“Ripe For A Fall”
The News & Observer reports from North Carolina. “Raleigh Realtor Gary Hooker already has lost three sales to first-time homebuyers since lenders this month began cracking down on easy mortgage money. But his real worry is the effect that tougher restrictions on subprime borrowing may have on the Triangle’s unsteady housing market. Hooker said his clients weren’t able to get mortgages because they could not meet a new requirement for a 5 percent down payment.”
“‘I don’t think we’ve scratched the surface how it will turn out,’ said Hooker. ‘It’s a big deal,’ he said. ‘It’s coming at a time when all regions need it the least.’”
“Up to a quarter of the homes sold in North Carolina in 2006 were bought with subprime loans, according to industry estimates. Today, those loans are being blamed for a record number of foreclosures in the Triangle and the state last year.”
“This month, Advantage Lending in Raleigh said it has turned away about 10 customers because of tighter credit and down payment guidelines. Mark Timberlake, a mortgage broker in Cary, said two potential buyers left empty-handed when they found out they needed big down payments to buy investment homes. Before, he said, they could have borrowed the full sales price. Now they need 10 percent up front.”
“‘There are … people who were able to qualify for loans in the past few years who aren’t going to be able to get loans,’ said John Crawford, a mortgage banker in Greensboro.”
“Della McDowell, a broker in Durham, said that some of the lenders she uses now want borrowers to have at least two mortgage payments in the bank. Others are asking for canceled checks as proof of paying rent on time. Before, lenders would simply call the landlord and get a verbal confirmation, McDowell said.”
“Fremont Mortgage, the second-largest subprime lender in North Carolina, has ended relationships with a third of its mortgage brokers because of high defaults, said Mark Pearce, deputy commissioner of the N.C. Banking Commission. Charlotte-based AmeriTrust Mortgage also closed its subprime unit.”
“Wells Fargo has lowered its maximum debt-to-income ratio from 55 percent to 50 percent, Pearce said. For example, if a home buyer earns $3,000 per month, then his total monthly debt can not exceed $1,500.”
“Robin Green is finding out just how hard. Green fell in love with a $164,000 house. Even though her credit history suffered from large medical bills and a recent bankruptcy, she was able to get a contract on the home. Then Green got a call from her mortgage broker telling her things had changed. She would need to increase her credit score substantially or come up with a 5 percent down payment.”
“‘I was like, ‘Oh my God, I’m not going to be able to get this house,’ Green said.”
The Telegram from North Carolina. “‘Bubbles’ do indeed exist, and our conversations with brokerage firms in the northeast portion of the United States, along the North Carolina, South Carolina and Florida coastal areas, confirm that property values are declining in those areas.”
“One specific South Carolina brokerage firm in the Myrtle Beach area stated that the year 2005 showed an average decrease in value of waterfront properties of 25 percent. The year 2006 was estimated to follow with an additional drop of 10 percent.”
“We cannot confirm these numbers, but the point being made is that real estate buyers or investors are not willing to pay prices that in some cases reflect astronomical equity increases annually.”
The Palm Beach Post from Florida. “Overdue mortgage payments in Florida rose in the final three months of 2006, and soared over the previous quarter, the Mortgage Bankers Association said. Meanwhile, new foreclosures in Florida set a record as borrowers with troubled credit histories fell behind in their payments, the MBA said.”
“Mortgages in Florida overdue for 30 days or more in the fourth quarter of 2006 climbed to a record 4.86 percent of all loans tracked - up sharply from the same period in the previous year, when 4.66 percent of loans were delinquent.”
“‘As Florida was rocketing up in values, we had lots of investors that bought with the expectation of flipping these homes,’ said Jim Sahnger, VP of Palm Beach Financial Network in Sewall’s Point. ‘Many of these people are now over-leveraged or they’re ‘upside down’ - they owe more than their house is now worth.’”
“The delinquency rate for subprime loans in Florida in the fourth quarter was 12.53 percent, up 139 basis points from the fourth quarter of 2005, the survey showed. The delinquency rate for FHA mortgages, government-backed loans used by first-time home buyers, was 12.74 percent.”
“‘The FHA borrower profile is one with either little or no down payment,’ Sahnger said. ‘As with subprime borrowers … they are often ripe for a fall.’”
The Sun Sentinel. “The number of South Floridians facing foreclosure has spiked in 2007. Many took out short-term, adjustable-rate mortgages and are seeing their monthly payments balloon as interest rates rise. Increases in property taxes and insurance rates also are making it difficult to pay the monthly mortgage.”
“‘These are not bad people,’ said Louis Spagnuolo, a mortgage banker in Boca Raton. ‘But a lot of them are on fixed salaries, and they can sustain only so many price increases.’”
“The number of late payments in Broward County hit 983 in February, a 333 percent increase over the 227 last February, according to Realestat.com. Broward had 315 foreclosures last month, compared with 206 in February 2006.”
“Last month, Palm Beach County had 733 property owners with late payments, up 382 percent over the 152 last February.”
“Honey Hartman of Hollywood is facing a mortgage crunch. A huge property insurance increase this year pushed her monthly mortgage payment to $770, which exceeds her income of $643.”
“She negotiated with her lender to cut some of the added costs, and her two grown children are helping her make up the rest of the shortfall. Hartman expects she’ll ultimately have to sell her two-bedroom home and leave South Florida. ‘I’m in dire straits,’ she said.”
From CBS4.com in Florida. “Foreclosure actions filed against homeowners nearly tripled in Miami-Dade and Broward counties in January and February, compared to the same months last year, according to proceedings filed with the clerks of court.”
“Florida is particularly vulnerable to the risks of so-called subprime loans, which go to borrowers with lesser credit. After California, the state has the second-highest percentage of borrowers with subprime loans, generally recognized as having the greatest risk of default.”
“In Miami-Dade and Broward counties, 23 percent and 18 percent of all loans are subprime, respectively; of those, about 6.7 percent are more than 60 days overdue, according to First American Loan Performance.”
“Alan Rosenthal, who supervises the mortgage litigation practice at Coral Gables-based Adorno & Yoss, said the firm was seeing a ‘huge spike’ in foreclosure cases initiated by lenders.”
“‘I don’t believe we have seen the full impact of these what I call junk loans — the negative amortization loans and all these other weird loans. They are too new,’ he said. And real estate professionals are gearing up for what could be the start of a surge of homeowners desperate to sell.”
The St Petersburg Times. “The developers of Trump Tower Tampa learned Wednesday that they can’t stop buyers from suing to get back deposits on the much-delayed condo high-rise.”
“For Tom Long, the attorney arguing against Trump Tower, the ruling has significance beyond his clients. ‘I think this now, frankly, opens the floodgates to others to demand their money back,’ Long said. ‘It’s a three-year project and they’re at ground zero.’”
“Long said developers, more than $3-million behind in paying contractors, may lack the money to come up with refunds.”
The Tampa Tribune. “Two buyers of a condominium in the stalled Trump Tower Tampa project overcame the first hurdle Wednesday in their quest to get their deposits back.”
“The decision is a ‘fairly critical blow’ for the troubled development and could result in other buyers following suit, said Sander Moody, a professor at the Florida Coastal School of Law in Jacksonville.”
“‘Now, instead of pouring concrete and meeting with lenders, these developers have to pore over documents to hand over in discovery,’ Moody said.”
“The publicity, he said, could make it more difficult for developers to get financing, and Wednesday’s ruling increases the likelihood that developers could settle with the plaintiffs to avoid more lawsuits from other buyers.”
“The plaintiffs in this case put down 20 percent on a $1.4 million condo in August 2005 and contend that it is now impossible for developers to complete the 52-story downtown tower by the December 2008 deadline specified in their contract.”
Raise your hand if your suprised by the FL foreclosure statistics. Anyone? Buler? Buler? …..
Also, the property tax reform in FL is currently stalled in the political system. And it will remain there for the foreseeable future. Anyone who thinks that there is a chance in he** of taxes being elimiated, or even going down significantly, needs to wake up and smell the humidity. That’s why I support a capping of the taxes at their current point (I would love a roll back, but I am just too realistic) and a redistrubituion of this tax burden across all homeowners. Will it happen? I doubt it. I think this bill will just stall in the political system until the property values have cratered and the problem has taken care of itself.
I agree Mike. I cannot fathom not having property taxes. What would happen to all the municipal bonds backed by the ad valorem taxes? Also, raising the sales tax would hurt businesses, especially those near the Georgia and Alabama borders. Lastly, that would give the state an “open checkbook” to where they could continue to raise the sales tax. The idea was a “band-aid” and won’t happen. A 40%-50% drop in home values will solve the solution.
I am not surprised at all bu the foreclosure stats. They’ll be ugly for the next 2-3 years. Mike, we on for the Blue Martini tomorrow night?
I think we are on for Blue tommorow DAP.
Unlike some people here (and on other blogs) despite the fact that FL housing grossly overpriced, there are some real advantages to living here. One of them is definately the entertainment and fun afforded younger professionals.
I will never be a total doom and gloomer. I love FL, and love living here. That does not change the fact that housing is totally overpriced, politicans are horribly corrupt (is that different anywhere?), and traffic is insane. There are positives and negatives of living anywhere. I choose to see the positive side. That said, all the good looking women in the world, and all the great club/bars in the world are not going to keep this area from cratering under its own weight.
“despite the fact that FL housing grossly overpriced, there are some real advantages to living here. One of them is definately the entertainment and fun afforded younger professionals.”
Wholeheartedly agree. That’s why I came here back in the day. And over the years, Florida has given me other reasons to stay. When the “action” aspect of Florida wears thin, the semi-rural, “old Florida” areas are nice places to kick back and smell the roses a little bit. Provided there are any left.
Of course, you’ll know it’s time for that when fishing tackle beckons more than the ladies do.
“Wholeheartedly agree”
I’m so with you! Price is not my primary concern. I make enough for what I want and this is by far one of the best places on earth for me to live.
Amen, Brothah! Testify!
Florida will survive, it has been through a lot, but most Floridians are tough and used to making do on lower incomes. One of my favorite reads is a book called “Alas, Babylon” by Pat Frank, written back in the late 50s, a fictional account about how a river community in Northern Florida survived a nuclear attack on the US. I believe Frank was one of the original OSS spooks, before it morphed into the CIA. But forget the nuclear scenario, the book is just a brilliant outline of how certain rural areas of Florida could actually make it through a social breakdown.
Oh, I read this book years ago.
Not only did it describe how rural areas in Florida managed to survive a social break down, I thought it was particularly interesting about how the author discussed that all the money in the area became worthless. No one wanted it, because they couldn’t eat it, use it as a tool, and a barter economy took hold in the area. Also, soon the most valuable pieces of property became the old farms with vast tracts of land and orchards where food could still be grown. Medical supplies and the town’s one orange grove had to be placed under armed guards to keep people from outside the township from stealing all these items.
It was an interesting read to say the least.
Holler at me Friday. 10pm? You got my number.
Is this a south Florida housing bubble meetup? I’d love to participate…
Me too. Green beer!!!
I am all for a SFL “bubble party”. Post an email address and Mike and I will contact you. Thnx.
andrew_norm@yahoo.com
greg_block@hotmail.com
Once it craters, those good looking woemen (or their younger sisters) will move to the next hot spot!
Josh
If you can’t afford 5% down you shouldn’t be buying a home.
“Della McDowell, a broker in Durham, said that some of the lenders she uses now want borrowers to have at least two mortgage payments in the bank.
How can you even think about buying a house without a couple grand in your pocket?
“How can you even think about buying a house without a couple grand in your pocket?” — The answer might be that, during 2005-2006, the “qualifications” for being a homeowner were lower than the qualifications for being a tenant. Certainly nobody is RENTING to people who don’t have a few thousand up front.
you are absolutely correct. try renting a house without putting up a 1st, last and security deposit and see how far ppl. get. That’s why all the landlords were going crazy seeing the cap rate shrink to a few % points and wondering how the h3ll you’r supposed to make money on a newly purchased rental, since there was no way to compete with the I/O pmt.s that would get the same renters in a house. The smart landlords probably stayed in hybernation during the last few years.
Its nice to see the sanity returning, and its gonna be painful.
I’m just amazed at the speed its occuring.
got cash?
Great point AZ lender.
“‘I was like, ‘Oh my God, I’m not going to be able to get this house,’ Green said.”
If this kind of individual was going to rent from me, I’d have a few questions to ask first and a few checks to get as well.
Like, but, like, ya know like, Oh Mi God, like I can’t get a house, like bummer, like that totally sucks!
Is this the mentality of those who have been buying the last few years? I can’t believe she even surprised after going BK! Nuf said!
Yes, this comment also stuck out for me. My conclusion is that far more people than we realize (especially younger people) essentially have no savings, and live paycheck to paycheck. So many people during the bubble were not buying a home - they were buying a certain payment that they could afford under current conditions. But stuff happens. The economy turns sour. People lose jobs, sometimes for months at a time.
Much of the growth of the past 5 years has been RE related. As these people lose their high-paying jobs, they will realize that the overall economy has only been producing jobs that pay about $10-$15 per hour. I honestly wonder how many homes in the past five years have been “purchased” by people employed in one way or another in the RE or construction industries.
“So many people during the bubble were not buying a home - they were buying a certain payment that they could afford under current conditions.”
You just described California perfectly…and the storm is not over. KB homes, Lennar, etc. are still building in the high desert, Inland Empire and Fontana - you can be sure that they will get you into a home at any cost or monthly payment.
They are building a Lennar Urban building(s) at the corner of Washington Blvd. and Strongs Drive in Marina del Rey . . . huge demolition going on there. Even in the heart of LA, at the beaches, downtown, everywhere . . . it goes on and on and on.
When I purchased my first home in 1999’s, and I was single back then, not married yet, the house cost $160 K. I put down 65 K for down payment and finance the $95 K with a 15-yr fixed at 7.65%. I will be done paying off the house mortgage by 12/2007 because I have been paying extra $1500.00 monthly on principal for the last 2 1/2 year. I must be a rare bread of home-owner in this modern time…
Btw, if no one else tells you this here, I will. Congratulations!
“I honestly wonder how many homes in the past five years have been “purchased” by people employed in one way or another in the RE or construction industries.”
I was amazed when my in-foreclosure landlord was trying to short sale her property last October, the agent said he’d sold his last two short sales to immigrant construction workers. When I asked how they’d afford it in the coming meltdown, he just shrugged and said they’d figure it out.
sigh.
Paul
5%? What happened to 20% down? This is absolutely insane. Every FDIC “insured” bank should be required to have a 20% down payment before issuing a mortage. The same goes for quasi government Fannie Mae and Freddie Mac. I guess if some hedge fund wants to start a New New Century Mortgage, there is nothing anyone can do to stop them but any organization with government backing should be required to get a 20% down payment.
If 20% down came back, the housing market would just fold. End game, no more players, armageddon in the housing market.
I think it’s nuts that we got this far from normal lending standards, but if they moved back to the old standards quickly, RE activity would just halt. No reason to even go to work as a RE shill.
The home I am renting right now would require a 100K downpayment at 20% down. And this, while not a “starter home” is not being marketed to people that have 100K sitting in a bank account somewhere.
It would be a true neutron bomb in the housing market. There is no other way to describe it. 5% might be just as damaging. 20% would be, without a doubt, totally devestating.
I thought the old guideline is that you must have 20% down to avoid PMI. So, there still seems to be a loophole here. If you don’t have the 20%, then just pay the PMI. I’m not familiar what the rate is for PMI. Anyone?
You’re right, they can’t bring back 20% right away. I think I remember from Galbraith’s book on the ‘29 crash that it was precipitated or accelerated by a moderate increase in margin requirements. In the present case, the 5% requirement would (will) bring about a slow-motion crash, in the course of which, some lenders/investors/tranches will evolve to the 20% down, if they haven’t already. I guess y’all know that az_lender has been at 30% down for more than a year, and feeling nervous enough about that.
You’re right, they can’t bring back 20% right away.
“They” won’t have a choice.
What’s happening is America is borrowing further and further into it’s future. We are currently inflating money to simulate productivity, but it’s a joke.
When I hear a statement like this, “The Consumer is in good shape” instead of “The Producer is in good shape” I cringe. How far into fantasy have we progressed when consumption is seen as production.
My wife goes shopping. If she gets a discount on something, she thinks she “saved” money. Yes dear, but you bought something we don’t need. But I got a discount on this Coppertone. Yes, but we’re Black dear.
Just like goldfish I guess, people will consume until they explode.
if you put zero down you avoid PMI !
roflow
I don’t understand why this is the case. I get it for 80/20, but for a 100 LTV? That’s crap.
The 20% down requirement is only a requirement if Freddie and Fannie buying the paper. If a different pool of capital is buying the paper they are allowed to put different rules to protect their investment. There are substantial other pools of capital out there for mortgages which haven’t been nearly as picky about underwriting.
Yes, but for how much longer?
Reno, too true. I my neck of the woods property tax is over 2% of mkt value per yr (40% of what these people couldn’t save up, every year on top of their mtg, heat, light, maint, etc.). These clowns shouldn’t be buying homes!
I = In
“Robin Green is finding out just how hard. Green fell in love with a $164,000 house. Even though her credit history suffered from large medical bills and a recent bankruptcy, she was able to get a contract on the home. Then Green got a call from her mortgage broker telling her things had changed. She would need to increase her credit score substantially or come up with a 5 percent down payment.”
“‘I was like, ‘Oh my God, I’m not going to be able to get this house,’ Green said.”
If you can’t scratch together $8200, you should not be trying to be a homeonwer, Robin.
“‘I was like, ‘Oh my God, I’m not going to be able to get this house,’ Green said.”
Robin felt entitled to that house …
now she has to go with plan B - actually save some money first.
It amazes me that people don’t even have saved 6x the monthly cost difference between renting and buying.
Got popcorn?
Neil
I’m like, Oh my God! Like, wake up and like smell reality! Like totally! What a twit.
Like, you totally took the words right out of my mouth, Omygawd
Tempted to send Ms. green 82 cents to use towards her downpayment …
It is amazing how little reserves some people have. I am renter (of course), and this month a got a new place for next year. It is a 4/2 farm house with a barn and some acreage for $900/month (got to love upstate NY).
With that said, it is a good deal, even for here. So I almost didn’t get it, because an interested couple saw the listing before I did. However, they did not have enough money for the 2 months rent required for a deposit.
Why do you even waste time looking at places to rent if you cannot pay a deposit?
Although your typing “I am renter” is clearly a small slip of the fingers (you meant “I am a renter”), the phrasing is wonderful becuase it suggests that power song “I am Woman” or some knock-em-dead phrase like “I am Tarzan.” Think I’ll write a song called “I am Renter.”
“I, Renter” is more amusing.
I am renter…hear me roar!
BayQT~
Years from now, Robin will be thankful that she was never allowed to get that loan.
Not even years from now. This years sale with no money down is next year or the year after’s foreclosure.
Ghost, don’t forget the ones that will already be in foreclosure by the end of this year!
I had to come up with about 10K to rent a home (I probably could have negotiated it down, but I really did not care, and didn’t want to start off on the wrong foot with the landlord).
You can’t come up with 8K to buy one? Are you kidding me? What on earth were you thinking trying to buy a home with less then 1/2 a years income in the bank?
“I had to come up with about 10K to rent a home ”
Mike, you must be renting from a bagholder who really wanted to stick it to you. First, Last, SD??
On a side note, where are you going for your green beer Saturday?
Reminds me of when I lived in Japan. In Japan, you typically need six months rent up front. Two months security. Two months fee to the real estate agent. Two months “key money” gift to the landlord.
I probably posted this story a few months back, but its apropos. In 1998 three of us together were looking for a really good rental house in Pasadena. The one we picked was also picked by three other applicants/families/groups on the first day it was listed. We couldn’t have beaten the other applicants with “references” but we did creatively offer to pay a year’s rent up front. Magically we were selected as the most desirable tenants.
You have to be careful as a landlord with that one. I once had a tenant offer to pay six months in advance. Seemed like a good risk, worked as an office manager for a dentist, etc. 2 months later the rental house was raided by the DEA (you know; the guys in black masks). I don’t think they found any drugs but I don’t really know since I didn’t find out about it until they were gone and a neighbor called me to come and lock the place up. Always wondered if my house showed up on some list.
164K for a house. My goodness.
“‘I was like, ‘Oh my God, I’m not going to be able to get this house,’ Green said.”
Just stunned… and another issue… 50K is a 5% downpayment on a million dollar house. If you can’t scrape together 5 percent of whatever is even a semi-appropriate house for yourself, something is horribly wrong.
I know…..I think the guy down the street paid $164 for his new backyard landscaping.
“‘I was like, ‘Oh my God, I’m not going to be able to get this house,’ Green said.”
2 years from now, if she has any sense, this woman will be thanking God that this loan didn’t close.
I doubt it.
Yep. She’ll find another bus to be under in due time.
Here in CA, she would probably need therapy for her Post Traumatic Real Estate disorder. Someone actually had the audacity to say “no.”
“‘There are … people who were able to qualify for loans in the past few years who aren’t going to be able to get loans,’ said John Crawford, a mortgage banker in Greensboro.”
Contained? Right…. The wheels are falling off this mofo!
“The developers of Trump Tower Tampa learned Wednesday that they can’t stop buyers from suing to get back deposits on the much-delayed condo high-rise.”
I believe the legal term for this is: “Oh sh!t!”
In recent months, developers have said it would be mid-2009 before they complete the building. Since November, construction activity appears to have stopped…. Trump tried to buy out SimDag last fall, but the developer decided to instead sell to Orlando private-equity firm Mirabilis and remain as a partner.
If there are not enough total buyers to support financing requirements, how long are early buyers suppose to wait?
I don’t know why anyone would fall for the Trump name. Here in Chicago he’s building a condo tower. It’s going to be something like 92 floors and they’re currently on about the 29th or 30th. They exterior of the bottom 22 or so floors is done and it looks beautiful. Very un-Trump. Anyway, you may say that it would be great to live there. Perhaps so - but Trump used a clause in the purchase contract to cancel all the early buyers’ contracts (presumably so he can sell them again at a higher price).
So, this is what happens with Trump.
1) You get a crappy building that doesn’t get out of the ground and you lose your deposit
2) You get a marvelous building but are kicked out as soon as it proves to be good, essentially giving Trump an interest-free loan to start construction.
you might get a T-shirt that reads…
‘i put a deposit on the Trump building, all i got was this T-shirt”
got cash?
Gary Hooker should put his money where his mouth is. He should do the loan himself (no, he knows its not a good risk)
“The developers of Trump Tower Tampa learned Wednesday that they can’t stop buyers from suing to get back deposits on the much-delayed condo high-rise.”
I recall a post from a few months ago where some buyer had put down a deposit on a Trump project, perhaps this one. The buyer was quoted as saying something like, “I’m not worried about my deposit. If this wasn’t a good investment Donald Trump wouldn’t put his name on it.”
And Krusty the Clown wouldn’t put his name on corn flakes if they weren’t nutritious.
I think that was out in Cali or Mexico…..
It was Mexico….that guys name was Joe Dumbass - a cousin of Joe Sixpack.
“The decision is a ‘fairly critical blow’ for the troubled development and could result in other buyers following suit, said Sander Moody, a professor at the Florida Coastal School of Law in Jacksonville.”
I guess the phone lines over at Yale were all tied up.
And Shiller would’ve said something less tentative.
The line, “I was like, OMG I’m not going to get this house” is truly priceless.
For the record, the best Krusty endorsed product is the Krusty Brand Home Pregnancy Test with the sticker on the box that says “May cause birth defects”.
LOL.
“Fun! Easy to Use! Just Add Urine!”
Krusty sez: “If it’s positive, it ain’t mine!”
*warning: for accurate reading, wait nine months*
“ “Wells Fargo has lowered its maximum debt-to-income ratio from 55 percent to 50 percent, Pearce said. For example, if a home buyer earns $3,000 per month, then his total monthly debt can not exceed $1,500.””
Hmmm… just knocked 10% off the price of a home people can bid on and this isn’t done. I’m not expecting a return to 36% max DTI, but 45% as the maximum DTI will be seen pretty soon.
The train is coming into the station… way too fast! (ever see that photo of the crashed locomotive?)
http://images.google.com/imgres?imgurl=http://www.fulcrumgallery.com/ProcessedImages/100000/98926_PL.jpg&imgrefurl=http://www.fulcrumgallery.com/ProductList.aspx%3Fcat%3Dcategories_subjnew_architecture_buildings_trainstations&h=150&w=120&sz=6&hl=en&start=12&tbnid=jTI9CcIV6KGZjM:&tbnh=96&tbnw=77&prev=/images%3Fq%3Dposter%2Btrain%2Bcrash%26gbv%3D2%26svnum%3D10%26hl%3Den%26sa%3DG
That’s what we’re about to see. This madness will stop. Just not in time.
Got popcorn?
Neil
or the final scenes from the old movie, SILVER STREAK with Richard Pryor and Gene Wilder. With any luck, we’ll roll into the station behind the wreck.
I keep thinking of:
“And the train it won’t stop going, now way too slow down.”
- From Locomotive Breath by Jethro Tull
Up to a quarter of the homes sold in North Carolina in 2006 were bought with subprime loans, according to industry estimates.
Does anyone know if/where I can look up this information (how many purchases w/subprime) for PA or, more specifically, the Philadelphia region?
I would like to see this also. Too many condos have been built or are being built for real supply to meet real demand. Where are the new Philly jobs?
I am just now proposing to a friend of mine that we get a group together to buy a Phila condo. However, in no case would we buy it within the next four months (perhaps not the next four years).
“Does anyone know if/where I can look up this information (how many purchases w/subprime) for PA or, more specifically, the Philadelphia region?”
Yeah, check the foreclosure statistics.
paul
With resets rising, equity declining, and low-end borrowers locked out of the market, the number of foreclosures is going to skyrocket. So the question is- will the hedge funds, state retirement funds and foreign investors that end up owning these properties actually be willing to hold them long enough to find a retail buyer? Or are we about to see “vulture funds” set up to acquire these properties in volume (at severe discounts)? If the latter, then the falling knife is about to get a booster rocket attached to its handle.
Look for a return to 20th century pricing pretty much everywhere.
Good question, but I think “vulture funds” are unlikely to wade into the single family house arena. They are too hard to acquire and manage in a way that makes any sense. They will be out there looking for commercial properties, though, when that segment goes down.
The real question, in my mind, is who will wind up owning the foreclosed houses? In the old days, the banks were the bag holders. Institutional inertia put off capitulation, some times for years. Nowadays, who knows?
“The real question, in my mind, is who will wind up owning the foreclosed houses?”
Don’t call me a whacko…but I believe that especially in the overinflated areas like South Florida…county and city government will own the homes. It will be the solution to the workforce housing problem. The only real issue there is who qualifies for “workforce” housing? They better be working and not “working.”
Ahem, actually, not so whacko. That is sort of what happened in DC and other cities years ago. After the riots of the 1960’s and mass exodus from the inner cities during the 1970’s, many, many single family houses were abandoned because there was no resale value whatsoever. Zilch. Those who could leave, did so (sort of like Hurricane Katrina), and left their houses empty.
That didn’t stop the tax man from levying property tax, of course. The taxes were never paid and the properties were foreclosed upon by local government. To this day, in DC, there are neighborhoods with boarded up, city-owned houses. Of course, DC has historically not had its act together to put them to good, or any, use, but who knows?
That’s not to say we’re staring another ’60’s/’70’s urban upheaval in the face, but you may be on to something….
I don’t want vacant homes (any more than are already in my neighborhood from bagholders). What I would like to see is teachers, police, and firefighters given the opportunity to buy in at low prices. That would be much better than the alternatives.
That’s sort of how the ball got rolling in the late ’90’s in DC. The gov started to sell the vacant houses it owned to residents of DC below a certain income threshold who were first time buyers. The houses were stupid cheap (like, ten grand) and the gov would insure the re-hab loan. Actually did help both the fireman/cop and the blighted neighborhoods a lot. And then it morphed into a damn bubble. Oh my achin’ head. As long as those buyers didn’t HELOC themselves they’ll all be fine.
Bad Andy,
I don’t know you, but we’ve got real differences, so please take no offense.
Teachers, cops, and firefighters are bloodsucking leeches who live off of your taxes and deserve NO BREAKS! The only industry front group worse than the NAR is the NEA. A few years ago the firefighters here in San Diego let the county burn down, and were aclaimed to be heroes because of it.
Worse yet, my oldest brother (San Francisco Paramedic Captain) and his wife (Nurse) bought a 700k home in Cotati (Sonoma County) (no back yard - LOL), and he and his wife were proudly pointing out there neighbors: Cop, City Administrator, Cop, Fireman, Fireman, Teacher, Teacher, College Professor, Cop, Fireman…
Nobody that actually has to perform to ensure a continuing income stream.
Please don’t buy the propaganda.
Paul
I completely forgot about the commercial property implosion, on the way. It always follows the residential bust. So many entrepreneurs and risk-takers running their businesses, out of all the strip malls. As the MEW dries up, the strip mall business go first. Oh the Horror.
“Honey Hartman of Hollywood is facing a mortgage crunch. A huge property insurance increase this year pushed her monthly mortgage payment to $770, which exceeds her income of $643.”
I’m confused…how low could the payment have been before the insurance increase? And how was she even affording that lower payment on her income?…
Perhaps they meant her monthly payment was more than her weekly income, which would put her at 30% of income for housing? NOT!
Honey Hartman sounds like a porno name. If she’s not, maybe she could do a little porno on the side so she could make that new higher mortgage payment and keep her house.
“Honey Hartman”
Anyone remember the old Bobby Goldsboro song “Honey” and the Smothers Brothers send-up skit on the “Honey House”?
(Will the hedge funds, state retirement funds and foreign investors that end up owning these properties actually be willing to hold them long enough to find a retail buyer? Or are we about to see “vulture funds” set up to acquire these properties in volume (at severe discounts)?)
In markets that are over-priced more than overbuilt (Northeast, California) you’ll get price drops until cops, teachers and store owners and managers can buy again. Banks will probably allow generous, but not ridiculous, purchase terms to move inventory like the car companies do — 30 year fixed and full doc, but no money down if you don’t have it and no-one else does, with the bank holding the second.
In over-built markets you’ll have vultures, and lots of cheap property to rent.
Is there anyplace in the Midwest where suburban rents will fall below operating costs, leading to abandonment? It could be, in the older places. The influx of impoverished renters will change a lot of newer suburban towns. Expect a BIG political issue in formerly exclusive suburbs.
Thought for the day: If a federally-chartered bank, or in fact any bank doing business with FaM or FrM, has a foreclosed property located within a gated, exclusive HOA-bound development can they be held at fault for making special arraingements with that HOA limiting the re-sale of the property? Seems to me that many of the special covenents erected during the ‘boom’ years will be very hard to maintain in a equity vulture environment.
Hello All -
Robert Schuler is on WBUR.org right now. There is a wonderful discussion on sub-prime mortgages.
I was curious about Robert Schuler talking about mortgages, since the only Robert Schuler I know is the head pastor at the Crystal Cathedral here in O.C. and I was wondering 1)why would they have him talk about this kind of topic and 2)why would he be calling into an east coast radio station? Turns out it’s Robert Shiller, an economics prof. at Yale. That makes way more sense.
“Hooker said his clients weren’t able to get mortgages because they could not meet a new requirement for a 5 percent down payment.”
All Hooker is worried about is that he won’t get his commission, the fact that the “homeowner” would have gotten foreclosed on in a few years means nothing to him. In fact, I bet he would be happy to handle the sale of the foreclosed house for the bank to someone else who could not afford it.
I find the idea of lender “tightening” somewhat humorous. The fact is, lenders are going back to traditional methods. For example, requiring PMI, verifying income/assets and employment, 1040’s etc..
Maybe the newer folks in the business characterize this as the “tightening.” The impact of the sub-prime woes are taking grip. I can’t count how many LO’s I know are struggling with getting folks qualified and agents comments about borrowers not qualifying are just as many.
“The fact is, lenders are going back to traditional methods.”
Actually from what I read they have not even gotten back to traditional methods, they are just back from the crazy methods of the last couple of years. If they went back to traditional methods the whole RE industry would collapse in a day.
Agreed, see my post above.
It would be total devestation to the bubble markets, which would quickly ripple through the entire housing market. If 20% down came back tommorow, I would honestly expect prices in FL (and the other bubbles) to fall between 30-60% overnight.
We are approaching a crisis of credibility, not just in matters financial, but in virtually every aspect of our lives and I feel we are headed for a “back to the future” time of accountability, and something is going to be needed as a baseline for value and if those green, black and white pieces of paper in your wallet are deemed worthless, or the electronic blips on the computer screen that signify that one owns a scintilla of korporate amerika, crashes and is worth bubkis…
What will replace these 2 items that were strictly faith based items, in the 1st place?
Shotgun shells, canned goods, livestock, seeds, light farm machinery, diesel generators and various other implements come to mind……
My late grandfather lived through the Great Depression in Eastern Tennessee. Had to leave a high-paying mechanic job in Cincinnatti and return to the family homestead in 1930 with my Grandmother, my Dad and my Aunt to live…at the age of 29.
There were NO JOBS. And it happened overnight.
When my Grandad died he had over 3 million in his bank account and didn’t even have a credit card. The Great Depression taught him some hard lessons about money and debt.
At one point, he was shot by Railroad Detectives while stealing coal off a train in order to keep his family warm. This man was also a deacon at the local church.
Another Greater Depression will bring out the worst ( and also the best ) in some people.
One of the last things that he told me befoe he died ( as he was hinting at my inheritance ) was to STAY OUT OF DEBT. PERIOD.
I sometimes fear that this thing is gonna end very badly…
I hope his 3 million was distributed over at least thirty FDIC-insured banks.
Preach it, LP! This economy is in for one big flush down the toilet. There is so much going on underneath the veneer, i.e. entitlements coming due, 9 TRILLION in nat’l debt, that the avergae schmoe doesn’t even think about.
First thing is to get rid of all debt. I know I preach this weekly, here, but it is just too good of advice. When things start to crumble, you don’t want anyone to have a hold on you for something like cash, which could become worthless anyway.
Second, stock up on cash (although if it goes worthless, see above, no sense in having) since no one will have any anyway. SO what if you are one of those wackos with 50K in the mattress. You will have money when no one else will have access to it.
Third, get some silver and gold. Don’t go crazy, but like cash above have some on hand. This will be the currency of the world if fiat toilet paper ever dies.
Fourth, canned goods, generator, etc. (all mentioned in post above) would be good to have.
Fifth, get out of the cities. Suburbs will be bad enough, but as mentioned yesterday, rioting and looting will be the norm.
depsite the tinfoil hat I sometimes wear, I think as a rule you want to have te least amount of responsibilites as possible. You have to ready to get of a dodge in a hurry with family and some close friends and you have to be able to do it with some supplies on hand.
Trust me on this when the fabric of society finally tears apart, you don’t want to be caught off guard or near the rioting. I saw it up close and personal after the King verdict here in elLay. It was enough for me. I would not want to have to get throuogh that with family and friends.
We stole a page from the Mo Mo’s and keep a bunch of canned goods and cheap food staples, perhaps 6 months worth, on hand.
It’s amazing how reasonable some of it is:
I bought some 10 pound bags of penne pasta last week for $2.99 a bag and 20 pound bags of rice for $6.99.
Gotta eat.
“The publicity, he said, could make it more difficult for developers to get financing,”
That’d be just fine with me. Looking around at the toxic development in FLA, it reminds me of Soviet housing blocks. It really does, and it scares the crap outta me. Makes me almost wish for a massive hurricane to bust it up, followed by bulldozing parties. How can people even live in those cell blocks? Answer: many don’t, that’s why so many of them are mostly empty.
“It’s coming when these regions need it the least.”
Entitlement, entitlement, entitlement.
“Entitlement, entitlement, entitlement”
They owe it to me! 560 FICO 0 Down and a job at Wal-Mart. My price range is $350K!!!!!!!!!!
Hi, all.
Enough about that Robin Green chick in Carolina.
Been waiting to post this when Ben put up something about Florida….
I found this in SRQ Magazine’s online issue regarding one of the new condos that’s about to close (this is one of the ones discussed in an article about the downtown condo market in the Sarasota Herald Tribune last week):
http://www.sarasotamagazine.com/blog/template_archives_cat.asp?cat=12
(sorry, there’s more here than just the R/E stuff, but it’s the March 9th column titled “Will they or won’t they at 1350 Main” - should be right at the top).
Definitely sounds like the developer is putting the best face that he can, and “whistling past the graveyard” on this one. Am sure the majority of the units will close, but there’s about 35 on the market, probably the majority of those are flippers who are about to be stuck. In about a month all the closings will be on the appraiser’s web site and then the whole world will know what every unit went for, and that’s probably the most any of them can expect. As for me, I’d also look into how much of each purchase ends up being mortgaged. To take someone out, I would want to walk away from the closing table doing no more than paying off their loan at best. But even then I think I’d be overpaying. Condos will have to be discounted to the point where they can be rented out for positive cash flow, which is about a third of the present asking prices.
I’ve already put together a spreadsheet showing what the buyers paid for another property, Rivo on Ringling, if anybody wants it email me at mariner_78@yahoo.com and I’ll be happy to send it. But you can get the same info from the appraiser’s office. Bottom line is that there’s about 25 units for sale in the building, asking around $400 per square foot. Looks like the average price they paid the developer is $250 per sf. Me, I’ll be looking to buy there (maybe) when the banks are selling them from their REO inventory at $150/sf.
OT - I see we have another Mariner (mariner22) posting here. Must be my younger cousin - probably good looking.
Cheers / Mariner78
Of all the places in the West Central Florida area, Sarasota leads the “it’s different here” pack. Don’t get me wrong, it has always been a lovely area with a nice population mix and is known for a good quality of life. But even Sarasota will not escape the carnage.
I like Sarasota. Might even consider buying one of those traditional concrete block houses in one of the older neighborhoods one day.
“I like Sarasota. Might even consider buying one of those traditional concrete block houses in one of the older neighborhoods one day.”
One day is the key word. Sarasota is going to bite it big time imo. Take a good look at ‘05 prices and subtract 40%. Believe it…
“Me, I’ll be looking to buy there (maybe) when the banks are selling them from their REO inventory at $150/sf.”
Compare this to the condo/townhouse mess during the S&L crisis. The whole market was a complete disaster then. The condo/townhouse properties were so far underwater that many of the owners just left. I was younger and living in New Orleans during that time. My friends and I lived in these properties for dirt cheap rent. Since we are in uncharted territory, I wouldn’t begin to guess where this will finish.
Roidy
P.S. This being New Orleans we partied, partied, partied! It was fun.
“Raleigh Realtor Gary Hooker already has lost three sales to first-time homebuyers since lenders this month began cracking down on easy mortgage money. But his real worry is the effect that tougher restrictions on subprime borrowing may have on the Triangle’s unsteady housing market.”
Oh, I’m not worried about the effect, Mr. Hooker (what a name for a realtor). The effect will be, prices will fall! It won’t happen overnight, but those wanting to/having to sell, will have no other choice, because few can buy at bubble prices without subprime. Life is good!
” Mr. Hooker (what a name for a realtor).”
It’s even worse when you’re having one of those dyslexic moments where your brain drops out a letter or two. At first I read “Gay Hooker” and then, when I looked back in disbelief, saw that it was “Gary Hooker”.
And the few who CAN will finally NOT. Thanks to (belated) publicity on subprime mess. Strangely, now that the media are trumpeting the truth, I’m not seeing any more REIC shills blaming the problem on the media.
The average YOY RE SFH sales rate is around 6.5% of the owner occuplied units. This means that RE has a very very slow turnover rate. Now since the lending requirments are changing somewhat we can expect to come back closer or below this sales rate. So what we have no matter what the price of the SFH RE will be is a small pool of buyers in any given market. Inventory will continue to be high for a number of years maybe 10 to 15 years out with signifcantly high number of vacant homes and ghost towns out in the former cow pasture developments. We also must realize that boomers in the next 10 years will want to convert that equity into cash which will add to the selling but doesn’t change the demand factor.IMHO
I don’t think those investors who put down payments on units in Tampa’s Trump Towers have anything to worry about. Mr Trump seems to be an honorable man and I’m sure he wouldn’t mind writing these folks a check from his personal checking account.
Maybe his TV show(s) will keep him solvent. People will watch TV no matter what.
Actually, there is a modern day example of government bailout of banking system (Finland). Finnish government bailed out a couple of major Finnish banks in the early 90’s, after a big real-estate crash.
All “non-performing” loans were put the special “junk bank”, called Arsenal. This cleaned the balance sheets of the banks and saved the Finnish banking system from collapse. There was only one big BUT:
This “Junk Bank” created a moral hazard to bankers. Companies were put down for any kind of temporarily payment difficults because government’s tap was wide open. This created a big “Screw you, Government pays anyway”-party for the bankers and further worsened the recession.
The characteristics of US real-estate crash is very similar that of Finnish one except US one is much much worse and much bigger. You will get an idea, what is to be expected, from these facts of the Finnish crash:
Finnish public debt rose rapidly from 20 percent to over 70 percent of GDP, just in FOUR years! Unemployment jumped over 15 percent and interest rates rocketed up to 15-16 percent. Over 25 percent of Finnish companies went bankrupt. There were a lot “two-house” trap household, unable to sell the old one while new one already built. (You got 2+++ house traps, even worse!)
The only thing that saved the day was the relatively low public debt level BEFORE the crash. Finnish government was able to bailout and ease the pain a lot without blood in the streets and all-out revolution.
Americans do not have that luxury. US public debt has been rising fast during relatively good times and all kinds of unfinanced financial blackholes are already waiting in the (near) future. During recessions tax revenues dry up a lot and that creates even more financial problems.
US government, states and major cities are all up to their eyeballs in debt TODAY. 20-30 percent drop in the revenues will probably happen anyway and that will effectively bankrupt many cities, even states. They surely are NOT prepared for this incoming clusterf….
How do you provide food and shelter for those millions new homeless people? Your National Guard is getting IEDed in Iraq and Afganistan. Who is going to borrow even more money to Americans? Nobody.
The only one short-term solution is to print even more money but that will cause the dollar collapse. It will be chaos and blood in the streets. One year ago I predicted US banks going under in another blog but no Americans believed me….”it will not get that bad”, “you are pessimist, aren’t you”, “US is too big to fail” and all that blah blah blaa.