“This Spring, The Cards Favor Buyers”
The Register Star reports from Illinois. “When Kim Thusing put her home up for sale in August, she was confident about her chances. ‘When I put it on the market, honestly I thought it would sell in a week,’ said Thusing. ‘We’ve had lots of people looking and lots of complimentary remarks, but they seem to be weighing their options.’”
“After three years of rapidly escalating prices, the average sale price of homes went from nearly $122,000 to $141,000, the boom went bust in the last half of 2006.”
“The Rockford Area Association of Realtors tracks home and condominium sales in 114 ‘grids’ or areas in Boone, Ogle and Winnebago counties. In 2006, the average sale price fell in 27 of the grids.”
“‘There wasn’t anything that really changed when the (local) market came to a standstill. It wasn’t like a huge factory closed,’ Thusing said. ‘People read what was in the news and started looking for prices to drop.’”
The Chicago Tribune from Illinois. “The national subprime lending calamity first reached the South Side graystone on Greenwood Avenue in November. That was when the homeowner, Georgia Rhone, first missed payment on a mortgage that jumped from $974 a month in 2004 to $1,850 a month last year.”
“Her lender now has begun foreclosure procedures as a result of a deal she realizes she never quite understood but has her in a vise: a mortgage charging 11.625 percent after being refinanced twice in two years.”
“In Illinois, the percentage of subprime loans in foreclosure at the end of 2006 was 6.22 percent, up from 5.04 percent a year ago, according to the Mortgage Bankers Association.”
“‘Lenders are so scared about losing market share,’ said Malcolm Bush, president of a Chicago non-profit that studies housing. Their subprime underwriting has become so ‘appalling,’ he said, that some borrowers are defaulting on adjustable-rate mortgages even before the rates change for the first time.”
“In Chicago, more than 56,000 high-cost mortgages were originated in 2005, double the number in 2004. Adds Jeff Metcalf, who tracks foreclosures: ‘We see instances where people aren’t even in their homes for a year.’”
“Rhone said she told her broker the monthly payment on the most recent deal he brought her was ‘very, very steep for my budget.’ ‘They said, ‘This is the best deal’ available and that we would refinance in a few months,’ she said.”
“‘We are seeing it across the board’ in all price ranges and in all types of communities, said (broker) Jim Rossi. ‘A lot of lenders who came into business in the last five years applied the wrong product to the wrong buyers,’ Rossi said. Buyers were ’stretched into larger monthly payments than they should have had.’”
“Lending practices ‘were so loose that it drove prices up,’ he said. That, in turn, created a ’snowball effect.’ As prices rose, buyers needed larger mortgages to buy the house, and lenders eased standards to do the deals.”
The Kansas City Star from Missouri. “Negotiating a home purchase is a bit like playing poker. This spring, with about 18,000 houses on the Kansas City market, the cards favor buyers.”
“About 30 percent of the homes on the market are new, the hangover from the recent building boom when builders were cranking out 10,000 or more houses annually.”
“According to the latest data from the Realtors association, the area’s housing inventory stood at 18,133 homes in January. Put another way, there was a 15.9-month supply of new home inventory at the sales pace in January, and an 8.6-months existing home supply.”
“New homes are particularly plentiful in the Northland and Wyandotte County, and the price range where some serious ‘wheeling and dealing’ should be occurring is the mid to upper six-figure range, said agent Steve Johnston.”
“‘Metrowide, upscale is a buyers’ market,’ he said. ‘The real upper reaches like $1 million plus, it’s not so bad because sellers can hold out. With the $400,000 to $800,000 homes, a lot is available and that’s where the wheeling and dealing comes in.’”
“‘Buyers can find the area they want and if the seller is not willing to take your price, you have the luxury of moving to the next one,’ said Jim Nutter Jr. of James B. Nutter & Co., a locally based national lender. ‘Two years ago, you didn’t have that luxury. You had to move fast or it was gone.’”
“Matt Buff benefited mightily from that third-party sale scenario recently. He and his family shaved 20 percent off the cost of a house in Olathe that had been appraised for $185,000. They not only paid $147,000 for their new home, but received a $14,000 check from the seller to cover minor repairs and some cosmetic improvements.”
“‘It was a corporation that had bought the home from someone who had to move on,’ Buff said.”
From St Louis Today in Missouri. “The American dream of home ownership could prove even more elusive as lenders clamp down in the wake of a rising foreclosure rate for the riskiest loans, say bankers, economists and community activists.”
“Don Menendez, a senior loan officer in Creve Coeur, said he already is seeing some sources of subprime lending dry up. Other funding sources are raising the credit rating needed to get a loan.”
“‘Every day, I’m getting e-mail saying that this program now requires a certain credit score or the programs have been deleted,’ Menendez said.”
“‘If someone comes in with not-so-good credit, our options are being limited every day,’ he said. ‘In the near future, I believe this credit is going to become obsolete.’”
“Rick Sharp, a former president of the Mortgage Bankers Association of St. Louis, and Marve Stockert, executive director of the Illinois Association of Mortgage Brokers, said they’re alarmed at the amount of mortgage fraud in the two states, which they say contributes to the problem, and in some cases results from subprime loans.”
“In Illinois, banking regulators have just one investigator to document fraud at the state’s 2,000 mortgage companies, and the person in that job recently quit, Stockert said.”
“Bob Cropf, an associate professor com crash of a few years ago. ‘It was a fairly big money maker until recently,’ Cropf said of the subprime loan market. ‘The perception was that these types of loans were stronger than they were,’ Cropf said. Investors ‘certainly weren’t being careful. They were putting too much capital in this area.’”
The Star Tribune from Minnesota. “With time ticking on his adjustable rate mortgage, Mark Lamb has been trying to refinance to a fixed rate and save himself from a $400 monthly payment increase come July.”
“The response from lenders is always the same: Pay down your debt and improve your credit score, both of which have been the same since he got the mortgage two years ago. Refinancing is ‘a lot more difficult now,’ Lamb said. ‘It was fairly easy to do that two years ago.’”
“The source of the trouble is the same part of the mortgage industry that helped drive the biggest housing boom in history over the past five years. Until recently, lenders worked to outdo each other at finding new ways to relax their standards and create increasingly exotic mortgages.”
“‘Anyone with a pulse and who could fog a mirror could get a mortgage, but we’re seeing that that just isn’t the case anymore,’ said Ronny Loew, a mortgage banker in Edina.”
“He said underwriting guidelines seem to change daily. He recently got notice that the minimum credit score for an Alt-A program for borrowers with marginal to good credit is going up from 620 to 660.”
“In some cases, he said, buyers are having to shop for less expensive houses to meet the new guidelines. For example, a person who might have qualified to buy a $220,000 house two months ago might now only qualify for a $205,000 house.”
“Doug Winter, senior VP for Countrywide Home Loans in Plymouth, agreed that the availability of subprime and Alt-A mortgages has changed dramatically. But he’s also seeing stricter requirements for second mortgages and home-equity loans.”
“He used to be able to offer a first mortgage for 80 percent of the property’s value combined with a second mortgage for the remaining 20 percent to people with credit scores in the mid-600s or lower. ‘Today, you can’t find a buyer to take that second mortgage.’”
“Buyers were ’stretched into larger monthly payments than they should have had.’”
Here we go…buyers “were stretched”, implying it was someone else’s fault they got in over their heads. I’m sorry, but unless that mortgage broker held a gun to your head, the only person doing the stretching was the buyer.
There’s going to be a different kind of stretching when the bubble home owners are bent over the table at the foreclosure.
What bothers me the most is that these people took these loans with a lower payment in order keep up a life style of buying on ‘How much’a month it agonn’a cost me’ while buying big screen tv’s, cars, trips, etc. instead of saving money to improve their financial situation.
salinas, my fist job out of college was working for a PI law firm. One of the first cases I I observed was one where there was a big cash settlement and the attorney set up a trust account for the family. The attorney told me it didn’t matter how well he structured the account, that the family would undoubtedly spend beyond what was immediately available to them, borrowing on what was to come. I asked him how he knew this to be true, and he responded that EVERY client he’d ever had did just that. Upon coming into money, not a single one had acted responsibly. In fact, he’d had one client who had almost instantly gone into debt and sued him for not doing a better job of keeping his money away from him.
I don’t care about them and their reckless behavior, so much as I am distured by the fact that they were allowed to set the prices for all of us, due to sleazy lenders catering to these peoples irresponsible whims.
Right. Home prices rose to meet the maximum amount that any moron could borrow.
Stretched? What about all those people who refinanced to the hilt. I bet they were “stretched” as well, but by sheer greed more than anything else. I am still amazed that the MSM, Wall Street and the government are still sweeping the extent of the problem under the carpet. IMO the reason why the majority of sellers including those with prime mortgages are not lowering their selling prices, is because they are up to their eyeballs in debt and are now caught between a rock and a hard place. They don’t want to cut their own throats financially speaking, and they can barely cover their mortgage payments. That is why foreclosures are spiking up, because they would rather have the lenders make that painful decision for them. If I were an FB, I would go full tilt for foreclosures instead of trying to buy in the open market from sellers in straitjackets, who would not accept my offer even if a .44 Magnum is pointed at their heads.
Hey, it can’t be bad… As his royal majesty Greenspan said:
“Technology has enabled creditors to achieve significant efficiencies in collecting and assimilating the data necessary to evaluate risk and make corresponding decisions about credit pricing. With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers.
… Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending”
Stunning:
“Their subprime underwriting has become so ‘appalling,’ he said, that some borrowers are defaulting on adjustable-rate mortgages even before the rates change for the first time.”
I wonder if these were cash-back scams. You think?
The Star Tribune from Minnesota. “With time ticking on his adjustable rate mortgage, Mark Lamb has been trying to refinance to a fixed rate and save himself from a $400 monthly payment increase come July.”
Poor Mark is a dumbass - he could not qualify in the beginning for the fixed rate, so how does he expect to qualify now that the market has tanked?
Seeing the monopoly money come off the table is great news. It means my hard-earned savings don’t have to compete with this BS anymore.
Keep tightening!
Unfortunately, as evidenced by our “friend” Penas story yesterday, there is still quite a bit of funny money available. It’s hard to believe, given the current situation, that $0 down $500k loans are still happening for housekeepers.
People talking about “selling” when they ought to be talking about “surviving”.
But look at the bright side. There is always a bull market somewhere. Sectors and stocks for investment in the upcoming months:
SSCC - They make carboard boxes. Cardboard boxes for shanty towns where the homeless will congregate.
SWHC - Smith and Wesson. Suicide revolvers are going to be in high demand.
HB - Hillenbrand, maker of caskets and funeral supplies
do these “suicide revolvers” come with only one bullet to keep the price down?
“In some cases, he said, buyers are having to shop for less expensive houses to meet the new guidelines. For example, a person who might have qualified to buy a $220,000 house two months ago might now only qualify for a $205,000 house.”
Well, offer $180,000 for that $220,000 house!
Geez, get yourself a real good bottom feeder, oh, I mean realtor to lowball you into the American dream.
Offer..$95,000 - 110,000 tops if you really want that house provided of course it is in great condition,move in ready. Remember you are going to have that mother for a long time unless of course you have a rich mother.
Why the requirement for “great condition, move in ready”? Just buy it to live in and make improvements/repairs as you go along. That’s how it used to be done. No need for perfection *right now*. That attitude (along with greed) is what got a lot of people in the mess they are in with defaults and foreclosures….wanting too much, too soon and with their pockets turned inside out.
People need to slow down, know what you can afford, and then enjoy your life.
BayQT~
“People need to slow down, know what you can afford, and enjoy your life.”
Well put. Life would be so much improved with home prices at 2 to 2.5 times gross annual income.
Watch this. It’s a graphic depiction, a metaphor, for what’s about to happen to the United States: http://youtube.com/watch?v=vt__AaFtmIk
That video is truly appalling. Nothing that dramatic will happen in the U.S. housing market, even metaphorically, thanks to politicians’ collective efforts to stop the floor from caving in. The floor will cave in, nonetheless, but it will happen very gradually, over a period of several years — just like last time (late 1980s — 1996 or so in most parts of the U.S.).
This decline will be much worse then the prior examples you have given. You could be correct regarding it taking a long time to run it though.
Yeah, GS, I have to disagree, too.
Just about the time politicians would get serious on the topic they’ll have Wall Street in full meltdown, car makers & airlines in BK, the dollar playing submarine, and huge looming budget shortfalls. Outside of maybe Ron Paul, they simply don’t grasp the enormity of the problem, therefore they’ll be paralyzed in horror when the walls collapse around them.
That video is chilling.
SO IS THIS ECONOMY
Just like Y2K was going to end life as we know it. Apocalyptic images seem to be firmly embedded in the Western psyche. I suspect that we’ll muddle through this episode.
what about negative national savings rate, ARM resets, neg-am recasts, and the unsupportable appreciation years of 2004-2005 do you have a hard time understanding?
financial disaster for millions of americans — home debtors, REIC ‘professionals’, and ancilliary industries is baked into the cake at this point. All that remains is to watch it unfold.
“It’s the end of the world as we know it and I feel fine.” — REM
YES, JUST KEEP WHISTLING
was that broad in the yellow blouse laughing or crying?
“This Spring, The Cards Favor Buyers”
In the frothy geography. But I’m growing skeptical in non-bubble areas. The same prediction was made for 2006.
The number one big obstacle to this is the ability of non-investor buyers to resist listing their properties. The second biggset obstacle is the ignorance of most buyers and the inability to stampede the mob away from their usual optimism with housing as an investment over the long term. Couple this with such things as females’ nesting instincts and nothing cataclysmic happens in nonbubbleopolis.
“The number one big obstacle to this is the ability of non-investor buyers to resist listing their properties.”
Resistance is weakening quickly. Watch those foreclosure rates continue to climb this year as resets sink the subprime and other high-risk buyers with option ARMs. FHA bailout action will prove too little, too late, especially given the 3% downpayment requirement on those mortgages. How is a FB trying to refinance going to come up with a 3% downpayment out of his negative household savings base?
——————————————————————————
NATION’S HOUSING
KENNETH HARNEY
FHA picks up the slack in subprime mortgages
March 18, 2007
WASHINGTON – With the subprime mortgage industry in virtual free fall, where do home buyers with less than perfect credit turn for financing?
The news reports are grim: Not only have dozens of subprime lenders closed their doors or cut back sharply on new mortgage offerings, but they’re also severely tightening the loose underwriting standards that got them into trouble. As a result, many people who would have been approved for a loan months ago now find all the doors suddenly closed.
But here’s some potentially helpful news: There is a mortgage source that is actually expanding its business nationwide for credit-impaired and first-time home purchasers. That source is the golden oldie of the mortgage arena – the Federal Housing Administration (FHA), which recently has seen a doubling of customers refinancing out of private, subprime loans into its insured mortgage programs.
http://www.signonsandiego.com/uniontrib/20070318/news_1h18harney.html
We are the borg.
Resistance is futile.
You will be foreclosed.
Your empty inventory will be added to our own.
I’m a little puzzled here. On a refinance you don’t know a 3% “down payment.” Down payments are for purchases. On a refinance you need the difference between the loan balance and the appraisal to be 3%. How hard can that be????
And for purchases, all you need is a down payment assistance program. Hey, you think, didn’t IRS get rid of those? Well, try this link. http://www.hud.gov/offices/hsg/sfh/np/irstatus.cfm
And even if they do get rid of them, the industry is already prepared with a replacement. http://www.dpfunder.com
I’m a little confused. Down payments are for purchases, not refinances. For a refinance into FHA, all you need is a 3% difference between the loan balance and the appraisal. How hard can that be????
And even for purchases, all you need is down payment assistance provider. Think IRS got rid of those? Try this link
http://www.hud.gov/offices/hsg/sfh/np/irstatus.cfm
And even if they do, the REIC is prepared with a replacement. http://www.dpfunder.com
I bought my first home in ‘89 with a VA home loan. Nothing down, although a VA loan has somewhat higher closing costs. At the time, VA and FHA filled the role of today’s subprime lenders. At that time, the VA had pretty strict lending standards. I had a couple of offers rejected, because the owners didn’t want to deal with the VA - they demanded home inspections and appraisals by inspectors and appraisers they selected.
For me, it worked out fine. I got lucky with the timing and walked away with a nice chunk of equity three years later. The VA did good by me.
“The second biggset obstacle is the ignorance of most buyers and the inability to stampede the mob away from their usual optimism with housing as an investment over the long term”.
In a perverse way, they will be saved by their own ignorance. The desire to have one’s own lawn to mow always seems to find a way.
At the closing of the loan:
Eustace: Ya meen we getz’ta have that big ol’ house and allz I gotz ta do is sign?
Loan Officer: We have an eligibilty test (Gets mirror from desk, holds up to Eustace’s face and a fog appear). Yes, you pass the test Mr. Hunsucker. Just sign here.
Eustace: Well hot damn! Yee haw, ma, look at dis! We gut areselves a house! With a geerage where we can put the still and the crank lab!
—————————————————————————-
At the foreclosure:
Eustace (Holding shotgun on loan office after killing rest of office staff): Them liberals in Washingtun done took are house. You shooda told us we was gunna need money. Then we woodna given it all ta that teleevision preacher.
Loan Office: Um, wait sir, we have this new program where the American taxpayer bails you out. Just sign here.
Eustace (signs document): Well hot damn! (shoots loan office). What do I need you fer?
great post, you have a future somewhere…
Sorry if this was posted on a previous topic, but this is one of Yahoo! News top stories:
Housing ‘Nightmare ‘Tarnishes the American Dream
http://news.yahoo.com/s/nm/20070318/us_nm/usa_subprime_dream_dc
BayQT~
Wait wait, let me get this. These buyers didn’t understand they actually had to pay, you know, have monthly payments of actual money.
Aha.
Ahahahaha.
Hahahahahahahahahahahahahahahaha.
974 to 1850 is some jump maybe the next jump is to 3700… sort of exponential doubling…
still sick 100% increase almost
“All you have to do is open up your spam (e-mail) bin and you see porn spam, and you see Viagra spam, and you see mortgage spam,”
Oh man. What an insult to porn vendors everywhere.
Funny!
But it is a profound observation in its way….those are indeed the three main categories of spam I receive.
Add to that how three of the four types of ’spam’ phone calls I get are housing-related: mortgage brokers, house-cleaning services, home-improvement services (and the 4th is creditcard offers, which is related as well really!). Plus consider all the television ads for mortgage or refinancing deals, if not indeed the infomercials on how to make your fortune in real estate…there was nowhere to hide for these poor deluded borrowers. They got hit with this stuff harder than pharma ads offering to fix their sexual deficiencies, so how could they resist? Greed became as intoxicating and well advertised as any of the other lusts, and plus it seemed like you were being a good citizen to participate in it all. How could the whole house of cards blow down? Didn’t they tell us it was all good? Should we start worrying about the viagra too?! (who reads the fine print on those pharmaceutical product info sheets either…fine print, fine print…)
cheers all…
“Lending practices ‘were so loose that it drove prices up,’ he said. That, in turn, created a ’snowball effect.’ As prices rose, buyers needed larger mortgages to buy the house, and lenders eased standards to do the deals.”
Congratulations, Mr. Jones. The HHB’s message is landing right smack dab in the middle of the U.S. heartland’s MSM explanations for the housing situation.
“HBB’s”
“‘Anyone with a pulse and who could fog a mirror could get a mortgage, but we’re seeing that that just isn’t the case anymore,’ said Ronny Loew, a mortgage banker in Edina.”
Ummm, how long have we been saying that here on this blog?
The jig is up!
It used to be: Hurry up and buy because prices are going up every month. Now its: Why buy now when prices are going down every month.
‘From St Louis Today in Missouri. “The American dream of home ownership could prove even more elusive as lenders clamp down in the wake of a rising foreclosure rate for the riskiest loans, say bankers, economists and community activists.”’
My sister and husband became the proud owners of two houses in the St. Louis area as of last December, despite my urging them to wait until the summer. Now I am quite worried they will take a serious hit on the one that they are planning to sell in a couple of months, given the rapid dessication of subprime lending.
Why did they buy the second? Or was it a classic case of move-up buyers not selling before they purchased?
“Or was it a classic case of move-up buyers not selling before they purchased?”
Exactly; plus a severe case of impatience. I had talked them out of buying, but a few days later, I heard through the family grapevine that they had changed their minds. The flipper who sold the home to them for $40K more than he paid a few months earlier figured out how to scare them into acting quickly (buy now or someone else will snap it up…).
It’s a shame they listened to somebody with an agenda, rather than the prudent family member looking out for their best interests. This mania has had quite an effect on peoples better judgement.
Ventura County starting to wake-up to the bad news:
http://www.venturacountystar.com/vcs/county_news/article/0,1375,VCS_226_5426650,00.html
“Her lender now has begun foreclosure procedures as a result of a deal she realizes she never quite understood but has her in a vise”
If she didn’t understand something in a mortgage, a huge loan that lasts for about half an average person’s lifespan, and has the power to ruin your life, WHY OH WHY DID SHE SIGN IT????
I keep reading these anecdotes where people, now in trouble, say, ‘well, I never did really understand the mortgage’. duh…
Did the country take a big stupid pill a few years back?
IMO, we need a really bad recession to put the fear of God back into people on the topic of borrowing money.
They really aren’t that stupid, they have learned that pleading stupid, and claiming to be victimized is their best hope for an easy out.
My husband has a PhD and I’m working on one, and we find it hard to read these documents (especially him, lol, since he doesn’t tend to pay attention to these terms and ideas til he’s forced to). I can imagine lots of people aren’t even sure how to ask the questions they might have. Add to that a loan officer acting like a carnival barker, telling you that any concerns you have are just those typical buyer anxieties, you know, it’s sooo stressful, we understand, but you just have to close your eyes and jump, don’t worry! If things get out of hand, you can always sell in a couple years.
I tell you, I got told this as recently as 2005 from a realtor who came recommended by other PhDs. Hey, you know, don’t take these decisions so seriously, what kind of loan to get (we were actually considering whether to pay pmi, lol, or not!), your value will always go up, or you can sell at good profit in a couple years. This was in a market where things were already stagnant for some time, but the news hadn’t yet hit the MSM. Then you go to a loan officer who is in a hurry and you get sold a bill of goods (we weren’t in that position, actually…we saw a regular bank person who was selling us traditional-y products) without understanding it. A *lot* of people, faced with someone sitting there waiting for you sign, waiting while you try and read the fine print, try and understand more fully what you’re signing, and maybe even having had your questions answered with terms you don’t understand, will just not go through the possible outcomes in their mind, will say “okay, whatever you say” to the loan officer. Do we think that these guys were ending their pitches with warnings even as strong as the ones you see on pharma adds?
“Warning:Might cause great pain if the housing market stops appreciating at double digits clip and you can’t afford payments that are twice as high. Loose underwriting standards are subject to change without notice. Credit ratings might hit the skids if you miss payments. Our claims that you can always refinance subject to interest rate and economic conditions at the time of future request”
Sure, they *should* have been paying more attention to the negative consequences, but so should the loan officers.
You have no excuses lady. None.
Unless your phd is in marketing.
I almost got a PhD - dropped out after I found out what it stood for - pile it higher and deeper. (no offense meant, just a little over-educated type humor, I have an M.A. but nobody would ever guessit.)
Hey, I never said I needed an excuse
I’m renting, didn’t buy the overpriced houses (though I’m only now even beginning to convince husband that it was the right move) that hubby tried to force us to buy at least 4 or so times. Fear trumped knowledge, and almost did for me. Thank goodness for this blog, for my sanity…
And I myself would never sign into a loan I didn’t understand, just saying that it’s complicated and could certainly throw someone for whom reading is more of a challenge…
cheers…
Of course borrowers should understand the terms of the mortgage they are agreeing to. I see way too many subprime folks over at the Credit Boards putting their trust in “my broker” and getting screwed. And we know the low monthly rate gets them in, they are promised they can refi later and .. .. now they cant.
Tanta at Calculated Risk posted this primer on Option ARMs, neg-am and the like. Heavy reading and you can guess how well a broker/loan officer could explain the terms to a subprime borrower.
http://calculatedrisk.blogspot.com/2007/03/tanta-negative-amortization-for.html
“After three years of rapidly escalating prices, the average sale price of homes went from nearly $122,000 to $141,000, the boom went bust in the last half of 2006.”
Er….maybe it seemed rapid there, but it’s a whopping 5% a year. If that’s a boom, what do you call the SoCal experience? I’m out of metaphors.
By Midwestern standards, it most certainly is a boom.
Rockford
only ? 80 % ? automotive based
she was upbeat in August , of what 1999
the ;ast good year for US auto
“executive director of the Illinois Association of Mortgage Brokers, said they’re alarmed at the amount of mortgage fraud in the two states.. ”
Screenplay -
Lender: “This casino is closed”
Broker: “But why, we were having such a good time?”
Lender: “Yes, much too good a time. I’m shocked! Shocked that there is gambling here!”
Broker to Lender: “Here are your winnings sir”
Lender: “Oh, thank you very much”
Has any one else noticed this dynamic? People that have owned a home for 10-15 years and thier home is still worth alot more than they paid but they are upset because they can not get what they could have last year if they sold then. It is such a sense of entitlement.
I am finally starting to read about the baby boomer impact. As I have been saying for a while now, what happened over the last 30+ years to housing was a baby boomer phenomenon. When you remove that support, all hell is going to break loose.
The boomers played a game of my cribs better than yours, and now most players have their cribs. What comes next?
Nothing but sellers as far as the eye can see. Before this is over housing will be considered the worst investment possible, except for maybe stocks, which also will get pounded as boomers unload.
I hate to say it but this country has this coming.
Waittaminute! I’m a boomer. I save my money (what little I have), don’t buy on credit, and don’t even have a mortgage. I wear clothes till they wear out and my car (Toyota) has 200k on it and still going strong. I don’t think you can blame the boomers for this, what about all the Gen Xers and yers who think money grows on trees? It’s a cultural phenomenon, not just one sector. And from what I’m hearing, a LOT of those sub-prime loans were made to illegals.
Gen X had nothing to do with the run up in the 70’s or 80’s. And I don;t think a huge number were buying $1m homes now. Nope, this is largely a baby boomer deal. But let’s not blame the big bad illegals. Sure they played a role like everyone else. But to single them out as the main culprit is outrageous!
BTW, glad you got savings and live within your ability.
You are the exception to the boomer locust!
wow! I’m learning a lot here about my peers. and I thought they were all rich and I was the loser… hmmm…
I’m a Gen Xer, born in 1975. I have a $107K/yr job at one company and a $70/hr job at another. I work about 70 hours a week. Yet, I drive a ‘97 Geo Prism (basically a Toyota) that has 70K miles on it after 10 years (and it’s the only car I ever owned).
I don’t think money grows on trees. I earned every penny I have. I live on about $20k per year, not including taxes which take about 1/4 of my income. I invest in the S&P 500 index, fully fund my retirement plans, and don’t try to time the market. I started my first IRA at the age of 20 while paying my own way through college.
In short, I’m fiscally responsible. Perhaps I’m the exception to my generation, but the baby boomers are certainly no more responsible, neither is generation Pepsi of whatever those born in the 80s are called.
However, I can honestly say this. Following the baby boomer generation has certainly been a great burden to Generation X. We have to carry the burden of social security at a time when the worker to retiree ratio is at an all time low. We have to deal with inflation from dual-income families being the norm, which really hurts singles. Housing prices have escalated in part due to baby boomer driven demand (including baby boomer speculators). And a far greater percentage of baby boomers than Gen Xers supported the evil USA Patriot Act. We Gen Xers and our children will have to live with the tyranny of that act long after the baby boomers have died.
As a member of Generation X, I can’t say that the baby boomers gave us a better world than they inherited. I just hope as Gen X ages, it does a better job. Unfortunately, I’m not confident that it will. The culture of liberty and self-responsibility that America used to be known for appears to be long gone.
Gen X, my deepest apologies. I admire you and wish I could shake your hand. But as a Boomer, I have to ask you this, why are you working so dang hard? Go enjoy life a little, for pete’s sake, go have a latte and a scone and get yerself a nicer car, like a Lexus or something. How unpatriotic. Get a nice house, you deserve better.
(Sorry, just more dumb Boomer humor. Wish I’d had half your sense when I was your age.)
the Gen Xers and our children will have to live with the tyranny of that act
I think PATRIOT is bad law and bad precedent etc etc but there’s no tyranny with it, not yet at least. The security kabuki show BS that I have to go thru at the airports is a greater tyranny.
I invest in the S&P 500 index…
Uh, you might want to rethink that unless you want to lose everything for which you’ve worked so long and hard.
“I hate to say it but this country has this coming.”
Speak for yourself. The Country is full of American citizens who work, pay taxes, raise families, participate in their communities, vote and contribute to charity. Millions and millions of them. That we have been invaded by the illegal dregs and the vultures who conspire with them, as well as homegrown criminals, hardly qualifies for the demise of America.
“Speak for yourself.”
Uh…I was.
Blaming illegals again. It couldn’t possibly be greedy corporations with no souls, right? Don’t get me wrong. I do not support illegal aliens, or any illegal activity for that matter. But nobody held a gun to the lenders heads and told them to give $500k to undocumented illegals!
The mortgage brokers did it to make profit. They KNEW what they were doing, and they didn’t give a shit who got hurt. Did you people forget all the stories posted right here? Brokers making calls to see if they could sell the loan before they would process it. Massive hot potato going on. Stated income loans? No docs? No W2?
With this sham setup it is no wonder EVERYONE got into the game, including illegals. But the mortgage brokers knew exactly what they were doing.
Regardless the tab for all this greed is due.
“Speak for yourself.”
Uh…I was.
“The Country is full of American citizens who work, pay taxes, raise families, participate in their communities, vote and contribute to charity. Millions and millions of them.”
Voting for Clinton/Bush, waving a Chinese-made American flag, giving used clothes to charity, and raising ignorant self-centered brats hardly qualifies one as worthwhile.
This country is full of greedy, lazy debt-ridden idiots who live with their heads up their fat a$$es (and looking around America - I do mean FAT). They were busy stuffing their bloated, drooling faces with cheetos/McDonalds/soda, reclining in their la-z-boys watching Nascar/American Idol/Flip This House. Meanwhile, their jobs were shipped offshore, their 401k/pensions raided, and their country bankrupted.
We deserve what’s coming.
I think a big part of the problem was that the public was too apathetic to insist that the S&L bandits get the beating they deserved. After the dust settled there, business leaders (lenders) realized there a limited downside to pursuing a bubble, but not pursuing one would cause them to be crushed by the competition. Essentially, we as a public created conditions where lenders were forced (in a Darwinian sense- to not do so would mean they would lose out) to loan to the hilt. If they had seen Neil Bush and the other S&L pirates (other than a tiny minority of them) get hard time and lose every cent they owned, and even possibly seen the stockholders get some extra punishment (i.e. tax deductions for losses on S&L stocks dissallowed) the MFs would think twice in the next boom.
I second that!!
The Chinese are getting just as fat with our exported diet and they are spending and borrowing just as badly as we are.
Excellent point regarding the boomers. The demand side going forward is very poorly thought out but let me add this. 69% of American households own RE. 12% live below the poverty line,which means the RE/mortgage industry has a very small group to continue the pozi RE story. This 18% remaining certainly is not the financial high end or have the best credit scores but that’s what is left to pick over for first time buyers. RE is as you suggest is headed for a significantly different 30 years ahead one based on continuing high inventory and aging boomers looking for somebody to make their retirement nest egg dream come true.
BINGO.
For some reason I think you are just trying to get a rise out of people here. But just the same, I’ll say to you that you’ve not done your research nor have you kept up with the anecdotes and MSM stories of people from ALL walks of life and age ranges that have taken part in this boom/bust. There have been more stories of 20 and 30 -somethings buying million dollar homes/condos than you can shake a stick at. This is NOT about boomers ruining it for everyone. It was clearly a get-something-for-nothing, eyes-bigger-than-stomach, credit loosening fiasco, and a LOT of different people played a part in it.
Don’t get it twisted. There’s a sucker born every minute of (fill in the blank)creed, color, and station in life.
Just how long have you been reading here????
BayQT~
I’ve done my research. And I think you missed the central premise of my post. I am talking about a 30 year trend, not the latest bubble. Do the math. Boomers started buying their first home in the 70’s. That led to starter home boom. Then they moved up in the 80’s as their families expanded. That led to the move up boom. And finally we saw the McMansion boom, which is the second to last chapter is this saga. That is where we are today. Next comes the move down phase, where boomers want to lighten up and simplify. The kids are gone and they don’t need the space or headache. Besides, most have not saved a nickle, and what they have saved is tied up in speculative stocks. They are going to get very nervous the next time the market drops big.
These are boomer characteristics. Not Gen X characteristic. Not Illegal characteristics. I’m talking boomers.
And my point was that the next 30 years are going to be about unwinding this huge bubble. Boomers have nobody crazy enough behind them to pay these prices.
They are screwed. And they brought it on themselves by greed. Not every boomer. But the majority did. Some will make out fine. A lot will be screwed.
Boomers didn’t save for a rainy day, and a sh*t storm is coming.
I am a 48 yr old boomer and I agree that boomers are the ones that fed the bubbles for the last 30 yrs. How could it not?
78 million people born into a prosperous country at the time. Its no wonder!
The label givin to us that i agree most with is “optimistic partiers”. I think that pretty much sums it up.
The party is over.
Nobody will be spared on this go round…
There will be plenty of blame to spread, and hopefully, it has the same consistency as steer manure, so we can make something out of the mess.
I know we’re unusual for this generation but my husband (boomer) and I (boomer/edge of gen X) have no house, no kids, no debt. We’re the ultimate slackers. We can live on 40K a year easily. I don’t need $4M for “retirement” or whatever BS they feed you. It’s a great feeling.
Not that’s a great plan! We are working on a similar strategy. I don’t want to get rich or die trying either. Give me a nice little chunk of land, a modest home, all paid for, with paid off cars and minimal nut, and I am good!
Got the cash for the house. Cars are paid off. Zero debt too. Plan on being semi-retired in 5 years (mid 40’s). The LAST thing we want is a big mortgage and granite counter tops!
Frugal living rocks!
I hope to find a woman like you txchick57. One who doesn’t mind living below her means, and understands financial responsibility. I seem to run into a lot of the keeping up with the Jones’ types. Expensive jeans, hairdos, and the like. I am not cheap with women by any means, but I refuse to mortgage my/our future for material possessions and a “look at me” lifestyle. And quite frankly, I don’t care for either.
I just wanna be a beach bum or rock climbing bum. No time to show up and kiss someone’s ass 8-5.
I really liked reading this little thread, it made my pessimistic butt optimistic for just a few moments on a Monday morning. Hopefully everyone out there who feels this way, and eschews the souless corporate/consumer spectacle, will weather the coming storm ok.
This is my first post after several months of lurking; I like this little group of posts, too.
I was born in 1963; never made more than $60K in my life. College grad. Don’t own property (I did once but sold in 2003). I rent a two-bedroom for $700/month in Chicago (considerably less than what I’d pay in property taxes/mo if I owned).
After 17 years of being passed over in corporate USA (mergers, acquisitions, having big paying jobs handed to those 10 years my junior), l decided to say ’screw this’. Presently, I’m going for a masters in elementary education.
And guess what? I haven’t worked at all during the two years that I’ve been pursuing the degree. I haven’t needed to. I’ve saved and invested since I was 24. I now have the cash to live on with no income (I’m also paying full tution as I go - and, while I could get scholarships, I feel that asking you to pay for me is wrong).
Note, though, that my formative years were considerably different than most. As a non-boomer/non-Generation X’er (there’s a whole cohort of us born from about 1958-1969 that don’t identify with either group), my childhood was not characterized by the JFK years/pre-1970 economic boom, nor the 1982-2000 economic boom. Pong or Tang anyone?
Instead, my formative years were marked by gas lines, Watergate, high unemployment and rampant inflation. That I saw all this from ages 8-19 was very beneficial.
Those experiences made me what I am (a contrarian) who is happy as a clam living a cheap lifestyle (I got used to it as a child) and who doesn’t find it demeaning to work jobs that most would deem ‘beneath them’. (I’ll never forget being a 16-year-old who had to compete with 33 other white teenagers for the sole minimum-wage, no benefits grocery bagger job available. That was in 1979. No, I didn’t get the coveted job).
I sleep very well!
Saw your point…did the math….I’ll raise ya $20 bucks. Just kidding.
Seriously, though….although there are a HUGE number of boomers, not ALL bought houses in the 70s and 80s, (of those who bought) not ALL are move up buyers, and not ALL are non- savers. You absolutely cannot blame this mess on one group. There are too many players, INCLUDING the children of boomers who may have thought they could do better than Mom and Dad, legal (and illegal)immigrants, and also non-Americans buying because our home prices are seemingly cheaper than in their own countries, to just stick to the boomers.
I absolutely agree with you about taking a long time to unwind the mess, but there are a LOT of HBs who are not boomers.
That’s MY point.
BayQT~
bring out your dead!
I don’t agree. In Alaska, the main force driving prices is the boom/bust cycle (not baby boomers) when resource prices/military spending change. However, there has been an abnormally fast run up in prices in the last couple of years which I think is due to relaxed lending standards. I think the recent (2000+) run up in prices is due to easy lending leading to lots of people overextending themselves, not demographics.
OKAY, EVERYONE… despite my occasional disagreements with him, Joe Momma’s dead right on this score.
Several authors have shown that economic expansions and contractions are closely correlated to the population of “peak spenders”, i.e., those in their peak earning and spending years of 40 to 50. The number of “peak spenders” has been rising for decades due to boomers, and starting in 2010 their numbers will start declining dramatically (due to those same boomers). Oh, and the trend won’t turn positive again until at least 2020(!) — we’re frelled for a solid decade.
“Lending practices ‘were so loose that it drove prices up,’ he said. That, in turn, created a ’snowball effect.’ As prices rose, buyers needed larger mortgages to buy the house, and lenders eased standards to do the deals.”
It all comes down to prices. If prices hadn’t been driven up at unsustainable rates, because of a speculative mainia in housing, we wouldn’t be seeing the problems that are starting to emerge. The price correction happening now has to continue. Prices have to get to a level in which people can really afford a medium priced house on a medium income. Prices were driven up by artificle means and any goverment intervention to support prices will only extend the misery. A fast correction allows people to put it behind and move forward. A slow drawn out correction hangs a cloud of negativity over the economy for many years.
What I find funny is the reaction so many in the US had to the methods the Japanese used to deal with their bubble. So many slammed them for not writing the bad loans off the books. For not letting the banks and the related businesses fail in the fallout.
Now that the shoe is on the other foot, let’s see what we say now.
I suspect we will fight this all the way down.
Joe Momma: agree 100%. How many US banks will be looking to write down their various RE book values over the coming years. lets not forget the insurance companies, IB, REIT’s etc. Will be quite a show!
Yep. Will be a wonderful show if you have the stomach for it.
And let’s not forget, the Japanese weathered their storm because they are BIG SAVERS!
We don’t do saving in this country.
We will weather this storm if the JAPANESE (and Chinese, and Russians, and Indians, and Europeans…) are big savers. We’ll just borrow more money from them
vmaxer: don’t forget that the US gov’t has been the prime force in creating the current RE crisis. The various loan programs, VA, FHA, Freddie, MyCommunity Mortgage, state and local bond issues providing low cost mortgage underwriting, breaks for developers, tax write offs, the list is quite big. Without the gov’t providing all these breaks the RE industry would never have a 69% owner occuplied rate they have today. The so called great investment is really another gov’t hand out.
That’s right. The goverment provided the fuel and private industry drove it till it broke.
‘The real upper reaches like $1 million plus, it’s not so bad because sellers can hold out. With the $400,000 to $800,000 homes, a lot is available and that’s where the wheeling and dealing comes in.’”
Gotta love this type of thought processing. Let’s see, all the $400K and $800K property is going to go to $200K and $400K and the $1 million and up property is safe because those sellers can hold out and pay those higher property taxes, higher insurance rates, higher heating and cooling costs, etc. Yeah, makes sense to me. Dah!
“‘Anyone with a pulse and who could fog a mirror… ”
And even some who couldn’t got loans.
I sold a home in the rockford area in december and that home today would sell for $10,000 less then i sold it for