“The Thrill Did Not Last” In North Carolina
The Hickory Daily Record reports from North Carolina. “In the Hickory region, the surplus occurred within the past three or four years. ‘Everyone was hearing how great the market was and sellers couldn’t understand why we couldn’t sell their houses,’ said (broker) Diane Cline in Hickory.”
“Dee Blackwell and Taylor Dellinger, analysts with the Western Piedmont Council of Governments, estimate about 10,000 homes are for sale now, more than ever before.”
“If there isn’t a surplus now, there could be in the future. A study performed by the WPCOG found 24 potential major housing developments in Catawba County with more than 6,000 potential lots. River Oaks, located on Lake Norman, just north of the town of Catawba, will contain 2,000 home sites.”
“Key Harbor in northern Sherrills Ford is second in number, with 1,400 planned units. Nearly 9,000 more lots are planned in Alexander, Burke and Caldwell counties.”
“Blackwell and Dellinger say the development will at least create many questions, such as what occurs in 15 or 20 years when retiring baby boomers begin to die off. ‘We’ll have this huge surplus of housing,’ Blackwell said. ‘And who will be able to afford the housing?’”
The Charlotte Observer from North Carolina. “Mark and Lea Tingley bought a new home in 2001 in a subdivision called Southern Chase. They recall feeling surprised they could afford a house. And thrilled.”
“Southern Chase was a new kind of subdivision for Beazer, an experiment in selling low-cost homes to low-income families. The strategy was a financial success for Beazer. But the neighborhood fell apart.”
“Seventy-seven buyers have lost homes to foreclosure in a subdivision of 406 homes. That’s about one in five, more than six times the national rate.”
“Some homes sat empty. Others became rentals. Prices dropped. Mark Tingley pointed to holes in his siding, garbage in neighboring yards, overgrown lawns, junked cars. He feels angry, cheated and trapped. ‘We were just so happy,’ he said. ‘Now, no one is happy.’”
“The buyers in Southern Chase share responsibility for the decisions they made. But an Observer investigation found Beazer acted in ways that made a high rate of foreclosures inevitable. Beazer not only built the homes in Southern Chase, it arranged mortgage loans for two-thirds of the buyers.”
“The company used that control to arrange larger loans than some buyers could afford. That allowed it to include the cost of financial incentives in the price of homes.”
“The night before Southern Chase opened in 1997, people camped outside the sales office, waiting to pick the best lots. Home prices started below $80,000, roughly half the Charlotte-area average. Demand was ‘hot as a match,’ said Barry Helms, the sales agent who greeted them. He remembers selling six or seven homes the first day.”
“The unusually low prices were a strategic decision for Beazer. Beazer also was responding to opportunity. The federal government was pushing to expand home ownership. It was encouraging mortgage lenders to relax standards, to make loans available to many lower-income families for the first time. The FHA offered to insure the loans: If the borrower didn’t pay, the government would.”
“Contractors did the building. Beazer focused on marketing. It held pizza parties at nearby apartment complexes. ‘We believe in the dream,’ read a Beazer flier distributed to apartments in Concord. ‘We believe that everyone deserves to own their own home.’”
“But as the company pushed to find new buyers, it increasingly crossed the line between selling to people who could barely afford homes, and selling to people who couldn’t.”
“Lea and Mark Tingley were not looking to buy a home in early 2001. They had little savings. They heard about Southern Chase from Lea’s brother, who had just put a deposit on a home there. If he could afford a house, Lea recalls thinking, I can, too.”
“They say the sales agent told them Beazer would arrange the down payment. The company also would arrange a mortgage. It would even help with the monthly payments for the first two years. Lea remembers the sales agent saying, Let’s just do this. You’re pregnant. You need a home of your own. She returned the next day with a $600 deposit.”
“The model the Tingleys purchased had a base price of $96,490 on a 1999 price sheet. By 2001, Beazer had raised the base price for the same model with the same square footage to $108,990. Beazer arranged the loans through a subsidiary. From 2001, Beazer Mortgage arranged loans for 84 percent of the buyers in Southern Chase.”
“Almost all of the loans were insured by the Federal Housing Administration. That meant Beazer and the lender had little to lose if the borrower could not afford the loan.”
“The Tingleys moved into their new home in April 2001. Lea cleared out her 401(k) to pay $2,500 toward closing costs.The keys came in a manila envelope with instructions on the front: 1) Dump on table. 2) Place key on ring. 3) Do the ‘Happy Dance’ (Jump up and down shouting wildly.)’ The thrill did not last.”
“Lea had applied for the loan without Mark because he had credit problems. She omitted from her application a monthly payment of $350 on a leased Dodge Avenger. Lea said a Beazer employee told her to do it because the application also didn’t include Mark’s income.”
“‘At the time it made sense to me and I was just excited about owning the home,’ Lea said. She says she knows she shouldn’t have omitted the payment, but she trusted the employee.”
“In the summer of 2001, three months after buying the home, Lea called the dealership and asked to have the Avenger repossessed. She could not afford the car and the mortgage.”
“2004 was the first year in which many buyers were making a full mortgage payment without Beazer’s help. The overwhelmed owners might have sold their homes to pay their debts. But prices in the neighborhood had dropped.”
“Too many homes were for sale. Foreclosed homes were available for 80 cents on the dollar. There were newer subdivisions nearby. Many remaining residents owed more than they could sell their homes for, and they lacked the savings to pay the difference.”
“Martin and Jill Higginbotham tried to sell their home for two years after Martin took a job in Tennessee. Finally, Martin mailed in the keys and called the lender. ‘Do what you have to do,’ he remembers saying.”
“The lender foreclosed in early 2004. Twenty-nine other owners lost their homes that year.”
“The Tingleys had a plan when they moved to Southern Chase. They would sell after five years and move to a larger home. By last fall, the Tingleys owed more than $115,000 on a house valued for tax purposes at less than $108,000. They talked with real estate agents, who quoted even lower prices.”
“The Tingleys were struggling to pay their mortgage. The monthly bill had climbed to $1,091, including catch-up payments. They didn’t have the savings to sell the home at a loss. ‘We can’t afford it, we can’t sell it and we’re hurting ourselves just trying to keep it,’ Lea said.”
Really long time readers will remember the Observer did some early breaking work on what would become the story of the housing bubble; government subsidy, relaxed lending standards and overbuilding.
WSJ reported a couple days ago that FHA loans lost huge market share to subprime lenders from 2002 to 2006. There is discussion amongst builders and other members of the REIC that FHA needs to step back into the game and refinance some of the FBs out there. However, not even the GSEs would lend to the new breed of subprime borrowers.
Furthermore, with Congress weighing tighter restrictions on the GSEs, the idea is DOA. It’s not going to happen; the GSEs are already too big and have outgrown their mandate and are probably undergoing a bailout of their own hence the relaxed accounting and reporting rules). The REIC stretched the rubberband way too far and a lot of people are going to get stung.
Here is an excerpt from the WSJ article:
For decades, the FHA was a major backer of mortgage funding for borrowers with poor credit. But the FHA’s share of the market has dropped sharply in the past decade as hordes of aggressive subprime lenders wooed away borrowers with an array of seemingly attractive options, including no-money-down mortgages and interest-only payments. The subprime players also offered faster approvals, instant home appraisals, less paperwork and fewer hassles, winning over consumers even though subprime mortgage rates were generally higher than rates for FHA-insured mortgages.
According to Inside Mortgage Finance, subprime mortgage originations, or the dollar volume of such new loans nationwide, totaled $600 billion last year, more than triple the 2002 volume of $185 billion. FHA-backed loan volume fell to $53.7 billion last year, down from $145.1 billion in 2002.
And the subscribers link: http://online.wsj.com/article/SB117400504161738764.html?mod=todays_us_page_one
In short, FHA loans took a backseat when all the funny money from subprime lenders hit Main Street. Now that subprime lenders are spent, the REIC wants them back in the game.
“For decades, the FHA was a major backer of mortgage funding for borrowers with poor credit. But the FHA’s share of the market has dropped sharply in the past decade as hordes of aggressive subprime lenders wooed away borrowers with an array of seemingly attractive options, including no-money-down mortgages and interest-only payments”
Just a side observation:
I hear on a lot of blogs how it’s the GOVERNMENTS fault for all this, because of programs like FHA loans.
However, this particular bubble is significnatly a PRIVATE ENTERPRISE bubble.
Don’t get me wrong, the Govt has much blame, partially due to artificially low Fed Funds Rate for too long, and also allowing fractional reserve lending.
but make no mistake, this bubble took off due to PRIVATE NONREGULATED capitalism.
“However, this particular bubble is significnatly a PRIVATE ENTERPRISE bubble.
Don’t get me wrong, the Govt has much blame, partially due to artificially low Fed Funds Rate for too long, and also allowing fractional reserve lending.
but make no mistake, this bubble took off due to PRIVATE NONREGULATED capitalism.”
Housing Inspector, AWESOME! And don’t forget, the FED is NOT a governmental entity, it too is PRIVATE. But the govmint does allow fractional reserve lending.
There’s only one law when it comes to dealing with private enterprise: “Caveat Emptor”.
BTW, if you look at how this has played out, the tactics are very similar to economic shenanigans in much of the third world. Between the rampant illegal immigration and economic shenanigans, I would say some are working VERY hard to make the US into a third world country.
The only legislation I would accept from the federal government is a rollback of bankruptcy laws to what they were before the Bush Administration’s rabid Congress tinkered with them on behalf of the banks AND a re-insititution of the usury laws.
I don’t mean to de-emaphasize the governments role in this debacle. However, the statistics in the article gives us a broader picture of the crisis and alludes to reasons some of the MegaBanks were lobbying Congress to restrict the GSEs role in the mortgage market. Furthermore, it demonstrates the bulletproof like attitude of the RiskLoves.
For supporting government, the taxpayers deserve to get stuck with the bill for this debacle.
You know, Mark, that’s exactly right. That says it all for me. Even those of us who fancy themselves to be prudent and protest the bailout, what did we expect? We support the government that does this.
Mark, you may get a few flames for that. Some of us may say “I didn’t support this” “What choice do I have, everyone has to pay taxes” Blah, blah,blah.
We do have choices. There are always choices. Sometimes the potential consequences of those choices are not palatable. But still, we all agreed to this if we live in the US and pay taxes.
And almost no one will vote for Ron Paul, the only decent human being in D.C., because principles scare the electorate.
Well, I for one support the government because I am compelled to. If I stop sending quarterly checks, it’s off to rape camp for me.
Pardon me while I have a fit of patriotic fervor.
Mark I will vote for Ron Paul. That man “Gets It”.
And how about David M. Walker, Comptroller General of the United States for V.P.
The USA might have a chance with those two gentlemen in charge.
“Bread and Circuses”.
That’s why the founding fathers set up a democratic republic and not a full-on democracy. Unfortunately, a couple century’s abuse has totally frelled the constitution.
From what I understand, brokers started pushing sub-prime over FHA because:
1. The sub-prime loan programs were easier to understand, reducing their work demand.
2. The sub-prime loan programs provided much more $$$ to the brokers in the form of sales incentives.
That’s also why you hear news reports of predetory lending practices with brokers putting people that would have fit less expensive lending programs into sub-prime. Sub-prime was just paying the brokers too good.
1. Subprime loans provided much more $$$. Why screw with FHA guidelines.
2. Ditto
3.Ditto
4. Ditto……..
“but make no mistake, this bubble took off due to PRIVATE NONREGULATED capitalism.”
Yep. You are 100% right. Capitalism ALWAYS heads towards corruption unless REGULATION is strong and enforced.
I can’t wait for the NO REGULATION crowd to chime in.
As far as FHA losing market share to sub prime lending, isn’t it true that some of these sub prime loans where sold to FHA as MBS? If this is true, then this makes FHA the bagholder, as these originators are or soon will be history. It would be no different than if FHA originated these loans. Don’t you think?
Also, if it is true that FHA is now a bagholder of defaulting sub prime loans, does this open up an ave of convenience for a gobmint bailout? For example, who is to stop FHA from refinancing these FBs with exceptionaly favorable terms (like very, very low fixed interest 30 year loans). How do we know this isn’t going on right now?
Got 10% down?
FHA doesn’t buy loans.
“isn’t it true that some of these sub prime loans where sold to FHA as MBS?”
I’d really like to know the answer to the question you raise. If true, that would be scandalous and heads would roll.
FHA doesn’t buy MBS. Why on earth would they? They are a government agency that provides mortgage insurance, not a hedge fund.
Perhaps he meant FNM. From the Washington Post:
By David S. Hilzenrath
Washington Post Staff Writer
Friday, March 16, 2007; Page D01
Executives of Fannie Mae and Freddie Mac invoked the upheaval in the mortgage market yesterday as a reason for lawmakers to be cautious about subjecting them to stricter regulation.
The recent meltdown in unconventional home loans provided political ammunition for Fannie Mae and Freddie Mac just as House members are poised to move ahead on long-delayed legislation aimed at tightening controls on the federally chartered mortgage-funding companies.
Freddie Mac chief executive Richard F. Syron testified yesterday that the legislation could not only hurt the two companies but also damage the already weakened housing market.
“We support strengthening [government] oversight, but not at the cost of crippling our ability to compete in the marketplace,” Syron said in the longer, written version of testimony delivered to the House Financial Services Committee.
Fannie Mae chief executive Daniel H. Mudd’s criticisms of the bill were milder. After testifying, he called the bill “a positive step forward” compared with earlier proposals. But at a time when regulators, rivals and other critics question how much the public benefits from Fannie Mae and Freddie Mac, Mudd said the companies can cushion shocks such as the trouble in the subprime mortgage market.
He said Fannie Mae is developing loans to rescue borrowers trapped in mortgages with sharply rising interest rates. Syron said Freddie Mac is developing safer alternatives to existing subprime loans.
But Judith A. Kennedy, president of the National Association of Affordable Housing Lenders, testified that Fannie Mae and Freddie Mac have helped fuel the increase in subprime mortgages by purchasing securities backed by such loans and not doing enough to offer alternatives in the past.
URL: http://www.washingtonpost.com/wp-dyn/content/article/2007/03/15/AR2007031502138.html
I just knew it. It was them liberals in Warshington what messed up our mortgage.
“Mark Tingley pointed to holes in his siding, garbage in neighboring yards, overgrown lawns, junked cars.”
Add in blue tarps and junked snowmobiles and you would have an upscale neighborhood in Alaska.
Perhaps they should have named the subdivision Southern Comfort instead of Southern Chase.
all GOV programs breed failure
, an experiment in selling low-cost homes to low-income families.
Government subsidies = Capitalizing the profits and socializing the risks.
Unfortunately the piedmont area of NC isn’t the only area experiencing rapid growth. The mainland areas around Hilton Head (Bluffton, SC) are awash with new developments. Also, the Greenville (SC) newspaper reported that fully 10% of all the homes in Greenville County were built since the beginning of 2000.
We may have to move back to Florida to escape the crowding!
I live in Eastern NC, in a medium sized town and we have a glut of houses compared to 2.5 yrs ago when i moved here. The subdivision I live in had 3 house for sale in late 2004, now there are 17 houses for sale. To the best of my knowledge only 1 house has sold this year.
Welcome to the American dream.
When did “The American Dream” get hijacked by the REIC or was real estate ownership always exclusively associated with the dream? Was NAR responsible for tacking on the words “of Homeownership”? After the great depression, I believe it signified freedom from oppressive government and the opportunity to get a job or start a business, as well as private property rights.
Well, since the beginning of the republic, homeownership (or actually, in the begining, land-ownership) was a large part of the American dream, it led to the manifest destiny concept and the whole of western expansion (unfortunately for the native’s sake). But, unfair to the natives as it was, that home/landownership concept was to be fueled by a lot of HARD WORK, not just easy chair speculation. If the current breed of wanna-be homeowners had to clear a 1/2 acre of old growth oaks and build their own structure from scratch, there would be few with the strength or stomach for the task.
” 1/2 acre of old growth oaks and build their own structure from scratch, ”
That is my issue with this RE boom ,and especially Fl….
There is practically no more natural areas left. My idea of paradise is a walk in the woods or down the beach alone. Now every square inch is paved over you cannot see the beach except for a glimpse through the condos. Progress? I call it hell…I keep forgetting the new paradigm is what value is open space ,or beauty? If you can’t profit ,or monetize it, you may as well pave it over and build a spec home, or 7-11. Beautiful…
If you want woods, buy them. Why should others pay for your pleasure?
Hey city boy, since when is being in nature a pleasure? It’s a human necessity for sanity. Of course, most people wouldn’t know, they’ve never been there. come to your own conclusion. read a book by Chellis Glendinning called “My name is Chellis and I’m in recovery from western civilization.” Seriously, it will change your entire concept of the things we supposedly value. Your comment scares the heck outta me, if everyone’s like you, the natural world is screwed.
“Hey city boy, since when is being in nature a pleasure?”
Not to be mistaken for NYCityBoy. I’m not involved in this one.
since when is being in nature a pleasure? It’s a human necessity for sanity.
I’m perfectly sane and you could NEVER drag me into the woods. I don’t care what some crackpot wrote about being born-again from the uterus of mother nature, it doesn’t apply to everyone. Speak for yourself only please.
Well, maybe sanity is a subjective thing. Don’t get me wrong, to each his own, I apologize, but to me, the natural world needs more defenders. Does everything have to always be about money? I’m tired of seeing everything paved over.
My point was balance.You can’t stop (progress?) but we built for sheer profit with no regard to livability…Example the new Lowes in Stuart,fl. Right on oceanside with it’s back to the beach. What greater value to society is having a bigbox blocking the beach view? …didn’t want to digress off housing, just a comment this boom has changed (in my view) is a worse situation.
Kathleen Day provides some background on the history of homeownership and lending through the prizm of the S & L crisis. She also covers the political workings behind the scenes.
URL: http://www.amazon.com/Hell-Politics-Trillion-Savings-Scandal/dp/0393029824/ref=sr_1_1/002-1030266-8296061?ie=UTF8&s=books&qid=1174230170&sr=1-1
In some ways, I’m beginning to think that “The American Dream” is a marketing concept, just like DeBeers’ “Diamonds are Forever” and “Diamonds are a Girl’s Best Friend”. There *are* financial and emotional reasons for owning a house, but not owning a house *doesn’t* mean that you are “Living the American Nightmare”. As a matter of fact, some recent homebuyers are “Living the American Nightmare” right now.
You got it! Congratulations. You’re a lot farther along than most.
The “American Dream” thing is a marketing ploy that’s been used ad nauseum to sell houses, cars, higher ed, etc. But the real American dream is in these words ” life, liberty and the pursuit of happiness”. Anyone who thinks the american dream is encompassed in the act of buying or selling shelter is a mental midget.
I agree. I get nauseated when I read or hear that phrase.
Homedebtorship is not my dream. Never was, never will be.
Got 10% down?
it’s pretty bad when a company like Beazer is allowed to prey on people of meager means, con the government by gaming the system, and create a neo-slum in the process. A great example of an entity getting rich at the expense of the poor, the taxpayers, and society in general.
Bet they’re laughing all the way to the bank and won’t have to pay a dime to fix the situation.
Maybe that is what they call “The American Dream”? The ability to loot the place.
Get rich or die trying.
Your handle is fitting.
The new statistics are out for Madison, Wisconsin. House prices are down 4.6%, confounding all the believers that home prices could never fall in the state capital!
http://madisonhousingbubble.blogspot.com/
LET THOSE CLOWNS IN WISCO SHARE SOME OF THE PAIN! TALK ABOUT OVERPRICED HORSESH*T!
how much cheaper can homes get???
Were these people living in cars before this? Thier payment must be $600 a month.
The truth is all this GOV intervention is welfare FOR THE REIC.
True affordable housing=mobile homes but no one will say it out loud. REIC doesnt make a killing on those.
Wow ,what a great article Ben to show just what happens when you push unqualified people into housing .I find it to be such a conflict of interet that a builder also has ties or owns the financing company .
The article points out how the loan agent encouraged the borrower to not list a debt payment of a car and the borrower ended up loosing the car and the house I guess. I wonder if some of these people they put in this housing project even had stable employment ? Looks like they put those people on a adjustable or they qualified them at a low teaser rate or the builder filled in the difference for a while .Good story to show what happens when people do not really qualify and how the industry was really pushing people into homes even back in 2001 ,and these houses were cheap .I guess alot of these homeowners didn’t even have enough money to maintain the houses or mow the lawns .
This is pretty standard for the big builders.
It goes to show you these big builders are not “builders” of anything, as all of the building activity is contracted out. They are, in fact, big marketers; with either affiliated lenders or in-house lenders.
Got 10% down?
Didn’t Beazer help out for 2 years ? I wonder if this is the same period that Beazer Mortgage would be on the hook for early default ?
Moreover, the note was probably structured in the builders favor — low monthly payments in the begining and so on.
Is it surprising that GM has GMAC? With fractional reserve lending, the real money maker is when you can create the money. You have to be a “gov’t certified” creater/counterfeiter to get in on that racket. Ever wonder why WalMart wants in on the act?
If we all are able to create money, we can all be rich…right? Right? (sarcasm, and a lot of it).
The blame needs to be laid where it belongs. In a democratic republic, the people are the supreme power, and the people are collectively at fault. The people will get the gov’t they deserve, either through action, or lack of action.
That is by definition who has the power. If the people’s knowledge of basic monetary policy, credit, and inflation is lacking, the people are unable to decipher sales pitches by politicians, bankers, and media folks to know if policies are in the interest of the people, corporations, politicians, bankers, etc.
In case there is any doubt, allowing the Fed to have a monopoly on the currency we must use is not in the people’s best interest. Not by a long shot. The people’s interest is served when the people own the money. When the people demand it be returned, we can begin to talk about sane monetary policy. Until then, you are assuming that lenders won’t be overcome by greed. So far, it hasn’t happened in the history of man.
You have to ask yourself, if you had the power to create money, do you think you might, over the years, look the other way just a bit to “secure just a little something for ma and the kids”? If you couldn’t, what makes you think a banker or politician coudl.
‘We’ll have this huge surplus of housing,’ Blackwell said. ‘And who will be able to afford the housing?’”
Another “analyst” who can’t comprehend prices falling when you have a surplus ? Inconcieable !
“The strategy was a financial success for Beazer.”
Typo. Company name should be “Sleazer.”
I have to say from where I live in Australia it’s pretty breathtaking hearing about people in trouble over a house mortgage of $115K.
In my part of the midwest $80K will still get you a comfortable house.
I have to say from where I live in Australia it’s pretty breathtaking hearing about people in trouble over a house mortgage of $115K
Many of these people make $6 per hour. Multiply that out: it comes to a whopping $12,000 per year. Let’s say dual income. So $24,000/year.
And these types of people do NOT get health insurance or any other benefits.
The Charlotte area referenced in the article is a hellhole. It is truly LOW wage. I’d bet that nobody in that development makes more than $18,000/year. or $30,000/year if there’s double income.
Does anybody know how much it cost to rent in that area verses owning a home ? Its seems like the were putting some people into that project at over 50% debt ratio or maybe even at 100% income to debt ratio .
You didn’t know that we have a lot of poverty in the US? Or was it breathtaking that these people were approved for a mortgage in the US?
I was just expressing shock that the property was a house rather than a trailer or 1-bed condo.
Our dollars are smaller, but there was an article in last Saturday’s local paper quoting the cheapest freestanding house in the entire city area being 329K.
Anyone here in financial trouble with a SFH and a 115K mortgage here could simply sell and walk with 200K or so. (Or, more likely, refi and cash out 6-figures.)
In case anyone wants to make a ‘location, location’ point, there are NO cities of more than 100K inhabitants in mainland Australia where you can get (within a reasonable commute) even the most basic SFH for less than about 250K.
(I make the population qualification because an officially designated “city” in Australia can have as few as 15K people, including suburbs.)
Well,…Australia is not a third world country. America is. Having trouble with a $115K house makes sense. Most Americans really can’t afford that.
Same here in Los Angeles. The monthly on that mortgage is probably less than LA’s average car payment.
BTW, as my statement illustrates you can only imagine how that screws with your frame of reference.
“Much of the development will cater to out-of-the-region people, whether it’s Charlotte commuters looking for housing in southeastern Catawba County or northern retirees looking to settle in the foothills.”
That commute from Catawba County to Uptown Charlotte is just wonderful. That should really add to the quality of life for these people. What would that take, during rush hour? I would guess an hour and a half.
From what I understand Catawba County lived and breathed the textile industry. That industry has disappeared in North Carolina. Help me out here, Bill in Carolina, but what the heck is the economic base now in Catawba County? Frog gigging tours?
The next shoe to drop in the Carolinas will be the destruction of their furniture industry. They’ve already been bludgeoned in their tobacco industry.
Lowe’s moved its headquarters to Mooresville. That helps a little. But the Lake Norman area is ghastly overpriced.
Hickory has some high-end stuff on the lake. There are parts of Hickory that could get you killed. There is nothing to justify this massive over-pricing.
The entire Charlotte area will continue to turn into suburban hell. If you want to see a city that is completely there for the benefit of the developers, Charlotte is your city.
Lol … and the people are racist jerks. I should know, I toured the place with my mixed race friend, and I’ve never met such rude people anywhere.
Sorry, I don’t know anything about Catawba County.
Lake properties will remain overpriced, and I think the trend is still up for now. You’ve got people like our friends who will soon be moving here from coastal SC, plus all the FL transplants, who would like to be on the water without worrying about hurricanes. A big lake isn’t the Gulf or Atlantic, but it’s water nonetheless.
In 2005 our community was a hard-to-sell backwater, where home and lot prices were flat to down, and occasional foreclosures (such as the one we bought) were available.
Now builders are buying even relatively undesireable (cheap) lots, and there’s a record number of spec homes under construction. They sell fairly quickly. Among resales, only the “dogs” that owners have never upgraded remain on the market for long periods, or fail to sell. Our marinas have an estimated two year waiting list for slips. I would say that within a decade, whenever a smaller, older home comes on the market, it will be bought as a tear-down.
The down side: Increased crowding, denser development, degradation of the lake’s water quality, etc., etc. Such will be the case throughout the non-coastal areas of the Carolinas. When we arrived here we felt we wouldn’t have to move until it was time for a progressive care place. We’re not so sure anymore.
But for now, life is good.
My good friends live in Mooresville by Lake Norman. I visit there at least once a year and consider myself somewhat familiar with the area. They put their house on the market last summer and left it there until X-mas. They were hoping to get some cash out of the place , pay off some bills and move to a larger house farther away from the water. They were sick of all the bugs that come with living next to a lake. In the meantime they used up their savings repainting and carpeting as the realtor suggested. No offers just lots of lookers. They were convinced they had at least 60k in equity(bought just 2 years ago). They dropped the price a little but still no bites. I begged them to drop the price ALOT and get out while they could. Instead they re-financed to the gills with the plan of putting it back on the market in the spring when “the market comes back”. Nowdays I just don’t ask about the house anymore.
‘“Blackwell and Dellinger say the development will at least create many questions,
-such as what occurs in 15 or 20 years when retiring baby boomers begin to die off.
-‘We’ll have this huge surplus of housing,’
This is a totally new paradigm! Death of the ‘Baby Boomer’ and real estate prices. We will begin a new World Wide stradegy to profit from this down in Irvine Ca…they lead the way.
“Mark Tingley pointed to holes in his siding, garbage in neighboring yards, overgrown lawns, junked cars.”
giterdone
I can’t believe that this is a description of a neighborhood in Concord, NC? I thought the racetrack bred culture and civility in the local populous. LMAO.
I feel bad for the old-timers of areas like Concord. They just wanted a quiet life and then the local government caves in to anything the developers want.
Disclaimer: I’ve been to many NASCAR races.
I have to say, that my initial reaction to distressed-homeowner stories is to instinctively place major blame on the buyers. In reading the story about the Tingleys, you can see where relatively innocent consumers can end up in that situation.
That doesn’t change my opinion on many FB’s, especially flippers.
However, there was not much in the way of bad intentions with these people. There really wasn’t even much greed, nor should they have really “known better.”
Too bad for them.
…to clarify, I should have included the word “but” before the I mentioned the NC homeowners, to make it more clear that they are an exception to my typical disdain for greedy FB’s.
Please. Innocent?
“Lea had applied for the loan without Mark because he had credit problems. She omitted from her application a monthly payment of $350 on a leased Dodge Avenger. Lea said a Beazer employee told her to do it because the application also didn’t include Mark’s income. “At the time it made sense to me and I was just excited about owning the home,” Lea said. She says she knows she shouldn’t have omitted the payment, but she trusted the employee…
In June 2002, the Tingleys’ monthly mortgage payment climbed from $675 to $744. Their income did not keep pace. Mark had quit work to care for the couple’s daughter. They were unable to pay the full amount…
The Tingleys had a plan when they moved to Southern Chase. They would sell after five years and move to a larger home. By last fall, their daughter was 5, their son was 3 and the 1,410-square-foot house felt small. But the Tingleys owed more than $115,000 on a house valued for tax purposes at less than $108,000.”
Stupid greedy white trash and mortgages do not mix.
Recap:
Lied on the application
Bought more than they could afford (car was repossessed after three months in the house)
Husband quit job
Tried to sell so they could buy a LARGER house
You forgot:
* Kept breeding babies they couldn’t afford to feed
The Lake Norman situation is remarkable.
Lake Norman for those of you who don’t know is a man-made lake in NC (made by Duke Energy). In the past, it was a quiet little place (rural) about an hour north of Charlotte.
In the last 5 years, it’s become McMansionville. In a serious way.
My in-laws own a home on Lake Norman. Bought it for $250,000 10 years ago. Appraisal this year: $1.1 million. It’s a very modest ranch style 3BR 3Ba house but it is 2 lots wide. All around it are mcmansions now.
they’re thinking of selling it. lots of upkeep, those second homes.
Lake Norman is like Candlewood Lake up in Connecticut, which was owned by the local energy utility until the recent sale to a private equity group. Private Equity Group=PEG=PIG.
I am experiencing some serious revulsion over the housing bubble today.
Bubble-nition:
Southern Chase:
verb;
1. The act of buying a home below The Mason–Dixon line you couldn’t afford and then having to elude or run from creditors.
2. The act of washing down a massive gulp of Jack Daniels with beer.
I’ve never done 1 but I love 2.
I’ll take #2 (and offer to buy a round for others) if/when the Spring Selling Season falls flat.
These are exactly the areas where true bears would want the Spring selling season to be relatively successful. Every house sold moves the median down half a place.
Just wait until the revenueers see the 1099s the FBs get on the short sales. Then you’ll see a Southern Chase!
BTW, what happened to Bubbles? He should be dry by now
The real estate cheerleaders have all gone elsewhere to cheer each other up. Now only the choir is left. But I’m still learning from this blog.
A little OT (and politically incorrect) here but has anyone else considered this aspect of the situation? How many illegals came here for work in construction related jobs and now are jobless for the unforeseeable future?
Will crime skyrocket? I am thinking it will for sure. Its not like they are going to run back over the border, there is no work down there for them. I shudder to think of the impact this could have in that area, but maybe it will push the gov into doing something about illegal immigration?
Here’s the fun part - who do you think was buying with stated-income, 100% LTV, subprime loans?
There was a story yesterday about a miss “Peña” who was a janitor, wanted a house along with “multiple adults” who all intended on living there, none of them had proof of income (i.e. avoiding taxes), and spoke no English. She was turned down at first, but ended up paying 1.5 points to get her $500k house.
New bank jobs opening up as we speak - translating foreclosure docs into spanish.
The government is tightening up the border, believe it or not. I have some friends that are illegals…they say its getting really expensive to cross. Used to be they would work for a while, send money home, and then go home for a while when they run out of work. Now it’s so expensive to cross, they can’t go back home and expect to return, so they stay.
If they can’t get work, they’ll go home to their families, eventually. There is going to be a rough period before they decide that not only is there no work, there will be no work for them. After that they will go home.
Some illegals have told me how they cross the border seasonally every year, to work for the same “gringos” in agriculture, and then return home when the seasonal employment is through.
What will these “gringo” seasonal employers of illegals do now if their labor cannot cross the border? Will they offer them a subsidized living stipend throughout the whole year to keep them from returning to their families?
Got 10% down?
OMG you are Right CITIBANK Has Tons of openings for Tellers….will even pay Bonuses as long as you are Bi lingual, extra for mandarin, russian, greek, was posted at the local citibank a few days ago….
I feel fairly certain that amnesty will be in a few years. Open borders a few after that. We have 2 million? vacant homes in the US now. Biz wants cheap labor, and busy consumers..Go to Walmart,the obvious immigrants have full carts ,and new trucks, that’s all that matters. All those FB’s that have houses to sell,what will be their decision? They’ll say bring em on…bad for you,but great for Walmart & GM.
Not so sure.
Once the SHTF and job losses mount, unemployed Americans will start screaming bloody murder about unfair competition from illegals and “immigration reform” will be DOA.
With all of the border tightening we’re hearing about, I wonder if it will be one-way tightening. That is, will it be as difficult to go south as it is to go north? I would think yes, unless border personnel are trained to look the other way for southbound traffic.
Tho’ I have heard that more than half of illegal immigrants did not ’sneak’ across the border, they just entered as tourists or under educational visas etc and just didn’t leave.
I have been an appraiser for FHA foreclosures for many years and I can tell you what we find when we enter these homes that have been taken back.
We have appraised some 12,000 of these homes over the past 14 years. I am not slamming people in general but I am stating what the common threads are when we go into foreclosed properties.
1: Obvious signs of heavy use of alcohol.
2: Drug use
3: Pornography;copious amounts.
4: Living conditions you would not put a dog into.
5: Leased water softeners.
6: Big dish antennaes
7: Auto Parts including engine blocks etc.
8: Many types of contaminants even in play areas. Feces in the living area. (Human and animal)
9: General disrepair of all mechanical systems.
10: Destruction of the home upon leaving.
There is simply a part of the population that lives like pigs regardless of the assistance given.
Once they took possession HUD would put another homeowner in the same house for nothing down and give them money to fix up the place only to forclose again within a year or two. We appraised the same houses over and over again and they got progressively worse.
We appraised about 120 houses per month in just central Florida. For the past 5 years, since the subprime lenders came in we did less than 5 per month. Let’s see, 120 X 5 X 12= 7,200 time bombs in just this area.
The average home value for FHA at the time was $67,000 and that same house is now $200,000. This in 4-5 years. I figure if you take the 7,200 homes times 5 you get the potential impact of subprime here in central Florida in the next 12-18 months and the average outstanding balance of about $275,000. This would total 35,000 plus foreclosed properties with an aggregate mortgage balance taken in the shorts by taxpayers of about $100 million plus managment and maintenance etc. The selloff at the current rate of sales velocity would take about 3.5 years with carrying costs to the taxpayer. Even then with the drop in values and the 20% off the top reductions by HUD the losses would be astronomical to the surrounding property owners. Couple all this together and you have a China syndrome meltdown in property values fueling even more foreclosed properties.
There is no way to put makeup on this pig.
I recently read where people will pour concrete powder down the drains upon leaving a foreclosure, have you ever encountered this? I can’t imagine buying a property at auction just to find that the pipes are full of concrete.
By the time we got there all the utilities were off so I am not sure about that issue. The point is vengeful people get pretty creative. Some of thethe scum left pets locked in the houses and we found their skeletized remains. Imagine what that type of person is really capable of doing.
I’m against handguns and generally opposed to the death penalty, but I would have no problem pulling the trigger at point blank range on the worthless human trash that would do this to an animal.
I’ll refrain from the comment on liberal hypocracy in that post and just say that I 100% agree with spike. A while back, an ex girlfriend of mine told me a story about her dad abusing an animal. I made sure he got the point that I wasn’t happy
(cue sopranos music)
I wonder if spike even recognizes his/her hypocrisy?
yeah, that really bummed me out, too, but death just ain’t good enough for these scum. Make em work in an animal shelter cleaning day after day. I dunno, it’s hard to believe that there are really people like that. (Getting off-subject, I know, I know)…
Well speak right up Bill. Why don’t you tell me exactly what “hypocrisy” you have imputed from my post? Waiting breathlessly for a little spiritual guidance from Deliverance country.
Haha I think I know what they are reading into it. As a hunter, I come across people all the time who are anti-gun, anti-hunting, avid animal-rights people yet spew “death to hunters” insults. I’ve had the pleasure of hearing more than once from those types: “I hope you shoot yourself!”, or “if I were pro-gun I’d shoot you myself for what you do to animals!”.
I may have no problem taking down a deer, elk or moose with my bow but I agree with the sentiment of your post Spike. Being an excellent shot already, I’d gladly volunteer to take out the people who abuse pets!
I agree with dimedropped, me and husband looked at buying foreclosed homes in the 90s when housing was at the bottom.
We encountered everything that was described above. Some of the homes smelled so bad, were so filthy, that I could not even walk through them without becoming physically ill (usually chemicals and human and animal feces). And since housing was so cheap at that time, and the homes need so much work to just make them liveable, we said, eff it, and bought a new construction.
Of course this was before my husband got into the plumbing, home repair business, so if we decide to go this route again we have no fear of getting our hands dirty. But this will only happen if the market complete bottoms out, the basic structure of the home is sound, and the neighborhood is something we’d actually want to live in.
And yes, people do pour concrete down the drains of their foreclosures…that is if they even leave the original plumbing intact. The majority of the repos we saw had all moveable plumbing, electrical, and fixtures stripped out by the previous tenants…most didn’t even have toilets or cabinets left in them!
Dimedropped,
Wow, cool job man. Free auto parts, and free porn !!!! You probably had to give back the water softners though…..a shame.
J
Yep, but all the beer was gone.
$100 million???
Check your math. Aggregate based upon your figures in $9,900,000,000.
For the numerically challenged, that’s about 10 BILLION DOLLARS.
Your right fred but I am Irish and it is march 18th and it was early in the day.
You said it, dd, and it’s always been that way.
When I was just a toddler my mom and her best friend used to clean those houses. The sh!t they encountered was totally inhuman.
I live 45 min outside of charlotte, nc. the housing market is full of houses that are not selling and over priced for the local population. I am single and work at a college making close to 40K a year. I still can’t afford a house. The people who have moved here from Florida and other state have driven the price thru the roof. I refuse to take any thing other than a traditonal 15 or 30 year fix mortgage with 20% down. I have live here all my life and I have been to college. If you are not employed by the banking industry, work for some sham corporation that feed off the misery of other people, or a greed home builder or devloper, than you are not going to buy property or a home in NC. If all those retired people looking to move to NC, especially the Charlotte area, good luck. The Job market sucks major around here and all the walmart jobs are gone due to the massive lay off anf plant closing in the textile, furniture, and other indeustries that have closed their doors and moved to China. And for those that will question me on this bleek outlook for the NC , especially the Charlotte area, I work with lay off workers eveyday and I can tell you that it not getting any easier. The word is that NC is priced below the national average in home prices, but NC is also below the national average in pay to it employees (No union here. The housing bubble is here in NC and it will pop soon, prices will fall and all those floridian will rise heel at the decline in housing appreciation.
It’s them bankers and liberals in Noo York City what done us all in. The Lord is going to pay my mortgage so I’m sending all my money to the television preacher.
Hang in there dude, it can’t be that bad.
Bought my house, in Clayton, south of Raleigh, with $3000 down. It was a foreclosure, (not from drug addicts), it looked a mess, but was structurally sound. It also came with two engine blocks! But the previous guy actually worked on that stuff. He died, wife moved away, bought it from a bank for $80k. 1300 ft, acre of land, on a country road. Special program at that time, no PMI required. And it’s brick! Really helped that the back yard was full of tons of trash, and the inside looked like a train wreck, no one wanted it. But I’m a single guy too, didn’t care…crap, I like that stuff.
So, my point, you can’t tell me that there isn’t a house like that around the backwoods of Charlotte. Forget about 20% down, times have changed, that rule was bogus twenty years ago. I got a 30 year at 6.25%. Twenty percent down would not have changed that one bit. No one says you can’t pay more later on.
So, don’t get depressed, life can change in an instant. I never thought I would own a house, yet here I am. And no ARM either, I would have bought a mobile before I ever did that.
Find a reputable buyers agent, worth their weight in gold.
KEEP LOOKING.
While I certainly mindful of the fact that losing one’s house to foreclosure is a traumatic experience, it is not as if these folks are being throw into debtor’s prison. They just go back to renting. I think that this round of subprime defaults will lessen the stigma of foreclosure. Somewhat like filing bankruptcy no longer has the social stigma that it used to.
“They just go back to renting.”
I wonder. Landlords usually want first and last month’s rent and a sizeable deposit…you think these folks have that? I’m guessing section 8, squatting or doubling up with family or friends. Buying is probably easier for these folks than renting. The government doesn’t guarantee rentors, so it’s a tougher market.
Just because it is no longer the responsiblity of the loan orginator to determine whether the debtor can pay, does not alleviate the responsiblity of the debtor to pay
The thrill did not last; The thrill is gone baby:
http://www.youtube.com/watch?v=lqAuuIDU2sw
When David Lereah resigns, we’ll all be singing “The Shill is Gone”
HUD’s Inspector General first documented the problems with “gift” down payments in 2000, and again in 2002. GAO did an extensive study of their problems in 2005. IRS called them scams in 2006 and said they’d yank their non profit status. Yet it’s 2007 and FHA still allows these things, and IRS hasn’t touched them. Yet people suggest that FHA is qualified to bail out subprime borrowers????
BTW - this article reiterates the importance of something I’ve been saying for awhile. FHA has almost no market share in the major house price bubble markets, like California, but they are still big players in the high default states like North Carolina, Michigan, and Ohio.
There is an article in this week’s Barron’s magazine that describes how the “gifted” down payment works in relation to the FHA loans. It is a shockingly stupid scheme, full of graft, with obvious outcomes.
To get an FHA loan, the FHA has historically required borrowers to have a minimal 3% of the home’s price as a downpayment. Problem was these marginal buyers couldn’t even cough up the 3%. Enter the “gift” scheme: Non-profit charitable organizations were set up by individuals to “gift” the 3% downpayment.
Where did the charitable organizations get the 3% from? The non-profit org agreed with the seller of the house to raise the price by 3%, when the home sold, the seller would make a charitable contribution to the non-profit of the 3% and the non-profit would then “gift” that to the buyer as the dowpayment. Thus, the borrower would qualify for the FHA loan.
The CEO and the CFO of one of the larger non-profit orgs that make these arrangements pay themselves $300k to $500k in salaries every year to run these non-profits. So let’s just say they grabbed a lot of cookies while their hands were in the cookie jar.
Since this has been going on for several years, here is the surprising outcome: borrowers that didn’t actually use their own savings to put 3% down and used the “gifted” downpayment default at a much faster rate than those who actually used their own money as a downpayment.
This perversion of the FHA loan system is shocking to me. Since online access is restricted to subscribers, I urge all of you to read this article for yourself in the Barron’s magazine that came out this weekend.
Now I’m really nauseated. Did you have the names of any of these so-called “charities”. I want to make sure that I don’t donate to them.
I doubt there’s much in the Barrons article that wasn’t in the GAO report. http://www.gao.gov/new.items/d0624.pdf
The three biggest non-profits are Nehemiah, Ameridream, and Buyers Fund, but there are literally hundreds of them.
Thanks for this interesting info that demonstrates yet another opportunity for profit for the unscrupulous. Apparently these 182 “downpayment gift” foundations are funded by donations from builders and developers (tax-deductible, of course), and fees from sellers (who increase their asking price to cover the fee required by the non-profit. You are right - - these “nonprofit corporations” pay their CEOs well. And, by the way, recipients of these 3% downpayment “gifts” are not required to pay taxes on them. So we taxpayers get screwed again, the developers and builders get more buyers to drive up their prices, not to mention a tax writeoff. Amazing.
had a look at the Barrons article. It’s pretty bizzarre. It says the Milken Institute looked at these loans and didn’t find foreclosures. That’s technically true, of course, the study didn’t find foreclosures. But I think that’s largely because the study didn’t LOOK AT foreclosures. It’s not like it found they were high or they were low, it was largely based on a survey of people who were still in their homes. Won’t find a lot of foreclosures that way! The Milken study is available at http://www.milkeninstitute.org/publications/publications.taf?function=detail&ID=306&cat=ResRep
Oops, I put this in the wrong forum……
Lake Norman is mentioned in the NC article. What an awful place. It is a man-made lake north of Charlotte created for a nucler power plant. The lake is surrounded with McMansions on tiny plots and the key status symbol is your boat. The most extreme headcases have what appear to be offshore racing boats (on this crowded lake!). I was there on a weekend and it was a cacophony of power boats zipping around. And on the horizon you see the nuclear power plant. The house that I visited was in the $1 million plus range. The plot was roughly the width of the house so that they could cram as many houses in with lakefront access.
A truly bizarre place that exemplifies bad taste. I was told that it is popular with wealthy people from the “Nascar industry”.
The joke was played on more affluent people too.
…cacophony of power boats zipping around. And on the horizon you see the nuclear power plant
Wow, seems likean episode of The Simpsons. And from your description, the nuke plant actually seems like the better part of the package. People pay $1 million to live in that hell-on-earth? The mind boggles.
Saw an article in the paper today about a missing woman that disappeared after she left a gambling hall in WV. Don’t get me wrong, I’m sorry she’s missing, but this is the irresponsible way people live. She lives with her brother’s family. She didn’t show up for her 1st or 2nd job or the paychecks from either one. They retraced her routes that she always takes to buy cigarettes and to go to the gambling hall. These are the kind of people who will try to buy houses. (Works two jobs to make ends meet and had regular routes to buy cigarettes and get to the gambling hall.) It seems like for 2/3 of the sob stories you hear, this is how they live. And they wonder why they have no money and need a subprime loan. Plus they’re mad when they can’t get what they feel they are “entitled” to.