“You’re Going To See A Lot More Incentives Now”
The Denver Post reports from Colorado. “One out of three mortgages made during the past three years with ‘teaser’ interest rates below 4 percent are expected to go into foreclosure because of rising payments, according to a study Tuesday from FirstAmerican CoreLogic. Zachary Urban in Denver, estimates that about 40 percent of loans made in Colorado during the past three years were subprime, adjustable-rate or otherwise ‘exotic.’”
“Urban, who oversees the Colorado Foreclosure Prevention Hotline, said more calls are coming in from people desperate because their mortgage payments are rising beyond what they can afford. ‘We are seeing a lot more people in that position who are current but they are caught by the rate adjustment,’ Urban said. ‘They are slammed.’”
“Aurora resident Kevin Bell suffered payment shock just a month after refinancing into an option-ARM loan with a low teaser rate in March 2006. Like the majority of option-ARM borrowers, he is taking the minimum-payment option most months, adding principal back to his mortgage.”
“Bell said he is trying to get other debts paid off so he can refinance. But time is running out, either a refinancing or a day of reckoning will come next year.”
The East Valley Tribune from Arizona. “Gilbert homeowner Raul Harris is the unfortunate bearer of two mortgages. For months now, the local loan officer has been trying to sell his four-bedroom home in the massive Seville development, where builders are still active.”
“A major part of the problem, Harris said, is that builders are dramatically slashing prices to off load homes that are finished but unsold. ‘You can’t really compete,’ he said.”
“Builders say homeowners aren’t asking realistic prices. But many owners can’t afford to drop prices because of the steep prices they paid for their homes a year or two ago, said John Fioramonti, who tracks the Valley’s new home market.”
“What some sellers are asking may be unrealistic in terms of current market prices, but it’s not unrealistic when it comes to their financial situations, Fioramonti said. ‘They’re just trying to get what they have in the place,’ he said.”
“Harris paid $569,000 for his 2,700-square-foot home about a year ago and put it on the market for $575,000. ‘I’m being realistic, especially when I owe the bank,’ said Harris, who purchased another home in December.”
“Builders in his neighborhood are selling similar homes in the high $400,000s.”
“Many of the speculative homes Montalbano Homes is trying to sell in its project in the Queen Creek area already have upgrades, Jon Baer, VP of sales said. That’s because many buyers couldn’t sell their own homes and walked away from contracts, he said.”
“‘The builder is stuck in a situation where now we have to find a new buyer,’ he said.”
“Despite difficulties selling his Seville home, Harris remains optimistic, expecting the market to pick back up in a couple of years. So for now, he’s renting the place out. Sellers need to be patient, Harris said. ‘If you couldn’t afford to buy a half million-dollar home, you shouldn’t have bought it,’ he said. ‘Or stay in it.’”
The Review Journal from Nevada. “An officer for a $600 million luxury Las Vegas condominium project that filed for bankruptcy protection said Tuesday he is confident developers will secure new financing and a new partner so the project can proceed.”
“‘We have not been able to refinance our project to get to the point where we can proceed with construction,’ said Ryan Langson, vice president of Langson Development.”
“Salestraq, a Southern Nevada real estate research firm, counts Las Vegas Central among Las Vegas 19 high-rise condo projects with 8,874 units in the sales stage. Another 26 projects with 12,714 units are under construction.”
The Las Vegas Business Press. “The Nevada Mortgage Lending Division finished its investigation into the collapse of locally-owned Silver State Mortgage. Silver State has not yet declared bankruptcy but faced similar liquidity problems, brought on by the large volumes of loans it was forced to repurchase from warehouse bank Washington Mutual. Silver State closed its doors Feb. 14.”
“Another obligation left to deal with is to continue making monthly payments for California builder Shapell Industries, which Scott Bice, Nevada’s Mortgage Lending commissioner said had more than $400,000 in an escrow trust account with Silver State.”
“The account was set up in order to cover the first six months of mortgage payments for customers who bought homes this year from the Beverly Hills developer. The $400,000, Bice’s auditors found, was comingled with Silver State’s operating funds. Bice said it’s a clear case of financial mismanagement.”
“‘They blame it on their accounting department. But that’s clearly sort of a theft thing,’ Bice said.”
In Business Las Vegas. “It’s a profession that attracted everyone from strippers and school teachers to waiters and blackjack dealers with the lure of easy money by simply listing a house, only to have a buyer later that day.”
“A doubling of real estate agents and brokers in Nevada between 2001 and 2006 is more than the industry can handle and there are indications a number of them are leaving the industry, according to a report by the Nevada Association of Realtors.”
“That’s changed with the slowdown in the housing industry that has seen some agents’ incomes go from more than $100,000 a year to $1,000 a month.”
“Mike Denley said friends of his in the real estate industry have had to turn to other jobs to support their income until the housing market rebounds. ‘There are opportunities for those who will do the business,’ Denley said. ‘Before, you could put a sign in a yard and could have made it. Now, you have to work.’”
“Those employed in real estate sales, leasing and related positions account for 3.8 percent of the state’s workforce. Real estate professionals and their employees account for 48,000 jobs in Nevada, the report said.”
The Salt Lake Tribune. “As expected, Utah’s red-hot housing market is cooling off, and builders are offering up goodies such as free appliances and luxury vehicles in a bid to reel in buyers.”
“The freebies represent an abrupt change from the past two years, when builders along the Wasatch Front have not had to offer much of anything to entice buyers.”
“The housing market is losing steam. Inventories are growing. Homes, both new and used, are staying on the market longer. And appreciation has slowed. As a result, ‘you’re going to see a lot more incentives now,’ said Gary Cannon, president of the Salt Lake Board of Realtors.”
“The incentives, worth in some cases tens of thousands of dollars, stem from a steep drop in demand for new homes. Home builders have taken out permits for the construction of 1,846 new single-family homes along the Wasatch Front since January, a surprising 37 percent drop compared with nearly 3,000 in the same period last year, according to Construction Monitor.”
“All builders are probably feeling the pain, although many, including Utah-based Ivory Homes, declined to be interviewed about the slowdown.”
“Sage Builders was offering $5,000 off closing costs to buyers who use a ‘preferred lender.’ Now the company is offering buyers who meet certain criteria ‘zero down’ and no mortgage payments for six months, said Juliette Beckstrand, marketing director for Sage Builders.”
“‘It’s our biggest promotion ever. We wanted to do something important that would really help people get into a home,’ Beckstrand said.”
“The biggest savings can be on speculative houses built without a contract. Builders in some cases are so eager to unload these properties they will offer an assortment of sweeteners.”
“Jim Wood, director of the Bureau of Economic and Business Research at the University of Utah, also does not see doom, but he thinks Utahns should brace themselves for a more sluggish real estate market.”
“He isn’t surprised that home building is slowing given that surrounding states such as Arizona and Nevada started to see that a year ago. ‘It was only a matter of time before it happened here,’ he said.”
“Also inevitable, he said, is a slowdown in the resale market. When a residential market that has been booming starts to slow, the home building industry is affected first.”
“‘Then you’ll see the resale market hit next. You’re going to see fewer sales, longer days on the market and lower price appreciation. It’s coming,’ he said.”
Zachary Urban in Denver, estimates that about 40 percent of loans made in Colorado during the past three years were subprime, adjustable-rate or otherwise ‘exotic.’”
This is what I have been saying all along. not just subprime, but all of the risky loans, regardless of credit history. This is a MUCH bigger problem than advertised, and there will be no bailout.
I think that percentage is pretty reflective of the entire country.
And we never had the “red hot” market in Colorado. Prices here have been pretty flat these past 5 years. Corporate builders like Lennar have pulled up their stakes and left places like Larimer county (Ft. Collins and Loveland) in the past few years. Neighborhoods with empty lots and no sales office are becoming commonplace.
The only market segment to show any activity was for entry level (150-200K). Before I was aware of subprime and other exotic loans I wondered who bought even the entry level stuff, as the only “jobs” that were being created locally were in retail. Now I know who was buying those places and how. I was explaining to my wife how some of these buyers were now facing payments the could easily be as high as 70% or more of their monthly incomes (jeepers, we are paying 30% and that seems like a lot!).
30% is what people should be paying, unless they never intend to pay
CO has a weird economy
Hey - I am supposing you live in Ft. Collins. I went to Colo State. It WAS a wonderful town. Last time I was back there it reminded me of the term GENERICA. The amount of development that has gone on is incredible. What happened to all the open space???
What is also striking is the lack of commercial buildings. where does everyone work? What supports the growth - HP????
HP has closed its campuses in Loveland and Greeley. Even the Fort Collins site is now only 1/2 HP, with the rest occupied by Intel and a company called Avago (an Agilent spin off).
Quality jobs have been few and far between. When AMD opened a 150 person office last year the editor at the Coloradoan nearly wet his pants in excitement.
There has been a lot of commercial construction growth in Loveland in the Centerra business park. Unfortunately Centerra isn’t attracting a whole lot of new companies. It has mostly been cannibalization of existing local companies who are moving to nicer digs in Centerra. They also built a new “lifeStyle” center (an outdoor mall) across I-25 from the Outlet mall (which is now a ghost town).
Most of the growth is from menial. $10/hr jobs. Lots of illegals too.
Ft. Collins transplant here from the Midwest (most of us are). Tech has flat-lined or shrunk over the past couple of years. We have huge regional medical facilities - lots of medical related jobs and assisted living facilities. These should hold up in pretty much any economy. Other than that some light manufacturing, CSU still growing and a huge employer, much construction related also. There is a bunch of commercial construction going on, office space and retail - current bubble being built IMO. Still a great place to live, almost zero crime, quiet, great schools, close - but not too close to Denver, lots of outdoor activities to enjoy.
Home values have grown only modestly for the past couple of years so probably not a big bust. However, too many builders have built $500k+ specs and those are moving slowly.
Yeah, they also built a new hospital in Loveland. They also built a new car mall in Centerra, and a lot of car dealers are abandoning their old (but probably paid for) dealership facilities (mostly Loveland dealers) and are moving into new, posh facilities in Centerra. The rationale is that by being located in Centerra they will also pick up customers from Fort Collins, Greeley, Windsor, etc. The problems is that those towns have their own automobile retailers. It should be interesting.
Queen Creek (metro Phoenix) is hurting. Look on Craigslist and you will see brand new 3-4 BR rental homes at around $800/month.
Bill
That would be about right for that area.
I posted a “rental home wanted” on Phoenix Craigslist in August of last year, and I got HUNDREDS of replies for WEEKS from desperate landlords.
Time to hit up Phoenix CL with another fishing expedition.
great area to live in if you telecommute, otherwise add 2 hrs commute time. The money saved in the rent goes towards gas and car maintenace, and don’t forget the phyciatrist bill..
Yes, commute to downtown, or even most places in the East Valley, would be pure hell. Seems like snowbirds might be able to take advantage of the oversupply, though. I would think some of these landlords are keen to even collect 6 months’ rent in the winter.
Bill
Even being generous with the 200X rent, then those houses should be appraised or selling at 160K. These fundamentals are gonna kill the housing market, nationwide.
“Why don’t we just all buy a house with nothing down ,default immediately ,live in the house for a year, and have the government give us a pass on that no-cost rent benefit?”
From the end of the last thread, and it reminds me of something. In the Great Depression, desperate landlords often offered a couple of months free to get a tenant.
A friend told me his relatives would move every two months, from deal to deal, skipping out on the prior lease, and lived rent free for years. Once they had to go back for an uncle who was stranded on the sidewalk because he had forgotten the new address.
I suppose IT would make this more difficult today. Perhaps.
Nah, just use friends as fake references. People do this already for apartments and jobs. I guess the landlord could to a title search to see if the reference actually owns the place, but I doubt most people would bother.
http://www.bloomberg.com/apps/news?pid=20601087&sid=adOzOMu.GEqY&refer=home
“shares of Fremont rose $1.39 to $10.17″
Nothing but short-covering? Should we all jump in and go short, tx57?
I wouldn’t. There’s obviously an agenda.
I’m already reading that the subprime mess is yesterday’s news vis a vis the mkt in general.
Dow up like crazy!!!! BOOYAAAAAA!!!! WTF??????
Evidently a reaction to the Fed’s dropping phrases from “additional firming” from its statement today. Mkt interpreting Fed statement as a sign that the next move in short-term rates will be downward. Sometime. (Guess we can expect a continued decline of the US dollar.)
i mean phrases LIKE “additional firming” - sorry
“There’s obviously an agenda.”
Agenda = behind the scenes bailout w/o a word leaked to the press?
I dunno, Stucco, but I didn’t see any hedge funds “investing” in Worldcom or Enron at the end.
Looks like the Pig Men are holding the bag with their ownership in these lenders, and want to pump and then dump. Like Frank Partnoy quotes one, “Lure people into that calm and then totally f_ck ‘em.”
Enron and Worldcom didn’t have the FDIC as a fall back.
“I didn’t see any hedge funds”
Were there even many hedge funds on the landscape when WorldCom and Enron went down the tubes?
Ha! You’re kidding, right?
Voodoo trading!
Nobody has reported the contingencies attached subprime portfolio which was sold which may be substantial.
Fremont has sold the portfolio which is a big PR event obviously and has raised some cash which will help with liquidity in the short run but I bet they have retained some sort of performance liability in the portfolio sold which will come back to bite them in the butt.
Our Peak Oil Prophet speaks on housing in his latest. JWK puts it all in perspective for us…
http://www.kunstler.com/mags_diary20.html
The Greenspan statement quoted therein is amazingly idiotic, asserting that if someone could wave a magic wand and make house prices go up by 10%, the subprime mess would be no mess at all. Up till now, I had retained SOME respect for Greenspan, despite various improbably upbeat statements he had made. Kunstler amusingly budgets the $46000 income of a mortgage slave, finding there may be $18 a week for food, clothing, entertainment, etc.
“$18 a week for food, clothing, entertainment, etc.”
Uh oh, best not tell that to the retail industry. Oh what a ripple effect this is going to have.
I agree with you about the idiocy of Greenspan’s comment. Actually, housing would have to go up at least 10% every year for the next decade or so to help out these borrowers.
Kunstler is a tool. Before he was into Peak Oil, he was peddling the Y2K nonsense. http://peakoildebunked.blogspot.com/2006/05/305-kunstler-thought-y2k-was-end-of.html
This video is also very good to put Peak Oil in perspective:
http://video.google.com/videoplay?docid=8677389869548020370
The book “Crossing the Rubicon” by Michael Ruppert is a must read.
This site also puts it in perspective. Make sure you watch the video.
http://www.oilsmokeandmirrors.com/
“Harris paid $569,000 for his 2,700-square-foot home about a year ago and put it on the market for $575,000. ‘I’m being realistic, especially when I owe the bank,’ said Harris, who purchased another home in December.”
“Builders in his neighborhood are selling similar homes in the high $400,000s.”
_____________________________________________
bahhahahahahhaa
Realistic? LMAO!!!!
“Harris, who purchased another home in December” =
Harris who signed another suicide note in December.
I everyone enjoying this as much as me?
All those BS over the last few years is FINALLY going away.
I hope it is a slow painful ride down for these saps. If its short and quick no one will learn anything from this mess…
Crispy,
This definately a Schadenfreude moment worth savoring. Mr. Harris, welcome to Club Casey.
Got popcorn?
Neil
Mr Harris has an ARM that resets in November. By then, “realistic” will have a whole new meaning.
Harris paid $569K for this Gilbert house in October 2005 to a couple who paid $342K for it in March 2005. Is Raul Harris, mortage broker/flipper, the new poster child for the housing bubble (at least for the Phoenix area)?
And why does the article not state that he is a house flipper? There are many deed transactions in his name over the last three years. In all likelihood, reporter Misty Williams’ office at the East Valley Tribune does have internet access, and maricopa.gov is a free site with all of Harris’ recorded docs. But no, Harris is just a “Gilbert homeowner” and “the unfortunate bearer of two mortgages.” He is a flipper who bought his last set of houses for way too much after the slow return to sanity had already began.
I love these stories too. The buyers of the past few years are now the sellers. And they are now competing for end users, not flippers. The end users want realistic prices, so are passing on all of the overpriced flips. There are only a few options for these speculators who paid too much. Bring cash to the table and unload it. Rent at a loss and bleed cash for years. Work out a short sale with the bank. Or finally, BK. Any way you look at it, they’re screwed financially.
“A major part of the problem, Harris said, is that builders are dramatically slashing prices to off load homes that are finished but unsold. ‘You can’t really compete,’ he said.”
Don’t read to much anymore, about the ‘owners sticking together’ and holding the prices up. That dialog seemed to dry up about the time sales really began to slide last year. Builders need to sell, owners don’t (yet). Maybe the owners should have invited the builders to the neighborhood block party to get them onboard with this sales plan.
Hope he spends every last cent of retirement savings on the ride all the way to the bottom then loses it to the bank.
It is just a matter of time before his banker has him croning the pig song (think deliverance) in falsetto! Bring it on!
Someone correct me, but your typical vegas 2700sf box-on-a-square-of-dirt can be had for significantly under $400k in the current market. Especially after knocking 10% off typical asking prices, which many sellers will accept now.
correction: Harris is in Gilbert, AZ. SOME areas are nice, but …
I know nothing about gilbert but is my statement any less true? I mean, come on, it’s ari-freaking-zona. How nice could gilbert possibly be?
Right, your statement still works !
It’s a hell of a place in late July!
No, really. It’s a hell of a place.
““Harris paid $569,000 for his 2,700-square-foot home about a year ago and put it on the market for $575,000. ‘I’m being realistic, especially when I owe the bank,’ said Harris, who purchased another home in December.”
“Builders in his neighborhood are selling similar homes in the high $400,000s.””
Dear Mr. Harris: What you owe the bank is irrelevant to what the “realistic” price of your house now is. The “realistic” price is what it will sell for — and with builders selling new homes $100,000 cheaper than yours, your price isn’t realistic.
“Harris paid $569,000 for his 2,700-square-foot home about a year ago and put it on the market for $575,000. ‘I’m being realistic, especially when I owe the bank,’ said Harris, who purchased another home in December.”
“Builders in his neighborhood are selling similar homes in the high $400,000s.”
In other words, he’s being totally _unrealistic_.
“I’m being realistic, especially when I owe the bank”
_______________________________________________
Leverage is a BITCH on the way DOWN!
Harris should sold of his house first. What was he thinking? Oh, that is right, he wasn’t doing much thinking much at all. Guess nobody wants the hassle of moving twice. It is a much bigger hassle having two mortgages.
And so if Mr. Harris had bought his house with help from an inheritance and put 50% down, thus owing only $287k, would he then consider $290k a “realistic” price and take that amount happily when all the other houses on the block are going for high $400’s? Ha ha, right!
Exactly. Who gives a damn what YOUR mortgage is Mr. Harris….. and the builders homes are new, allowing a buyer to select their own bling, which by the way, will typically come with free upgrades that you didn’t want to pay for.
I’ll bet Mr. Harris paid top price with the cheapest standard features available, because there is more profit when its “Comp Time” at selling. Well….. that’s when the demand is good. This time…… oops, bummer.
I was going to post a slam on this Harris guy, but if you read further down in the original article you will actually see him say something intelligent about being aware that prices could go down and that people shouldn’t have bought if they couldn’t afford it or weren’t planning stay in the house for several years. I think Harris might be one of the few specuvestors that is responsible for his actions and knows he will be paying the price for several years to come.
I know lots of people who bought into this development (Seville) in the past few years hoping for windfall profits. It’s just west of Queen Creek. Homes there in 2006 were selling from $500K to $1M plus. These people are in for some serious pain.
“Zachary Urban in Denver, estimates that about 40 percent of loans made in Colorado during the past three years were subprime, adjustable-rate or otherwise ‘exotic.’”
That is a funny mispelling of toxic.
Exotic is the fashion-forward version of toxic. Their just trying to make the situation sound sexy.
Trying to reconstruct the etymology (toxic –> exotic), start with a leading “E” because everything has to be electronic these days, and throw in a touch of trendy dyslexia to swap T with X.
“e-toxic loans”
I doubt you want to live with anything exotic long. Being married to an exotic loan for 30 years is not likely a good idea.
GH, you missed the whole point of exotic. Just like exotic lovers, you’re supposed to churn the exotic loans every few months, if not quicker.
No I totally get the point. Being stuck with an “exotic” loan these days, is a lot like finding out your exotic lady is pregnant, and her family are all mob.
Or she’s a toxic dancers……
danc-er.
Generally you never want to spend more than an evening with anything labeled or perceived as “exotic”. Too expensive and too many hassles in the long term. Wake up the next morning and kick her/it out the door.
Anytime you hear “exotic”, “luxurious”, “exquisite”, you grab your wallet and run. That applies to ANYTHING.
Oh cool, another chance to rip on Vegas.
Ever been at a craps table that goes from super hot to super cold just like that? For hours everyone’s making four, five, six straight points that are 10 or 15 rolls long. Everyone’s winning place bets, come bets, field bets left and right. Then… point, seven, pass the dice, point, seven, pass the dice, point, a roll or two, seven, pass the dice, point, seven, pass the dice. Everyone’s sevening out in the vegas housing market now.
For the record, saw a Hour and 23 minute roll in Tahoe, in the mid 80’s…
That was probably me (although I remember it being longer). I was a Cal student, up for a weekend, down to my last $25, and went on a hot streak like I had never seen (and haven’t seen since). I won thousands, the table won thousands and thousands (the pit boss had eventually raised the minimum to $25).
When I finally crapped out, one old guy at the table tipped me 2 $100 chips.
I promptly went back to Berkeley and spent it all in one place-on a top of the line bicycle. Best bike I ever had, money well spent.
Of course, since then, trying to replicate that feat, I’ve handed that money back plus interest.
Hot craps rolls always seem longer than they actually are. Just like sex. That’s not a bad thing; just human nature.
I was more than a little green and turned $100 into around a grandido on that 1:23 whirl. Wish I knew what I was doing.
The reason I know what the time was, when the shooter crapped out, the boxman looked at his watch and said to the stickman:
“An hour and twenty three minutes”
Wow. Someone doing the full assortment of place and come bets with full odds would have completely cleaned up. Usually I try to have several numbers working at once (and multiple “come” bets act as insurance against quick sevens) so long points do the best, even when they end in sevens.
There’s a very good reason that the “big 6 & 8″ and field and prop bets are so very close to your stack o’ chips…
Pavlov woulda loved Vegas~
Towards the end, it was taking around 2 minutes a roll, to pay off the table and the boxman looked at the dice 9 ways to sunday, each time they were rolled.
I think Harvey’s Inn (now the Lakeside) lost around $250k, that night, in a 83 minute stretch.
Yup - it’s time to bet the ‘Don’t Pass’.
In stock market terms that would be the ProFunds Ultra Short NAZ 100 (USPIX). It returns (or loses) 200% the inverse of the QQQQ. Definitely not for widows and orphans, but a good place to make an aggressive bet against the market.
Just short the S&P 500 futures. You get a 5% annual premium that will decay in your favor and can get treasury interest rates on the collateral.
“What some sellers are asking may be unrealistic in terms of current market prices, but it’s not unrealistic when it comes to their financial situations, Fioramonti said. ‘They’re just trying to get what they have in the place,’ he said.”
Sorry, the market doesn’t care about his, or anyones personal financial situation. It’s time for all of the flippers, greedheads, and unwitting speculators to burn.
EXACTLY!! Sorry Mr. Overleaveraged, I see your pain but that doesn’t change the fact you’ll be taking a 50% haircut.
They’re trying to unload Super Bowl tickets they paid $5000 for when there’s a torrential rainstorm going on and all the buyers would rather sit at home and watch it on teevee.
Your problem, not mine. Back to the bank it goes.
Right. Kind of like trying to get $2000 for a Playstation you bought Christmas Eve.
“Those employed in real estate sales, leasing and related positions account for 3.8 percent of the state’s workforce.
I’ve been reading total % of RE related jobs was 9%+ in 05 w a long term mean of 6%
anyone know the deal ?
Just my 2 cents - it depends on what you refer to as real estate jobs. There is a ton of employment in subdivision construction. from permitting, to construction to sales. Sure, an asphalt worker or draftsman may not truly be a “Real Estate” jobs - but when the market turns, they loose their job just as quickly as the RE agent.
“What some sellers are asking may be unrealistic in terms of current market prices, but it’s not unrealistic when it comes to their financial situations, Fioramonti said. ‘They’re just trying to get what they have in the place,’ he said.”
This is the classic “when did your problem become my problem” situation. Just kills me…
How about: “A failure to adequately guage market risk and overpaying for an asset on your part does not constitute an emergency on my part.”
LOL perfect…
It’s just like the SF couple who wanted me to rent their “investment” at a grossly overpriced amount because they were just a poor, young family starting out while their new mercedez was parked in the driveway.
I never get tired of that story.
“The housing market is losing steam. Inventories are growing. Homes, both new and used, are staying on the market longer. And appreciation has slowed. As a result, ‘you’re going to see a lot more incentives now,’ said Gary Cannon, president of the Salt Lake Board of Realtors.”
How are the builders going to add the value of incentives on to the loans without the help of subprime financing to drive a sizable wedge between the home’s market value and the sale price?
How are the builders going to add the value of incentives on to the loans without the help of subprime financing to drive a sizable wedge between the home’s market value and the sale price?
Exactly. Buyers no longer can wiggle into properties at the old price. Its over. Passthebubbly is right, the gambling table has gone cold. Oh, some areas will have a good March. Not many… Word is spreading too fast. Too many people are stuck with flips, overpriced homes, and cannot refinance. Not to mention layoffs are building up quickly.
Got popcorn?
Neil
In Colorado (Broomfield actually) a builder is in the first phase of a townhouse development that ranges from $240-280k base … Actual spec’d prices are more around $250-315k … And they are RAISING prices. Apparently building material supplies are sketchy and therefore prices are going up … So this builder (not sure if I should say whom) is passing this on to their customers in the form of a price increase in early April.
I visited TEN townhouse developments in teh $180-250k range in the Broomfield area last week. There’s no shortage of competition … And prices are going UP?
Here I am thinking builders are going to discount spec’d housing and load in more options as standards to shore up their pricing on their new builds … Stupid me …
“How are the builders going to add the value of incentives on to the loans without the help of subprime financing to drive a sizable wedge between the home’s market value and the sale price?”
They’re delusional. It’s the price, but they’re trying every last trick in the book EXCEPT lowering the price. It can’t work. People cannot afford these houses. They never could. The latest scam is to set up financing through the builder and some preferred lender with again, deferred payments (neg am), sometimes for 5 years. I posted a press release from a builder in Reno, and they called it “making a transition from renting to owning”. They never address the fact that once the payments adjust, the buyer has no hope of hanging on at their current income level.
Another “latest scam”: Use FHA financing, which requires a 3% downpayment, but skirt the fact that the buyer has no savings by “financing” the 3% downpayment on the loan.
Aren’t FHA all documented income loans that restrict you to a conservative % of income to mortgage payment? If that’s the case then even that 3% gimick won’t save them because these homes are still so over priced that few can afford them, especially in the nasty bubble markets like CA.
In Business Las Vegas. “It’s a profession that attracted everyone from strippers and school teachers to waiters and blackjack dealers with the lure of easy money by simply listing a house, only to have a buyer later that day.”
Well, back to the RE babes taking their shirts off instead their clients losing their shirts in the RE market.
lol
Funny, but a little odd that they lumped in school teachers with strippers, blackjack dealers & waiters.
The similarity in all of them is that most people quit the profession fairly quickly. I can tell you that teaching in the public schools is not easy, and a lot of young teachers get burned out in a hurry. I think something like half of all new teachers will quit or change careers within 5 years, although this probably includes women who have kids and don’t return to the labor force for a while.
Only the truly dedicated make a career out of teaching.
Or the truly incompetent, who can’t do anything else. You see both kinds, and they both get paid the same.
Work in a residential RE office (lowly admin)…am delurking to tell you all that it is different here (Western Chicago suburb). Major realtor meeting going on and the mortgage lender speakers are attesting to the fact that the market is on the rise. No problem here, because this is the place everyone wants to live. Everything will shake out by mid-summer. Assuring the captive audience not to listen to doom-and-gloom sayers. It is going to be OK. And the beat goes on…..
(will now return to lurking status)
Naperville?
Yes.
Land of Illusion. Lived there for 5 years. Even back then, I thought that the sprawling ex-urb (Naperville/Aurora) was overpriced in `99. Now? I shudder to think.
The place is an endless sea of 2-story colonials surrounded by strip-malls, Chucky Cheeses, sports bars, and–oh yeah–”great schools”.
Property taxes averaged 2-2.5%. Did I mention the “great schools”?
Anyway, picture the ubiquitous mini-van/SUV combo in the 3-car garage, right next to Daddy’s HD Fat Boy.
Most folks in Naperville are only two paychecks away from dumpster diving. But it remains a “showcase” community: rampant consumerism amidst a sea of bland, cookie-cutter architecture with an entrenched keeping-up-with-the-Jones mentality. My schadenfreude-meter is clicking on this big slice of Fantasyland.
The only part of the Chicago market that is on the rise is the inventories. The homes going under contract in the suburbs largely have contingent sales, so they are relying on the buyers receiving a windfall from selling their overpriced condos in the city. The problem is that these would be city condo sellers/suburban house buyers are competing against brand new construction (something like 9000? units being completed in the near future) in their quest to snag a GF. Something tells me that the GFs are going to choose the new condos.
Add to that the rising foreclosures, lack of downpayments, and flat to falling comps (how are the serial-refiers going to pay their bills now that they can’t pull out more equity?) and things are going to get really ugly.
Cali and FL might get a ton of press but Chicago has a bubble too. Speculators, flippers, brainwashed homeowners, 0% down, exotic financing, and the house-as-ATM were not limited to the coasts. Check out the Cook County Recorder of Deeds sometime. It is eye-opening and very, very scary.
Please don’t tell that to our supercharged realtors. This community is different. In the meantime, our inventory triples and selling a client’s home is like pulling hen’s teeth. But no one seems to get it.
“suffered payment shock”
LOL, good one — very dramatic.
Proof that RE “investing” has reached the unwashed masses:
http://dallas.craigslist.org/com/297874607.html
“THE SCHOOL COST $800 AND IT LAST FOR FIVE WEEKS.”
What did casey serin pay, like $16K? That’s a 95% discount!
She needs to release her caps lock key.
These are the kind of people who were purchasing the last few years for “investment”. I swear by gawd if I hear that term used again to describe the purchase of a property that doesn’t cash flow, I’m gonna blow my top!
I can’t feel sorry for a buyer that expected to sell within a year of buying a place and now is a FB because the builder reduced the prices . The major problem with the market for the last 5 years was the speculation and the total inability of borrowers to hold long term or even cash flow on the property they now have to rent .
The market priced people out and only because the borrowers and lenders were willing to phony up the loan packages did the party continue . Now all these greedy good -for- nothings want to be bailed out . I’m sure there are cases of people who where really swindled but I think the main cause of the run-up was a speculation mania fueled by no-rule low down lending . No-tax bail outs .
HW, your final paragraph seems completely correct. The typical IO ARM contract does say that after N years the payment will switch to interest-plus-principal … but it doesn’t mention the dollar amt of the new payment. It then further states that the rate will change to “LIBOR plus X%” but again does not give any example of what the payment would be if LIBOR remained unchanged. Loan origination agent’s big lie would be, “You can always re-finance.” Thus, even a non-phony loan package is pretty phony.
The large values of N (years), such as 5 or 10, imply that the foreclosures and decline will persist for a very long time.
If the Courts rule that the disclosures were faulty than the lenders have to eat it I guess but what are the chances of the courts ruling that those loan documents were faulty and voidable . The government might come up with new rules that greater disclosures are required in the future . Maybe there were some sub-prime lenders out there that have voidable documents but its a case for contract law to decide on IMO .
I think in most of the cases the people just didn’t read the documents because it was a real estate mania .
your final sentence exactly right
The loan documents indeed do not show the amount of the payment at adjustment time. Perhaps a better version of those documents would. I’d certainly recommend it, since many of these people can’t do the math themselves. (Heck, lots of them don’t even seem to know what pmargin they are paying above what index, so they can’t even start with the math.)
Now the lender would argue that even for wrst-case, “the actual payment can vary”, depending on whether the borrower has paid any extra principal. My counter argument: Not that many people who want these loans will pay extra, ever. And by showing it as if no extra payments are ever made, you can show the borrower how bad his worst-case scenario will be. Whoops, so THAT’S why it not in there!
Still, that to me is a consumer-assistance and clarification issue, not a legality issue for whether an existing contract is valid or not. That said, is it a matter of time before various states eventually start requiring such details show up in the mortgage documents?
“Sage Builders was offering $5,000 off closing costs to buyers who use a ‘preferred lender.’ Now the company is offering buyers who meet certain criteria ‘zero down’ and no mortgage payments for six months, said Juliette Beckstrand, marketing director for Sage Builders.”
“‘It’s our biggest promotion ever. We wanted to do something important that would really help people get into a home,’ Beckstrand said.”
Apparently that doesn’t include a better price. Their website lists ‘available homes’ from 450K to over 1.8M. Just makes me all warm and fuzzy.
I think 401 k bagholders should unite and ask for a bail out also . The new rule in life is you can’t have a loss on a investment because the gov. will bail you out . Further , whenever I go to Vegas and I come up short I want the gov. to bail me out ,after all I thought I was going to win at craps .
I sort of wish I had no sense of ethics because I could have a free 6 months in a $1+ million house. Maybe even longer since it takes a few beyond that to complete the foreclosure process.
‘They’re just trying to get what they have in the place’
Reminds me of the time a young guy started working in my office, and started putting money into his 401k for the first time. It was his first experience with the stock market, he was SHOCKED to see that his funds were actually down since the last pay period and his account showed a loss of a few bucks.
“You mean I can LOSE MONEY in my 401k!????”
The look on his face was similar to that of my 1-year-old’s right before she starts to cry ’cause her big sister stole a toy.
Bet a lot of flippers will be making that face in the coming months when they realize there’s no way they’ll get their money out…
The “O” face
Also ,I’m calling fraud on the builders keeping the list price high and than giving kick pack perks of paying the mortgage for years . Any lender that goes along with this is giving way more than 100% financing and is in violation of truth in lending and is in bed with the builder and its fraud to the final bagholder investor in the house loan note .
Further , why don’t we just pay the unqualified buyers house payment for 10 years so they don’t foreclose and raise the house price 100k to be able to do it . What the industry is doing out there is getting more and more stupid, but you notice i’ts always at the expense of a innocent parties like a MBS bagholder or the public in the form of a bail-out .
I love the L.A. Times:
Home equity could buoy economy
Borrowers who have built up their stakes could help keep the U.S. out of recession, despite troubles in sub-prime lending, economists say.
http://www.latimes.com/business/la-fi-economy21mar21,0,5279718.story?coll=la-home-business
What a desperate-sounding article. I especially like this logic: “Subprime foreclosures will be only a small percentage of total foreclosures” and therefore will not sink the economy. Love that. I think we can all see how this statement is as upside-down as many FB’s.
Exactly. There basically is no “home equity” left in CA that has not already been “liberated” via serial cash-out refi’s and/or HELOC’s. Some estimates out the figure of existing mortgages that have been refi’d or HELOC’d here in the last 6 years close to 90%.
“Yup - it’s time to bet the ‘Don’t Pass’.”
And while betting against the shooter might make one unpopular at the table, best to be unpopular when the table’s cold and walk away with pockets of cash., rather than a popular numbskull who gets raked over the coals by the house.
I think there’ll be a LOT of coals burning in the next year….time to bet against the shooter.
I often find that when I bet the don’t pass that most of the table has no idea what it is I’m doing. These dolts don’t even realize that there IS a way to bet against the shooter.
My problem with don’t bets is I’m not comfortable backing them with odds that pay less than even money. Yeah, there’s zero house edge and all, but I get a much bigger kick (per dollar gambled) on a 3-2 or 2-1 return on pass than a 2-3 or 1-2 return on don’t.
In craps, the only 0% house edge bets are the odds bets (when viewed independently from the required pass/don’t pass bet). They are 0% whether you’re on pass or don’t pass. The long term EV (expected value) is zero on both. “Less than even money” is in fact the true odds; the “kick” will be the same overall either way. I believe you’re thinking of the variance, which is another way of saying you’ll have more money in play (at risk) when you’re on don’t pass.
The actual don’t pass bet is slightly more advantageous to the player (house 1.36%) than the pass bet (house 1.41%), so consistently betting don’t pass & odds is actually the better play.
I know all that. I’m thinking in terms of “enjoyment per dollar of risk,” which of course is unquantifiable.
“As expected, Utah’s red-hot housing market is cooling off…”
Turning off the funny-money spigot sucks, doesn’t it Utah?
It seems their boom was quite short lived. Late to the party doesn’t always mean late to the hangover.
Link please, thanks.
Never mind, Stupid moment.
Any local anecdotes about Utah? We are moving there soon, and even with all the spew about a great local economy and job growth, I can’t believe what houses are going for in the nicer areas! Way out of proportion to local wages.
Anyone know of any flipper stories for the SLC area?
kris, I can tell you that it’s gotten ridiculous over here in UT SLC metro area. And I really think that a lot of sellers think they can re-live the glory days of last year. I don’t have a ton of flipper stories to tell, since I think a lot of investor buyers have left the state, but I can tell you they’ve been replaced by the increasing amount of “custom builders.” Utah doesn’t take to well to corporate builders (e.g., DR Horton, Centex) but they lurves them some custom homes…
For example, we went to an open house on a custom build around the corner from us, and the builder said (with a straight face) that the price was xxx amount but after the weekend the price would go up $15k. This is coming from a seller in a neighborhood where 80% of similar houses still sit with their sale signs in front (custom builds never occupied). There’s way too many houses in the above-$400k range, and I’m beginning to see a lot of bag holders. My personal observation is this scenario: Joe and his cousin decide to become builders, why the heck not, spend way too much on a lot, and try to sell a $600k poorly-laid-out custom home at a price point where the market is already flooded. What they don’t realize is that the California “money well” has run dry. No local Utahn is spending that much on a house with a 50k median income, especially with all the fancy finance options disappearing. If you plan to buy, know that you’re in the driver’s seat. Personally, spouse and I are waiting until late next year to even *consider* purchasing.
A side note: I would be cautious about buying anything built more recently. Many of the subcontractors have been putting forth really cruddy workmanship (don’t ask me how I know, I just know).
The denial phase is in full swing…
happyrenter, thanks for the update. You are right…it is better to rent for now, and we will probably will (as much as I hate renting, I hate overpaying even more!)
Any other stories out there?
Still data - dependent. I’d rather be long than short right now. It’s very cynical but money is money.
Risk loves need very little encouragement from BB to go hog wild. Look at how share prices rocketed up on the slightest hint the Fed will do nothing in response to its everpresent concern about inflationary pressures…
‘The FOMC repeated that rising inflation remains the greatest risk to a stable economy. “Recent readings on core inflation have been somewhat elevated,” the statement said. “The high level of resource utilization has the potential to sustain those pressures.”
In one small hint that the FOMC may be moving closer to cutting rates, the committee dropped a phrase from previous statements about the “additional firming that may be needed.” But the committee also heightened its concern about inflation, suggesting that it is still leaning toward higher rates if inflation does not moderate.’
http://www.marketwatch.com/news/story/fed-holds-rates-steady-sees/story.aspx?guid=%7B43CB9CC2%2D56D9%2D4DA2%2D9697%2DEAAFECE2236C%7D
http://www.marketwatch.com/tools/marketsummary/
Embrace it, Stucco. Make it your friend
It’s going to give us a beautiful short entry down the line.
It’s neither here nor there to me. I am a market watcher, not a gambler.
However, I am seriously concerned about the possibility that the stock market is being used as a monetary policy tool (e.g., to create a general inflation that makes Wall Street and 401(K) investors equally happy). If this is the case, then a bad ending is in store up the road.
Wouldn’t argue that with you at all. My job is to trade what I see, not what I think or want. It isn’t gambling.
I’m not one to judge what is gambling and what is not. But Mark Twain had a nice take on the subject…
The DJIA rocket appears to already be losing altitude…
Fed Open Mouth Committee down the middle …again.
Slightly more hawkish tone this time around. Should help the dollar Yen dynamic–viz, the carry trade will continue pretty much unabated.
Eventually the having it both ways rhetoric isn’t gonna fly–perhaps before their next meeting takes place. I do think the markets were expecting a more dovish sentiment, so I wouldn’t be surprised to see another sell-off subsequent to a more thorough parsing of today’s statement.
Looks like all the mullets who jumped that “head & shoulders” on the S&P yesterday got burned. TA rule: a h&s that forms after a thrust down like the one of a few weeks ago ain’t the same as one at the end of a long uptrend.
Fibonacci breakout commenced. 1500 here we come.
I dumped half. I’m the biggest chicken around when it comes to the long side but I got in at the bottom last week so it’s okay.
Looks like the neutral bias is back. Stocks rising to moon. Still, given the realization that the Fed has been goosing the system with massive amounts of $$$$, I’m inclined to think this puppy is overbought, especially given the weak data of late.
I don’t think you’re chicken at all. Especially in this environment. We’ve entered treacherous terrain. Prudence is the better part of valor.
Considering dumping another 25% at the close or rolling the stop up, that’s for sure. Don’t want to give this back.
OK chick, got that . . . but I’m more of a macro view person rather than technical guy . . . how long can the market look past weak consumer spending numbers and hints of continuing inflation?? I believe the coming consumer spending crunch (brought on by the hosing, er housing fiasco) is what ultimately corrects this market . . . right??
Yeah, after all the shorts who jumped that 500 point down day and didn’t cover are sufficiently punished.
It just sucks but it seems like the whole game now is fading the fade and has been for a couple of years now.
Heli-Ben and his buddies left rates unchanged and apparantly shifted to neutral bias (according to Bloomberg).
How much will a can of Campbells Cream Of Mushroom soup cost by the end of the year - 30 dollars? Get your wheelbarrows ready!
Taking half the long position off here. Seems a bit excessive.
SPX is going to almost touch the highs. Then all bets are off.
Dumped. I think this junk is going to go higher but I’d rather concentrate on building up put positions than trying to squeeze another 5% out of this move.
It’s been a great 5 weeks! I like this kind of action.
Too late to save the economy. You cannot push a rope to keep the beast away.
This is scary… (not a popcorn moment)
Neil
Is it a surprise that a central agency can’t run an entire economy? I don’t know why that comes as a surprise. How the hell is a group of 12 or so bankers supposed to know what the value of money should be? Another experiment with socialism will end badly. Will the result be more socialism, since some didn’t work, or will the people say enough? With what Congress and the media are saying, if I were betting with “options”, I’d be putting money on socialism, and lots of it.
Socialists/Big government advocates tend to blame government failures on lack of funding and authority. Then they seek more money and authority until they lay waste to everything… The problem is that bureacrats rarely give up power once they have it…they only seek more power (even though the price is more misery for the rest of us).
PF Changs just came out with a lovely new menu design. Prices no longer have dollar signs. Rather, in the style of upscale restaurants, the prices are in small, faint, italicized numbers sans $. And, oh yeah, they’re about 15 percent higher than the prices on the old menu.
Yeah, well ask people what a dollar is and most will hold up a fed note. That is not a dollar. Dollars came from Spain and had 371.whatever grams of silver in them. Excatly the reason why the founders specifically gave congress the right to only COIN money, not print it. the Fed is unconsititutional. I wish I sat on the committe that has the authority to renew its contract. I would vehemtly vote NO! every time.
“Dollars came from Spain and had 371.whatever grams of silver in them.”
—————————
and pistols used a piece of flint to spark a little pan of gunpowder and had to be reloaded from the front
Sure, things evolve. However, look up what a dollar really is and then look up what a federal reserve note is. It is neither federal nor reserve. It is a note that creates debt. Nothing is behind. When faith in that medium finally dies, there foes the neighborhood.
there’s no currency symbol, so just wait till they charge you in euro or quid
PF Changs just came out with a lovely new menu design. Prices no longer have dollar signs.
Yeah, I’ve noticed that a lot of upscale and wanna-be upscale restaurants do this.
What I don’t understand is why people consider PF Changs to be upscale and/or good. I’ve eaten there a few times (at the request of others), including their flagship restaurant in Phoenix/Scottsdale/Whatever. Food presentation is good, but the service level of the staff is ordinary and the food itself is nothing special. I’ve had better for half the cost at a lot of different places. On the other hand, they are a national chain - if you are in a strange city and know nothing about which restaurants are good or not, if you see a PF Changs you know what to expect.
Sort of like McDonalds in Europe.
Last chance to get your guns, ammo, and non-perishables?
LOL!
IMHO, it’s looking bearish for health club chains. I mean, who needs to sweat to the oldies when it gets too expensive to eat?
Lentils and rice. Now that’s economy eating! We’ll all look like Ghandi in a few years.
You can still get a bag of black beans for less than $1.00 at my local downtown (overpriced) supermarket. That’s 5-6 high protein servings. Healthier than what people normally eat too, and ridiculously easy to cook.
Just chowed down on some kitchiri and a delicious stew of vegetables in turmeric and coconut milk. Total cost probably less than two bucks.
Yup!
“Gilbert SPECUVESTOR Raul Harris is the unfortunate bearer of two mortgages”
Do not worry Raul, it only goes up … the ARM, I mean…..
On a lighter note, Florida beaches are running out of sand:
“For decades, South Florida’s beaches have received periodic infusions of fresh sand pumped from offshore to maintain their bountiful curves.
Now, the supply of sunken sand off Miami-Dade and Broward is tapped out.
”For practical purposes,” said Miami-Dade environmental director Carlos Espinosa, “we are out of sand.””
http://www.miamiherald.com/467/story/47863.html
“What some sellers are asking may be unrealistic in terms of current market prices, but it’s not unrealistic when it comes to their financial situations, Fioramonti said.
What’s ‘wildly unrealistic’ is the 2004/2005 buyers expecting ME to subsidise their mistake. Sorry, bagholders, wisdom has a price.
I think its pre-mature for the senators to be calling for bail-outs when we don’t know who the true bagholders are yet . I want the truth to come out before they try to cover up who/what is to blame for all of these defaults , (Is it the borrower , the lender ,Wallstreet ,REIC, the mania , is 911 to blame , the economy ,or all of the above . We haven’t even had court opinions yet on the contract law nature of the foreclosures .We haven’t even heard yet from MBS bagholders .
“I think its pre-mature for the senators to be calling for bail-outs when we don’t know who the true bagholders are yet.”
I agree. Way too soon to do anything as this is just starting to unfold.
“Gilbert homeowner Raul Harris is the unfortunate bearer of two mortgages. For months now, the local loan officer”
———————————————————-
A loan officer with 2 mortgages. Triple screwed. Wonder if he still actually has a job.
Yep, the whole Real Estate industry feed off itself. Now that there is little fresh meat left in the GFs, they have to attack the host, and it’s not going to be pretty……
Geez
Seems like the lemmings on Wall Street were more impressed by the Feds leaving out the S-prime word than the gold or currency market was…
Gonna have the end of quarter markup now probably. Rate cuts are net bearish though down the line. Gold likes it.