that way. People usually have to choose between bad (Dems) and very, very bad (Pukes).
Sometimes you go with the lesser of 2 evils.
But I always vote for the best person, although I can guarantee you that person will never again be on the right.
Independent? Sure. Left. Sure. Right? Never gonna happen.
I refuse to vote for Feinstein out of general principles. In 2000 I was happy voting for Tom Campbell. 2006 I voted Green or Libertarian, I forget. Even if that had thrown the Senate to the Repubs I wouldn’t care.
IOW it’ll take a pretty bad (D) candidate to make me vote (R) these days.
I’m in the middle, and it would appear that the Repubs are self-destructing these days.
“A Centex official says that some 50 percent of new buyers of an entry level new home subdivision in Tulare are Hispanics who speak no English.”
Is this yet another reason why our government will do nothing about illegal immigration? I would love to see who is contributing what to the campaigns of those in the Senate, House, and state legislatures defending illegal immigrants and trying to make them legal as quickly as possible. Of course, it all comes down to money.
If it is illegal to hire illegals (what a joke), wouldn’t it also be illegal to set them up in houses? And doubly-so to do this with rigged loans? I’m assuming these “Hispanics” (a made-up word, incidently, with no real meaning) are non-citizens, since one is supposed to be able to speak English to become a citizen. Or has this minimum requirement been tossed out with everything else?
They understand English when it’s convenient for them to understand
“I’m assuming these “Hispanics” (a made-up word, incidently, with no real meaning) are non-citizens, since one is supposed to be able to speak English to become a citizen.”
Of course, they’re not citizens,who’s kidding who, but you are no longer allowed to notice this. You are especially not allowed to say this out loud where someone might hear you. You are not allowed to call them illegal aliens, which is the correct term, you are required to refer to them as immigrants, or at worst, illegal immigrants, though they are obviously not “immigrants” at all. Immigrants are those law-abiding folks from all over the world who patiently follow the rules, file the forms, and wait years for the chance to immigrate to America. Illegal aliens are those who hold Americans and their laws in utter contempt, who sneak across borders or overstay visas,who traffic in forged documents and id theft, who steal services designed for citizens and legal residents, and who are now being coddled by state governments, the feds and of course, the Bank of America. The idea of “citizenship” as a ideal is a concept that is being shredded; we are being reduced to mere consuming units, or working serfs, indistinguishable from one another.
KICK em out now!!!
Except the one that cleans my house, and the guy that cuts my grass,oh yeah and the pool guy . plus the bus boys at my favorite bistros, and well the guy who harvest all of our wonderful food.
Gosh, you mean all the American maids, gardeners, pool guys, restaurant workers and field workers who did those jobs before might come back after we start paying them what they deserve.
Example: our maid (my parent’s home) in 1985 made $55/day. An illegal immigrant-maid today might make $65 to $75 to clean the same house. Not much wage inflation in over 20 years, but what has happened to cost inflation over the same period of time???
We hire legal, bonded maids (once or twice a year) from a service which pays them a decent wage and pays for medical insurance and has a 401k set up for them. We pay about double or triple what it would cost for an illegal alien because it’s the right thing to do.
Not everyone is out to scam the few productive workers out there.
“wobbles” at New Century and Fremont General ???
Seems to me both of these have ceased operations and are lying on the floor dying. If they’re still wobbling, it’s just death throes.
If banks became convinced that “Real Estate Only Goes Up” was a law of nature, and thus decided to lend to anyone regardless of repayment ability since recovery in foreclosure was guaranteed, why would any bank accept a measly 20% down payment once depreciation becomes the expectation?
Interesting conversation on Broker’s Outpost:
http://forum.brokeroutpost.com/loans/forum/2/102315.htm
Guideline changes and discussion of Option One
Nothing above 90%? That seems like a little bit of an overcorrection in my opinion. I think cutting back to 95% like everyone else would have sufficed.
————————–
Had to post that from the BO link. LOL!! These guys are delusional!
The “value” of the lenders’ collateral will be dropping on the order of 35-50%+++ (depending on the area). If I were a lender, I wouldn’t do anything over 70% LTV, at most…but that’s just me.
That was without question one of the most interesting links I have ever clicked on. Thanks!
One last priceless Broker Outpost exchange, confirming what we knew about affordability:
daveypearl: “But what is it that is coming down the pike? Who do you know besides your parents that own their home? Who do you know that isn’t in a 15 year fixed that is actually going to make that final mortgage payment? Nobody can afford a home now a days unless you move to Nebraska with the CA income?”
subprime1: “It’s real easy, you buy a house you can afford.”
rebekah: “yes, someone does that in this life time. That is un-heard of. I can’t tell you the last person i did a loan for that i know would be comfortable in that payment. This is getting out of hand.”
====
My favorite quote:
“I can’t tell you the last person i did a loan for that i know would be comfortable in that payment.”
http://forum.brokeroutpost.com/loans/forum/topic.asp?TOPIC_ID=102315&whichpage=2
My favorite quote in that thread:
“Now the borrowers have to come up with 10% down huh? This is ridiculous.”
LOL!
My favorite was by TonyInLA. “Get ready, the whole US economy is standing on the railroad tracks with their back turned to the oncoming train while fidgeting with their Ipods.”
Everyone in the REIC Gang…”ON your Backs with BIG ARMS and tiny Feet UP in the AIR”
The TIME has come to practice your “DYING COACKROACH” postion
I don’t know about that. Have you ever seen or read about how f*ckin’ tough cockroaches are? They can take a phenomenal dose of radiation and survive. Could be one of the few surviving species at the end of it all.
““San Diego County’s resale home prices remained relatively steady last month with the median price of single-family houses unchanged at $540,000 for the fourth straight month, DataQuick Information Systems reported Monday. The overall median stood at $480,000, down 5.9 percent from February 2006.””
WTF?. Am I dislexic that I can’t read this right?. It says that SD single family homes median price remains unchanged for the last 4 months at $540,000. Then it says that the overall median stood at $480,000, down 5.9 percent from February 2006.
Single Family Homes vs. Everything (overall). It is all bullshit anyways.
Single Family Homes vs. Everything (overall). It is all B$ anyways.
why does anyone need a human to complete a mort app ?
will they use them in the future ?
you mean they’re human?.
Actually, they don’t need a mortgage broker or a realtor, though they might make things more convenient for some borrowers.
FWIW………..
Global systemic crisis - April 2007
http://www.leap2020.eu/GEAB-N-12-is-avaible!-Global-systemic-crisis-April-2007-Inflexion-point-of-the-phase-of-impact-US-economy-enters_a448.html
luvs, any talk of a bailout in Australia?
I am not entirely sure this is just a “subprime” thing. This is about Zero down, Loans which permit the borrower to qualify on less than their income, and loans which are much too big to manage for in many cases all but the top few percent of earners.
This aside, 20% down would most certainly not have permitted the extreme run-up in prices. It would have eliminated a great deal of risk. It would have weeded out the “weak”. we would not be in the mess we are today. This is not a subprime thing, it is about irresponsible lending and borrowing. This is why the problem is SO much more serious than just a relatevely small percentage of loans to folks with bad credit. 20% would have capped this puppy where it started.
Yep. Back when banking was real, I was taught that 20% down was as much a test of character as anything. Now this is really quaint; the down payment had to be your “own” money, not a gift (even from the Bank of Mom and Dad). And your bank and loan balances would be re-checked before disbursement. Your employer had to sign an affidavit attesting to the high probability of your continuing employment. Gad, I’d forgotten some of this stuff - it was truly another world…a saner one.
I saw 5 more investors recently buy in Sacramento. Zero down, $50 to 70K back from the builder. These people are laughing at the deals they made now. Wait for 24 months and $3,000/mon neg chews up their cash (never mind 1/2 of them blew it on new BMW’s). None of these buyers would have even considered the purchases if they had to put 20% down. In fact none of them probably have the money to invest. Pathetic. And all the other potential buyers have to compete with this irresponsibility. Patience my friends. These charades will end for the flippers in a sad way. Patience.
Sounds like fraud. In which case there will be no mortgage payments.
Speaking of fraud, we haven’t gotten an update from Paladin in awhile.
The Center for American Progress:
“As progressives we believe that America should be a country of boundless opportunity—where all people can better themselves through education, hard work, and the freedom to pursue their dreams. We believe this will only be achieved with an open and effective government that champions the common good over narrow self-interest, harnesses the strength of our diversity, and secures the rights and safety of its people……”
Well now….. there was boundless opportunity for people to pursue their dreams. That government part of the equation though…… they kinda went with the narrow self interest. Since, as they state, the dream will “only be achieved” with the requisite government input, I think it would be safe to say that the application of this mission statement no longer applies to the current lending debacle.
Or as the HBB posters would more eloquently put it:
“Hey Sayeed, your little club is a bit late to the party. Feel free to stay the hell out of it now!!!!!!”
Not sure if this has been posted: http://www.latimes.com/business/la-me-homes13mar13,0,3449207.story?coll=la-home-business
I don’t know about you bubble-mongers but LA’s home prices are not going to fall. You can talk about the subprime collapse all you want, but LA is different. Yohooo!! I’ll be renting until death. WTF!!!
I know this is frustrating! Just a few days ago a wantabe flipper from Cucamonga (CA) who owns something like 6 houses (4 bought last year) said “I don’t repent of having bought these many homes.” But according to what she said, she is barely meeting her cash flow obligations (said in different words). This is with the variable teaser rates. I still bet that she will fold come the time her rates reset.
In any case, I won’t buy till prices fall considerably or inflation brings them down to par with reasonable prices.
It’s the median effect…if anything, it confirms that the lending standards are tightening. The bottow end o fthe market is probably getting slowly strangled there.
“I am not entirely sure this is just a “subprime” thing. This is about Zero down, Loans which permit the borrower to qualify on less than their income, and loans which are much too big to manage for in many cases all but the top few percent of earners.”
Subprime” as a category includes all of the above, including option ARMS (negative amort), no down payment loans, stated income loans, low income etc
The theory was that borrowing standards could be lowered by spreading the risk over many investors via new exotic kinds of debt instruments - which investement houses could then trade among each other and other 3rd parties for profit
Great theory however it will not work too well as the subprime sector continues unwinding
The WSJ had an article yesterday that claimed part of the problem with New Century was its lack of control over independent brokers. Apparently, anyone willing and able to sell their products was given a job. New Century did not care/control how or what they did in the marketplace. It was a bloody free for all. As a result, people in their late 80’s were given 30 year loans.
“‘Congress can’t wait for that many families to foreclose,’ said Almas Sayeed, who wrote the report for the Center for American Progress. ‘The economic impacts for communities and for the country could be devastating.’”
First of all, either Congress or the stock market is totally out to lunch. The stock markets don’t think this is a very serious issue. Markets are literally unphased by the housing sector, other that the builder and mortgage company stocks have corrected. They think the economic fallout will be “contained” !
Secondly, how the hell would Congress fix this situation ? People bought a house they can’t afford and won’t be able to afford for the next 15 years. What is Congress going to do about that ? Supplament their incomes for the next 10 years ?
There are a million houses for sale now and another million or more about to be foreclosed on. Is Congress going to buy all those houses and the houses from every flipper that now needs to get out ? And what would they do with those houses ? Burn them ? They can’t put them back on the market because that would leave us in the same situation !
There is NO way to fix this situation now. People with not enough income bought a house they can’t afford. Flippers speculated and got caught. House prices are unsustainably high. Inventory is huge. The ONLY thing you can do is let this situation run its course ! Let everyone get burned and learn their lesson, including the FED !
Everyone complains about Greenspan, but lets not forget that the Fed is a BOARD and I didn’t hear too many dissenting voices during his reign.
What a mess. You can’t cure a hangover once its there. All you can do is turn down the music, take a few aspirin and sleep it off.
“either Congress or the stock market is totally out to lunch.”
Do you think the stock market leads of follows the real housing market?
I don’t think it leads it because it seems nobody saw the subprime meltdown coming. And judging by the reaction of the stock market thus far, I don’t think they follow it either ! I think thus far the stock market thinks the sub prime implosion is just a few companies that did some stupid lending. They don’t realize there is going to be a credit crisis with consumers.
Ignorance is bliss, I guess.
I agree. The stock market follows; it does not lead; it waits for hard data before it responds to prevailing market conditions. Luckily for us, we have been watching the winds swirl around this debacle for some time. According to the Credit Suisse report and prevailing market conditions, it appears some homebuilders are due for another fall.
Housing Analyst Fears Credit Crunch, Supply Jump
Posted By:Bob Pisani
Homebuilding stocks took a hit Monday, as traders digested a report on the industry from veteran homebuilding analyst Ivy Zellman at Credit Suisse.
Among Zellman’s comments:
- 40% of the mortgage market (the subprime and Alt-A market) is at risk of fallout from tightening credit and increased regulatory scrutiny.
- The rebound in housing demand is “premature.”
- Orders for homes have not materially increased, compared to the fourth quarter.
- February has not seen typical seasonal improvement.
- She is reducing earnings estimates for many of her builders.
The concerns in the mortgage market are particularly troubling to her: Zellman estimates the impact to originations of 21%, or an approximate decline of 236,000 new home sales from December’s annual pace, to 887,000 units.
Another comment from Zellman’s report:
“We remind investors that the headwinds from deteriorating credit will impact supply and pricing conditions, as well as incremental demand. With delinquency and foreclosure rates continuing to rise, we believe this will result in more supply hitting the market throughout the year. In addition, we estimate that current inventory figures released by the NAR [National Association of Realtors] could ultimately be 20% higher, when homes currently in the foreclosure pipeline hit the resale market.”
http://www.cnbc.com/id/17582946
I was just reading parts of the report at CR. There might be some BKs in homebuilding as well.
Where is CR ? Linky please !
calculatedrisk dot com
Sorry. Calculatedrisk dot blogspot dot com
From the report:
“• 2006 subprime purchase originations posted an alarming 94% combined loan-to-value, on an average loan price of nearly $200,000.”
So the owners had 6% skin in the game. Thats all gone now. The average loan is underwater.
“• Roughly 50% of all subprime borrowers in the past two years have provided limited documentation regarding their incomes.”
50% liar loans. I guess we will find out how much money people DO make. Assuming their income isn’t impacted by the housing bubble burst…
“- 40% of the mortgage market (the subprime and Alt-A market) is at risk of fallout from tightening credit and increased regulatory scrutiny.”
So there will be 40% fewer buyers able to buy a house due to actually having to qualify for a mortgage.
“Zellman estimates the impact to originations of 21%, or an approximate decline of 236,000 new home sales from December’s annual pace, to 887,000 units.”
Housing starts will fall to 650,000 units a year. I think this is about half of what they were at the peak.
“We remind investors that the headwinds from deteriorating credit will impact supply and pricing conditions, as well as incremental demand.”
More houses will be on the market. There will be intense price pressure. People won’t need 2 houses anymore !
“With delinquency and foreclosure rates continuing to rise, we believe this will result in more supply hitting the market throughout the year. In addition, we estimate that current inventory figures released by the NAR [National Association of Realtors] could ultimately be 20% higher, when homes currently in the foreclosure pipeline hit the resale market.”
Sounds like NAR did include the houses in foreclosure. We could actually have 20% more houses for sale right now than they are reporting.
Its like the perfect storm in housing bubbles. All we need is for the job situation to deteriorate or the Fed have to raise interest rates to tackle inflation or keep the US supported and it will be the perfect storm.
The one thing we don’t have yet is hysteria. People are way too complacent yet. I expect that to change shortly, when when the spring buying season turns out to be a dud.
Seller complacency is over. With subprime meltdown a lot of deals are getting cancelled left and right. It’s a bloody massacre out there for any one selling, buying, or dealing subprime products.
The stock market certainly hasn’t come to that conclusion. Nor have the housing stats. Look at the stats for SD and Cali. Price drops are very minimal thus far.
The failed and failing deals are not reflected in recently reported numbers. They will be reflected in 2-3 months for some reports and 3-6 for others (OFHEO).
On another note, both Bloomberg and WSJ are reporting there might be some carnage with CDOs related to subprime mortgages.
URL: http://www.bloomberg.com/apps/news?pid=20601087&sid=a0uS8xp4v2CE&refer=home
From mktmaven’s link:
The Dallas Police and Fire Pension Fund invested in its first CDO about two years ago to boost returns, according to Richard Tettament, administrator of the $3.2 billion fund.
“We were beefing up our risk and we were hoping for a greater return,” Tettament said in an interview from his Dallas office. “We have an unfunded liability to pay off.”
Tettament said he isn’t sure what type of collateral backs the CDO, though he thinks returns exceeded 20 percent last year.
————————
Some people have been warning of this for a while — right here on Ben’s blog.
Add to the upcoming pension crisis (which many aren’t aware of yet) the existing SS and Medicare problems…mix in a little bit of Boomer’s trying to cash out some of their investments, and what do we get? A deflationary depression????
Of course, the govt will attempt some sort of bailout (inflation), but can’t see how that would work.
Foolish people making foolish decisions which we will ALL have to pay for…
I think I read yesterday (on this blog, of course) that a number of SPs (sub-prime buyers), allegedly not here legally, deliberately scammed the system by offering A LOT more than the asking price, getting 100% financing (because the lenders were so EAGER to give their money away), taking that extra $100K and sending it home or buying a house south of the border, and are only too happy to walk away from their obligation here. Does anyone have facts or data on that? I am shocked that this would happen, SHOCKED I tell you. Foreclosure = homeless? Doesn’t sound like it to me, in this case.
Has anyone watched housingtracker.net? Man, inventory has exploded in the last week. Where is the bottom Mr. Robert Toll? Oh wait, he knows, because he is still dumping shares LOL we are no where near bottom.
This is going to be one spectacular crash.
Yep. I can just imagine all those stupid sellers that were talked into delaying their listings until the myth of the big spring bounce of 2007, only to find sub-prime loans gone and more competition with foreclosures and builders .
The NAR has a out in that they can say it was the fall of the sub-prime lenders that messed up their bogus predictions for 2007.To bad the sub-prime lenders didn’t fall in late 2005 or early 2006 ,(or better yet 2002 would of been a good back off time ). Now there is a extra year (2006) of very bad loans on the books in with alot are cash back fraud deals .
It has been very hard for me to watch this nightmare unfold regarding this absurb lending . In past lending cycles sub-prime borrowers had to put alot of money down to get a lender to take the risk . Stated income loans have been around for a long time but again the borrowers in prior lending cycles had to put a big down payment to get a stated income loan .
How was the sub-prime lending any different than the 1929 stock market margin buying ? How could so many people buy into such a absurb concept as “real estate always goes up”,without any voice of reason that would challenge it, (except blogs that were not given a voice in the MSM). This whole real estate market mess is just a crying shame . I’m sorry but it’s just so hard to believe sometimes .
It is hard to believe subprime borrowers were allowed no downpayment. Apparently, they were the ones driving up prices. They had absolutely nothing to lose — not even a hit to their credit score.
“only to find sub-prime loans gone and more competition with foreclosures and builders.”
Boy that worked out bad for them ! The implosion will totally kill the spring season. But you know it had to happen sooner or later. I don’t know how often I posted that the housing bubble wasn’t making any sense for the MBS buyers. And then suddenly we learned it didn’t !
Yes, but you have to admit it took much longer than most of us anticipated.
So very glad to see people are beginning to open their eyes.
Note recent as a year ago claims were being made that any large correction or crash were very unlikely because 1. the economy is still strong 2. only certain markets were in bubble stages
Of course part of this reasoning is circular, because the strong economy itself depended to a large degree upon the real estate boom in certain major areas of the country
Of course since when is a national bubble required to create sectional or regional crashes. Obviously North Dakota is not going take the hit New England does - because busts are created by booms and certain areas had booms, in fact some of the largest areas in terms of population
Interesting numbers in this lot……….
http://www.prudentbear.com/articles/show/1326
Good one, luvs. Thanks!
IMO ,the front line lenders/REIC started pulling a fast one on the secondary market from about 2003 onward and they got away with it so those agents/lenders just got more bold . The foreclosures weren’t happening yet so the secondary market investors didn’t have the feedback to tell them that they were getting a high % of loans that had just gone downhill . By 2006 the loan bundle quality was absurb, riddled with fraud and cash back deals .
I have said it many times ,had I known that the lenders were making these kinds of loans I would not of touched the RE market with a 10 foot pole . I would of never dreamed that lending standards went downhill to the degree they did . What a set-up for a big fall .
It was high 80s here in San Diego this weekend, while walking to the beach from my rental we stopped by a open house 2 bedroom a block away. $563,000!! I could hardly contain myself, I get to live here too and only $925 a month all utilities paid for! Went to the beach, enjoyed the day, and we all had a good laugh at the idiots who actually bought here and all the for sale signs. So Spring is officially here in San Diego, and I’m see MORE for sale signs, and no sold signs to speak of.
Silent Sprint indeed….
Why is everyone completely discounting the possibility of a major RE downturn:
http://news.yahoo.com/s/csm/20070312/ts_csm/agoldenhome
One thing I’ve noticed is that Asia is more skeptical of the US markets and economy than the US investors are themselves. Japan and Korea just closed lower because they are afraid the US economy is going to be soft.
US investors and analysts and even the media (or especially the media) are very bullish on everything.
LEND biting the big one:
“March 13 (Bloomberg) — Bond investors rattled by mounting losses in subprime U.S. mortgages say trouble is brewing in collateralized debt obligations, the same securities that fueled the boom in leveraged buyouts and cut-rate finance.”
Boy, thats bad. The thing about all this debt is that its big enough to bring down the whole economy. There is litterally trillions of it and if parts of it start going bad, it could cascade. As soon as the guarantors get calls on those portfolios and they have to sell things to meet their obligations, they are in trouble. Thus far the failures have been soon enough in the term that the originators are supposed to buy them back. But soon they will be calling on the guarantors and that will be a different story. I wonder which hedge funds are holding big portfolios of mortgage guarantees ?
Kind of reminds me of being a “Name” for Lloyds of London. Remember that fiasco ? Easy money as long as you never need to pay out. But you can lose everything if you do.
oops, forgot the linky…
http://www.bloomberg.com/apps/news?pid=20601087&sid=a0uS8xp4v2CE&refer=home
The thing about all this debt is that its big enough to bring down the whole economy. There is litterally trillions of it and if parts of it start going bad, it could cascade. As soon as the guarantors get calls on those portfolios and they have to sell things to meet their obligations, they are in trouble.
—————————-
Hmmm…seems we’ve heard about this before…like, umm… over a year ago. Oh yeah, it was those pesky bloggers on Ben’s blog who saw this coming a mile away.
Congrats to all the brilliant folks here who do not earn millions of dollars a year, but seem to know more than those “experts” who do.
I’m in San Bernardino county. Our staging consists of throwing sawdust on the floor and bringing in a mechanical bull.
If a bailout becomes a reality -then lobbying against it will need some focused organization.