Putting Downward Pressure On The Sales Price
The Daily Press reports from Virginia. “The percentage of Hampton Roads subprime loans at least 60 days late, which are close to default, rose from 4.5 percent at the end of 2005 to 7 percent at the end of 2006. Adam White, a Virginia Beach attorney who serves as a trustee for foreclosures, said he had seen a big increase in the past year.”
“‘I have never seen an environment like the one we are currently in,’ he said, ‘with the rate of defaults and the volume of foreclosures. This is as bad as I’ve seen it in 18 years, and I think it’s going to get worse.’”
“New Century revealed in April 2005 that it had made more than 10,000 mortgage loans in Virginia totaling $1.75 billion. That lending clearly had just accelerated, with the company extending 4,000 loans worth more than $720 million in the previous year.”
“White said he was amazed at how many people were extended credit who couldn’t handle it. He said he knew this reckoning would eventually come in the wake of lax lending standards. ‘All of the gloom and doom that everyone was predicting a year ago is occurring because of reckless lending practices,’ White said.”
“Housing prices rose slowly last year in Hampton Roads, but the number of houses sold each month was down from 2005 as an oversupply built up. White is seeing fewer investors making bids for homes hitting foreclosure.”
“These properties are getting sold by the lenders at discounts, so they can get their money back as quickly as possible. White said, ‘They’re putting downward pressure on the sales price.’”
The News Leader from Virginia. “Despite the recent nationwide housing correction, area real estate insiders say the Staunton-Waynesboro-Augusta County market is still seeing strong growth, both in terms of units sold and the price for which they were traded.”
“Thanks to a high inventory of homes on the market now, ‘there’s more inventory for buyers to select from,’ said Fred Morgan, immediate past-president of the Greater Augusta Association of Realtors. That’s particularly good news for buyers.”
“Morgan sees a ‘normalized’ market in 2007. ‘I don’t think we’re going to experience the frenzy of activity we saw in 2004, 2005 and early 2006,’ he said.”
“‘With all the incoming businesses and growth not only in Augusta County but from what I hear is coming in across the mountain and in Rockingham County, we’re in great shape,’ said Pat Rexrode, current GAAR president.”
The Virginia Pilot. “For the fourth year in a row, the Census Bureau says, Norfolk is shrinking. Virginia Beach, too, for the second year in a row. Is that possible? Are Virginia’s two most populous cities really losing residents?”
“Norfolk Mayor Paul Fraim laughed when told about the new census estimates. ‘The Beach is growing,’ he said. ‘And so is Norfolk.’”
The Washington Post. “The galloping growth of Washington’s outer Virginia suburbs is slowing at last, according to Census Bureau estimates to be released today, with high housing costs beginning to dull the appeal of counties that have long been a magnet for newcomers.”
“The shift brings Northern Virginia in line with the District and Maryland, where Montgomery County’s growth rate continued to slow and growth in two other counties, Anne Arundel and Prince George’s, stagnated in 2006.”
“In Anne Arundel, where census figures indicate a net loss of 97 people, county demographer Kavi Maddula said that the county issued more than 2,300 building permits during the year, a figure that suggested to him that the population had grown.”
“‘I haven’t seen this data, but I would be surprised if those numbers were correct,’ said Maddula5. ‘If it were losing population, I don’t think we would have the kind of activity that we’ve had in residential and nonresidential construction.’”
The Philadelphia Inquirer from Pennsylvania. “A borrower with a credit score of 580 can no longer get 100 percent financing, said Ricky Boone, a Trevose mortgage broker. ‘Nobody will buy it,’ he said of the investors. ‘People now looking to buy houses, they are going to have to have more down-payment money.’”
“‘There’s nothing left. It all disappeared in a heartbeat,’ said Bill Metalsky, a loan officer with Creative Mortgage Group Inc., of Willow Grove, which had 15 percent to 20 percent of its business in the subprime arena.”
“Metalsky said he had a customer with a very low credit score, but a 20 percent down payment. It would have been easy to find a lender at the beginning of the year. ‘Now I can’t find anybody. Now I would have to have 40′ percent down, he said.”
The Phillyburbs from Pennsylvania. “The area’s inventory of unsold homes was up in February, to 3,646, from 2,526 a year ago, and from 3,389 in January. At January’s sales pace, that means there’s a 10.2-month supply of homes on the market.”
“The average house sold in February sat on the market for 68 days before receiving an offer, a 119 percent increase from the 31 days the average house took to sell a year ago.”
“Many real-estate insiders say days-on-the-market figures understate how long it actually takes houses to sell, because Realtors regularly pull slow-moving homes off the market and re-list them to make it appear they haven’t been for sale for too long.”
“In Bucks County, sales of new homes were off 36 percent in January. There’s little sign of a market turnaround in building permit data. Permits for single-family homes pulled by developers fell 40 percent in Bucks County in January, and 30 percent in Montgomery County. February data is not yet available.”
The Star Ledger from New Jersey. “Mark and Debbie File’s dream home is $8,000 from completion. That includes the two air conditioning units stolen last fall. And the stainless-steel refrigerator and microwave that were ripped from the walls over Labor Day weekend, perhaps, as Mark File suspects, by a contractor angry that the builder, Kara Homes, was behind on payments.”
“The rest of the development, Horizons at Birch Hill in Old Bridge, is much the same, partially finished and in disarray. While ‘No Trespassing’ has been spray painted on the boarded-up garage doors of unfinished homes, it has done little to deter vandals. One was so brazen he stole the front door off a unit.”
“Kara has yet to file a reorganization plan, although the bankruptcy court judge last week ordered the Old Bridge-based company to file one within 30 days or start making interest payments on its $230 million in construction debt.”
“‘Every day we delay upsets a group of people, except these people who are making $500 an hour,’ said Birch Hill homeowner Alan Ross. ‘The longer this site sits, the more undesirable it gets.’”
This is totally OT, and I apologize for starting a thread like this, but I was so shocked this actually happened I had to say something.
I was quoted on CNBC this afternoon on the housing situation. I am just shocked that the MSM is starting to really take the flag into battle over the housing bubble. It’s impossible to watch CNBC for an hour without hearing about the MTG or housing blowup. And everything, just everything, gets related back to the housing market (kind of like we are guilty of here on the blog).
Anyway, let’s just say that the MSM is no long squelching our view of this problem. Now is the time that we have to get the message out finally someone is willing to listen.
Oh yeah, and I just got my 6 seconds of fame.
What this you say with the 6 seconds you had .
What quote of yours did they use?
6 seconds of fame.
Here is the e-mail that I sent them:
Mike F, Palm Beach, FL.
I am very concerned that the mortgage mess is going to damage the economic outlook. A housing bubble is far more damaging than a stock market bubble because of the extreme leverage used in housing purchases. I think that some areas of the country are going to slip into a serious recession; while overall we experience a moderate depression.
Thanks for the great coverage on the mortgage mess!
They cut out the last 2 sentences.
Sweet!!! I did a spot on the radio last Wednesday morning after the DJIA tanked 240 points on Tuesday. I was able to use “subprime” and “implosion” in the same sentence (not that it was hard). The interviewer liked my assesment and echoed my sentiments. I then proceeded to warn that we would see the same issues show up in Alt-A and prime paper. Can’t wait to be proven correct (again)!!!
I saw that email. got job!
Great job!!!
Nice e-mail.
Bummer they cut out the 2nd to last sentence. That is unfortunately too true. Localized depressions (Florida, Detroit)
Got popcorn?
Neil
Central California, San Diego…
I’m not sure about San Diego… as soon as prices get reasonable, the job flow will reverse there. That said, prices have to correct quite a bit and I bet every trick will be done to keep prices from declinging. Unknowningly, delaying home price deflation is the same as spuring outward job migration.
SD CA had such a large and early run up in home prices.
The Star Ledger from New Jersey. “Mark and Debbie File’s dream home is $8,000 from completion. That includes the two air conditioning units stolen last fall. And the stainless-steel refrigerator and microwave that were ripped from the walls over Labor Day weekend, perhaps, as Mark File suspects, by a contractor angry that the builder, Kara Homes, was behind on payments.”
The RE bust will be ugly for a lot of mom and pop contractors that don’t have a lot of cash cushion to ride out the downturn. They also have limited legal options once the builder files bankruptcy. Just as in the lending sector, the little guy gets hit first and the hardest.
NorCalRay-
You bring up a good point.
When the developer finances start to go bad, the sub contractor’s and material merchants get stiffed, and the mechanic lien processes start.
In the last ‘90/’91 bust there was a residential contractor up here in the Northeast who was using people’s deposit’s and take-down advances to pay current bills.
Some fronted the guy full cash to get their homes built, so the lien checking got muddy.
Then the building material suppliers, plumbers and electricians started coming to doors and saying they were owed anywhere from $60 to $150k, and for the homeowners to pay up.
The contractor placated everybody for awhile with his jovial Irish demeanor saying it was all an accounting error.
But it was a big fookin’ mess.
In the end he shot himself.
Some of his clients were left with unfinished homes that cost them thousands more to complete and others were stuck with liens up the wazoo.
And there was no estate left to sue.
Got Popcorn
Not that is a very sad story.
“‘There’s nothing left. It all disappeared in a heartbeat,’ said Bill Metalsky, a loan officer with Creative Mortgage Group Inc., of Willow Grove, which had 15 percent to 20 percent of its business in the subprime arena.”
Ben, it’s like you found this article just for me. Willow Grove is the exact town I live in! I have been curious about subprime in this area. Now I see that it is, indeed, a factor around here. (Hate to be happy about that, but you know…)
This is discouraging, though…
In the 43 municipalities of central and upper Bucks County and eastern Montgomery County, the median home price jumped to $356,500 in February - one of the highest median sales prices ever recorded in the area, according to multiple listing service numbers provided by Prudential, Fox & Roach Realtors. In comparison, the median home price last February was $282,500.
Prior to February, the highest median price recorded in the area in the past three years was $325,000, in August 2006, according to Prudential, Fox.
As has been stated on here many a times… Must dig deeper than median home price in this downward spiral…
More than likely it just means that they higher income buyers is still buying and they are getting more house this year than it would have bought them last year…
… the higher income buyers are still buying and they are getting more house this year than that same amount of money would have bought them last year …
Wish we could edit posts!
The first time I thought you’s was right.
I bet that’s true. I have a price limit I’m sticking to, but if I can get more house for the money I’ll go for it (within reason there is only so much space I’m willing to heat and clean).
I’ve been “downtown” in Montgomery County (to the county seat) and it’s like the land that time forgot. $356k? There’s nothing there!
1. Pay off your credit cards in full.
2. Put 10% of your salary in a savings account.
3. Stop trying to be Paris Hilton. Quit buying Cristal and HDTVs.
How f’ing hard is that to understand?
Obviously, it is impossible for most to understand. Americans should have these concepts pounded mercilessly into their brains before they are allowed to leave high school and enter reality.
Sound advice, I try to live by it. BUT, how could this economy based on hyper-consumption ever survive if everyone experienced this epiphany? We’re simply in too deep, the sheeple must keep shopping - or else.
That’s right, Edge, that fractional reserve banking system has to keep on churning, otherwise…kabooommm!!!
Hyperconsumption and the “spin” the US is a superpower because it has a lot of “activity” (but doesn’t produce s*** anymore… just like Spain in 1650 was on the same downhill spiral) is based on making it irrisitible to use cash as a downpayment vs. a full payment.
Why get that 11k brand new econo car when you can get a Lincorn crapinator and use the 11k as a downpayment (and that pesky little monthly payment for the lease/loan and the requirment to carry full insurance coverage at a high premium too!!!)?
Schooling is optimized to crank out consumers…
I have often wondered why? Other than Target and Wal-Mart, wouldn’t the foreign sweatshops bear the brunt of the pain if we stopped buying useless crap.
Are you trying to destroy the economy!!!! SPEND! SPEND! SPEND!
With all the equity drained out of housing the last few years
HOW?
Methinks that there are going to be some really good deals on HDTV’s later this year.
I have been blown away this past year how every time I walk into someone’s house thay seem to have a super jumbo $4000 HDTV.
1. Check
2. Check
3. Check, Check, Oops…(bought a 42″ plasma on that crazy Friday after Turkey Day…$1200 bucks, which I jusified ‘cus of 1 and 2)
Being prudent and careful with your money…priceless!
You guys are crackin’ me up. If we all stopped spendin’ and saved even 5% and used the rest to start paying off debts, bye bye economy. We’ve said it here before when 70% of the economy is consumer driven and most of that is debt collateralized, then you are already toast. This economy is done. The fat lady is singing and it is only a matter of time before the whole shebang blows up!
Yo mean bye, bye China’s economy.
MBRenter,
Why do you hate America?
Stephen Colbert is that you?
Wait, wait. I don’t understand.
If I put 15% of salary into retirement, and 10% into savings, and then borrow 30% for a mortgage that’s like, 55% of my gross. How can I afford a BMW and a cruise when Uncle Sam takes 20% of my gross and then I have stupid things like food and utilities and insurance that suck up the rest?
Dude, that’s just NO FUN! (in jest)
In Anne Arundel, where census figures indicate a net loss of 97 people
There’s a negligible increase in population over the past 5 years in the DC area. As baby boomers retire in the next 10 years - lookout!
Arlington county: 3.4% over 5 years
http://quickfacts.census.gov/qfd/states/51/51013.html
Fairfax county: 3.8%
http://quickfacts.census.gov/qfd/states/51/51059.html
http://www.larouchepub.com/eiw/public/2007/2007_10-19/2007-12/pdf/04-12_712_feat.pdf
[PDF file] Northern Virgina real estate is going to be bloodbath. Check out the stats & charts for Loudoun County. This will be ground zero in the housing bubble collapse.
looks like interesting stuff — but, Lyndon LaRouche?
table at top of page 5 — 39% of all mortgages initiated in first half of 2006 deemed “exotic” — that’s a heck of a number. (exotic deemed interest-only and option mortgages — and presumably does not take into account normal ARM loans).
That’s a hell of a number, if accurate.
I still don’t understand what’s to stop a lot of people with investments that go sour from just leaving the country. Many of the properties bought in Nova were by non-citizens. What’s to stop them from taking their cash ‘earned’ from previous years and going back home?
I’ve been looking up tons of upside-down properties in the VA suburbs of D.C. lately. I’ve noticed that those foreclosures in particular have mainly South American and Middle Eastern names. I don’t use their names on my blog, of course, as I don’t feel it would be the right thing to do. Jim Klinge points out at bubbleinfo.com that the Spanish-speaking contingent have the riskiest loans. He has mentioned thinking their agents and lenders are unscrupulous and the language barrier also part of the problem.
Whatever you might think of LaRouche - and some leeriness is understandable - he’s got some extremely bright minds working for him. They called the tech bubble long before anyone else, and so far they’ve been uncannily accurate in calling the housing bubble. The data and information speaks for itself.
agree. it’s well done stuff, no matter what the source. just feels weird agreeing with LL.
Deng Xiaoping, who brought China out of the nightmare years of Mao’s Cultural Revolution, once said: “It doesn’t matter whether a cat is black or white, as long as he catches mice.” When it comes to staying informed, I don’t let labels deter me from weighing any point of view for its merits. While I don’t agree with LaRouche’s FDR-like proposals to revive the US economy, I have to say, as an EIR subscriber for the past ten years, that he has been amazingly accurate in forecasting economic and political trends. So, to the extent that he or anyone is right, I’ll agree with them - screw political correctness.
Don’t laugh. These guys were spelling it all out in detail back in 2002, well before most of the current housing bears were bearish. For example:
http://www.larouchepub.com/other/2002/2924fannie_mae.html
Yep. Their information has been very good for a long time.
We were all getting along and having fun and then you had to go and quote LaRouche and ruin it.
Congratulations for being the wet blanket!
Ignorance is bliss, huh?
“Many real-estate insiders say days-on-the-market figures understate how long it actually takes houses to sell, because Realtors regularly pull slow-moving homes off the market and re-list them to make it appear they haven’t been for sale for too long.”
What? Someone’s FINALLY exposing this Realtor trick?
I’ve been seeing this going on in Tucson for a couple of years. Heck, it even happened with the house behind me.
Here in the east bay area of CA, I have seen listings showing days on market as 5-10 with an asking price of say $600K. Dig a little deeper and you find multiple re-lists stretching back for 6-8 months and $50-100K in price reductions. It’s a total scam and should be outlawed. Using broad brush strokes, realtors are scummy hucksters.
“realtors are scummy hucksters”
I’d say that about covers it. I would have had a problem had you simply called them hucksters.
When are these clowns going to figure out we are wise to this trick? I see these houses listed and relisted 3, 4 times, sometimes even more. These homes been for sale for a year and some have been on the market nearly 2 years. Give it up, the buyers know.
here’s a little trick they are using in 97470. This builder got a great idea to turn some apartments into condos a few years ago. Anyway, these little pieces of crap started off at 212k per unit. About 2200 sqr feet, 3bdrm 2 bth, no covered parking.
After sitting on the market for over a year (with only 3 of 15 units sold), the builder started dropping the price, first 199, then 169, and they are now down to 149k. However, and this is why Im responding. He always leaves one priced at 199k, as people tend to sift throught the MLS at certain price points. Is he thinking that some dolt is gonna pay the 199k when the others are advertised for so much less?
The answer, in short, is “maybe” … I’ve seen it with rentals here near MD … Guy owns a row of THs and rents them out … Always has a listing on the MLS (he’s a realtor apparently) even though he has no vacancies. Costs him nothing and keeps interest up.
“In Anne Arundel, where census figures indicate a net loss of 97 people, county demographer Kavi Maddula said that the county issued more than 2,300 building permits during the year, a figure that suggested to him that the population had grown.”
“‘I haven’t seen this data, but I would be surprised if those numbers were correct,’ said Maddula5. ‘If it were losing population, I don’t think we would have the kind of activity that we’ve had in residential and nonresidential construction.’”
Sir, this is what we call ’speculation’ in the real world. You see the problem, you are building houses for people that are not there and may not ever exist.
This is supply and demand. If you have (way) more housing than people, are the prices going to a) stabilize b) rise c) go down?
I could have understand at the beginning some of the rising prices, as some areas had increasing population. But rise in prices in areas that are losing population is so beyond fundamentals, people should have caught on that before. Talking about San Francisco here, for example.
How much longer are they going to roll out these brain dead pinheads.
That is exactly how you determine its a bubble long before it pops. If building permits are way out of line with population growth then its speculation pure and simple. Very easy to determine even without a census using very tricky slide rule type analysis techniques. Like say: sales tax receipts, income taxes, school enrollment, vehicle traffic.
The only thing that’s going to help Anne Arundel county is the BRAC. Supposedly a ton of jobs are coming to the Fort Meade area because of the Base closures in other states. I was lucky to get into a house in 99 in AA county and can’t believe today’s prices.
“…provided by Prudential, Fox & Roach Realtors.”
Geez, you couldn’t make these names up. Prudential (as unprudent as they get), Fox (as in, guarding the henhouse) & Roach (as in, runs for the corners when the lights are turned on).
Fox and Roach is indeed their name. They’re quite a playa where my parents live (which is about 25 miles west of Phila.).
Yes, when I was working there and dealing with a new vendor who didn’t get the name I’d say, yes, fox and roach, like the animal and the insect.
Has anyone seen that HGTV show MY HOUSE IS WORTH WHAT. What total spin by the REIC and advertisers . They really are pushing home improvement as well as bogus sales price estimates if the seller does sell .
Im getting sick of the REIC that tries to con people into thinking that investing more money in their POS is going to overcome the basic market conditions .
Your are not going to get your money back on high end improvements in a down market .The lowest price you can come up with works better in a down market where people are having problems qualifying .
It cracks me up how the so-called real estate experts on that show (usually a real estate agent ),come up with a exact money figure of what their house is worth . I guess the shows producers didn’t ask buyers what they would pay for the featured house .
As you can see , the builders offering high end up grades only worked for so long and now it isn’t working anymore to get inflated appraisal sales .
“I guess the shows producers didn’t ask buyers what they would pay for the featured house .”
LOL. No sh*t! Your house is only worth what someone is willing to pay you, you effing retards at HGTV. Yeah, the real estate “expert” who was selling cosmetics three years ago. How hard is it to pull some sales comps up on the computer and then find a reasonable starting point? Let’s pop this economic zit already.
Well, at least there have been a couple of people so far that are disappointed by the “price”. I remember a couple in their 40’s that wanted $720, and the “expert” said $699. You could just see the look of disgust on the guys’ face. Gee, 2.9% less than he was expecting, that sucks. Now, his projected “profit” is a measley $140K instead of $160K. What a jerk.
Smart move by the producers on the name of the show. Two years from now they will still be on air with the FB finding out that their $800k “dream home” of 2 years ago will only sell for $250k.
That’s because “Pay off the principal on your loan” wouldn’t be a sexy enough show.
LOL
“One was so brazen he stole the front door off a unit.”
The next great business venture — stolen house parts.
Up for grabs: stolenhouseparts.com
LOL
freehouseparts.com ?
houseofstickyfingers.com
just in case you missed it.
Mortgage-backed security ETF starts trading
Fri Mar 16, 2007 2:00pm ET
NEW YORK, March 16 (Reuters) - Trading in the first-ever exchange-traded fund based on mortgage-backed securities kicked off on Friday, at a time when concerns are growing that defaults by borrowers with sketchy credit may spread to higher-quality mortgages.
Barclays Global Investors said its iShares Lehman MBS Fixed-Rate Bond Fund began trading on the American Stock Exchange.
The underlying index measures the performance of investment grade fixed-rate mortgage-backed pass-through securities from the Government National Mortgage Association (Ginnie Mae), Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac).
maybe in the future they will have a new show… START A FARM! and they will show how cashflow is generated through growing crops. (then they could subdivide the farm into plots and build shacks for sale) lols
I was online looking at farms for sale. Many boasted short plat approval for new houses. A lot of the farmers and landowners have gotten really greedy. Sickening.
Same for multi-family properties. All owners know that multi-families have been converted to condos for huge profits the last few years, and so they are not selling them as cash flow bearing properties anymore. They’re selling them as “great for owner occupied!” or “great for condo conversion!” I say, “F-you!”
Now that condo conversions have slowed that’s changing a bit, but prices are still high…..for now.
I’ve been wanting to buy an investment property for a few years now. You cannot find anything that is cash flow positive even with 25% down. Pure speculation. I’ll pass for now. Eventually things will turn my way.
Oh! I forgot about the other tagline, “Rents under market!”
To the victor come the spoils. Either you (the owner) raise the rents and I’ll give you your price (ok, not really) or give me MY price and I’ll do the legwork.
Agreed. Still too high. Visited the Portland area and kicked around a few tires. It ain’t time yet to buy multifamily.
But I thought the way to do this was to buy a bunch of McMansions, and put the farm inside the house.
I’m waiting for “Off the Grid”.
Oh boy, it’s getting cheaper and cheaper to live in West Palm Beach. Never mind that South Florida’s beaches are running out of sand and can’t find any to replace it (more taxes to cover costs). C’mon over people, move to Florida to get broke:
Miami Herald: “A steady influx of people relocating from throughout the nation fueled Broward’s population growth for years, making it one of the country’s fastest-growing counties.
But that trend reversed itself last year, according to a census report released today. It found about 18,000 more people left Broward than moved in from other states.
The new numbers confirm what many living in South Florida already know, say demographers and economists: The spiraling cost of living is making the region a less attractive place to live.
”Housing costs are out of whack, and there isn’t an acceptable balance between cost of living and incomes here right now,” said Bill Leonard, senior planner for Broward County
To be sure, Broward and Miami-Dade County, which has been experiencing a net loss in domestic migration for decades, are still growing — albeit slowly. But increases are being driven by newborns and foreign immigrants — not newcomers from other states, according to census estimates.”
Foreign immigrants = illegal immigrants
Newborns = lack of family planning
Sorry, I wasn’t aware that Ben had posted this story in another thread.
We will soon be hearing from the open borders lobby that the only way to stop the RE crash will be to make the border wide open (come on down!)
The Daily Press article in full is positive on Real Estate if I recall correctly. The Pilot article is totally funny. From what I understand, Virginia Beach said that the metric used to judge shrinking is fouled, and a citizen pointed out that metric is what they are using to base the taxes on. LOTS of locals crying about taxes, pushing hard to get taxes lowered. The cities are spending it as fast as they get it. Breaks for developers, $75,000 paintings for the new performing arts center. My region here has 7 cities that make up “Hampton Roads.” All of them compete with each other, duplicating facilities and services. I touch 5 cities going to and from work each day on my ~35 minute commute.
Houses for sale _EVERYWHERE_ but not many locals admitting to the troubles. I have two friends that recently bought. Young and recently married. I think I talked someone into waiting during lunch though, his wife wants.
You can find my negative RE comments in every opinion box on the Pilot. Doing my part to install doubt.dll in the minds of the masses.
The other night I ran across someone named Ron Paul who is going to try to run for republican presidential candidate. I liked what I’ve seen so far (which means he probably doesn’t have a chance). Need to check him out a bit more, I was impressed.
The Daily press is generally really positive on RE, IMO. I read it when I visit my parents.
The one thing that I find completely laughable about the peninsula [Newport News / Hampton] is how much the idea of ‘urban living’ is being pushed with the construction of numerous condo units over shopping, restaurants, etc. This brilliant idea in a location where the largest private employer is a shipbuilder.
My wife and I were looking a few years ago to do new construction from one of these Mom & Pop outfits in a subdivision with 8 lots. We had an RE agent we’d been working with who was willing to meet with us and the Mom & Pop outfit. The one thing we couldn’t get across to anyone was if we were to build, we would not be the contractor, we’d be the owner, and require a surety bond and a performance bond from the Mom & Pop contractor. We we told time and again “don’t worry, there is no need for bonding” to our statements on why we wanted a bond. Needless to say, we walked away.
I got the feeling from that experience that in most cases where people deal with a builder such as this example, the owner is also the prime contractor, largely unknowingly. The Mom & Pop business hands them a contract to sign with no requirements for bonding, making it easy for the Mom & Pop (subcontractor) operation to walk and leaving the owner as the prime contractor responsible for paying the sub-subcontractors. I bet we see a bunch of this in the coming months.
BC, In my experience, it is very rare that an owner would be the prime contractor - no experience and bank’s hate to deal with contractor owners - always miss budget (time and cost). So, very rare that bonding would be required. You are not really the owner until home is complete and closing.
Mom & Pop sell you a home (nominal deposit on your part), get the construction loan in their company name, build the house, it gets C/O’d, you go to closing and buy the home. Builder signs an affidavit that all subs are paid, no mechanics liens, etc. and title company insures the deal. States do a good job of protecting innocent buyers against mechanics liens filed after they close, which happens on occasion, but rarely.
If Mom & Pop don’t perform, the most you are out is your deposit $500 to $1,000 and if you catch it quick enough, you can get that back too. You have a ton of outs in your contract, especially non-performance. If a M&P builder has been around for awhile, you can ask to talk to their bank, subs, other references, etc as part of your due diligence.
If you buy the lot first, take out the construction loan in your name and then have them build your home, you have much more risk and bonding might be a good idea. Still don’t see it much, but it could be done. If you are that worried about your builder, I would find someone else to build - there are plenty of good ones out there. Also with a M&P, you can have more input, monitor construction regularly and insure a better quality product than the big boys.
We have record foreclosures…
With 4.5% unemployment
Mortgage rates 30year fixed approaching 5.5%
Right now jobs are plentiful
Right now money is cheap
What is going to happen if the economy returns to 1977-1981 where we had 12 to 18% mortgages and close to 10% unemployment.
Oh i forgot - new economic paradigm… This time it is different…
Those who can’t learn from history are doomed to repeat it.
Uh oh, how can we keep America shopping with interest rates that high again? In that case it, 10% unemployment might be a little low, don’t you think?
Oh, and KMFDM does rule - a pleasant reminder of happier times.
RE: 1977-1981
Totally, nasty fookin’ years.
Jobs are plentiful, if you don’t mind working at Best Buy. I wonder how many guys on the “Geek Squad” have degrees in IT and CS?
“I have never seen an environment like the one we are currently in”
You ain’t seen nothing yet my friend!
“Thanks to a high inventory of homes on the market now, ‘there’s more inventory for buyers to select from,’ said Fred Morgan, immediate past-president of the Greater Augusta Association of Realtors. That’s particularly good news for buyers.”
NO! When prices drop at least 50%, then that might be good news for buyers! You loser!
Yeah, this “good for buyer’s” crap is laughable. You could argue that the buyers that bought 1 year ago were unlucky/stupid, but they were at least betting on appreciation. They had some profit motivation.
How crazy do you have to be to buy today KNOWING you are going to lose your azz in this market? It isn’t like it’s a secret now, right?
It’s far from a buyer’s market.
“‘There’s nothing left. It all disappeared in a heartbeat,’ said Bill Metalsky, a loan officer with Creative Mortgage Group Inc., of Willow Grove, which had 15 percent to 20 percent of its business in the subprime arena.”
Here in SoCal, a co-worker who does notary services for home loan doc signings on the side, approached me today and said “You were right about this housing thing. I was making $4,000 a month doing loan signings seven days a week and now it has completely dried up. And now all I see is refi’s where middle-class people are taking the last little bit of equity they have. And I mean little bits, like $5,000.”
Hey, $5k is a big bit to me. And I’m not going to refi a cent of it. So there.
One more month of fear and loathing in L.A…
I don’t understand why anybody would refinance a house, especially one nearly paid off, for money to spend on frivolous material items. Refinancing would make sense in an emergency–a medical emergency, for instance, or to get a lower fixed interest rate, but it doesn’t make sense because someone wants a fancier kitchen or a flashier car. Now these goofs, having blown all their fantasy equity, are clawing at straws.
What is it about granite countertops and stainless steel that turns people into idiots? And why would everyone want the same boring thing that everyone else has. How can it be an “upgrade,” when it’s the lowest common denominator? They put this stuff in shacks these days, along with laminate “wood” floors. And for this, people are willing to risk losing their homes, and wrecking their financial futures?
“Metalsky said he had a customer with a very low credit score, but a 20 percent down payment. It would have been easy to find a lender at the beginning of the year. ‘Now I can’t find anybody. Now I would have to have 40′ percent down, he said.”
Wow! I thought I was bearish claiming these people would have to have 35 percent down.
Let’s see… If a typical mortgage lender losses 35% of the LTV on a foreclosure and they’re requiring poor credit risks to have 40% down, that means that they are only projecting a 5% drop in home prices.
Yes, my previous prediction was 35% down for poor FICO’s, but if the mortgage companies start to predict 10%+ drops, does that mean that 50% down could be required for sub 600 FICO’s?
My… the credit tightening we warned about… is here.
Got popcorn?
Neil
ps
I would love 35% down to be required for high FICO’s. Only helps me.
Are you & the bride-to-be planning on kids? You may need that firstborn!
Last year our illustrious GMU Center for Regional Analysis predicted 20% increases for Prince William County. http://novabubblefallout.blogspot.com/2007/03/cra-gmu-moment.html
We now have 20% *decreases* all over the place.
6084 OMEGA LN
MANASSAS, VA 20112
List Price: $389,900
Prior Sale: $510,000 7/25/2005
Prior Sale: $415,750 5/11/2005
-23.5%
6836 WITTON CIR
GAINESVILLE, VA 20155
List Price: $375,000
Prior Sale: $392,041 6/09/2006 J P MORGAN CHASE BANK
Prior Sale: $466,500 4/19/2005
-19.6%
6847 MANDALAY CT
GAINESVILLE, VA 20155
List Price: $529,900
Prior Sale: $740,000 3/14/2006
Prior Sale: $679,900 12/7/2005
Prior Sale: $633,915 10/3/2005
-28.4%
15506 BANJO CT
WOODBRIDGE, VA 22193
List Price: $336,500
Prior Sale: $348,763 11/17/2006 DEUTSCHE BANK
Prior Sale: $418,000 7/11/2005
-19.5%
etc. etc. etc.
Apparently they have a Gary Watts problem with omitted negative signs…
Here is another potential source of downward pressure on the sales price: New Federal regulations that would only allow lenders to approve borrowers who can repay their loans. What a novel concept!
—————————————————————————–
Federal regulations would slash subprime lending
Thu Mar 22, 2007 3:14PM EDT
WASHINGTON, March 22 (Reuters) - New federal mortgage guidance would slash 60 percent of Countrywide Financial’s (CFC.N: Quote, Profile, Research) subprime mortgage lending business, a company executive said on Thursday.
“Sixty percent of people who do qualify for hybrid, adjustable-rate mortgages would not be able to qualify” under the new federal proposal, said Sandor Samuels, executive managing director for Countrywide.
Most subprime loans, offered to borrowers with damaged credit, have adjustable interest rates. Federal guidelines issued earlier this month ask lenders to approve only borrowers who can pay the loan after low introductory rates expire.
http://www.reuters.com/article/bankingfinancial-SP/idUSWAT00719320070322
Resets may spur subprime losses up to 8 pct-Fitch
Thu Mar 22, 2007 1:52pm ET30
By Walden Siew
NEW YORK, March 22 (Reuters) - Subprime loans originated in the last two years may experience losses of 6 percent to 8 percent this year as the debt resets at higher interest rates, Fitch Ratings said on Thursday.
California borrowers may be most exposed to so-called “2-28 mortgages,” whose fixed rate resets after two years, because the state has benefited from home price appreciation in recent years and may suffer most as prices lag, Fitch said on a conference call.
“Outright price deflation is a risk factor that will drive defaults,” said Glenn Costello, co-head of U.S. residential mortgage-backed securities at Fitch. “Our concern today is that the low home price appreciation environment is going to make it more difficult for borrowers to refinance.”
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-03-22T175239Z_01_N22340652_RTRIDST_0_SUBPRIME-CDO-FITCH.XML
Tough, tough economy when everyone must earn above average just to stay even. The Red Queen is running faster every day.
The Economist seems to think the U.S. housing market is heading underwater (at least that is what the cover on the current edition suggests…)
http://www.economist.com/printedition/
When the tide goes out (you get to find out who was swimming naked)
Mar 22nd 2007
From The Economist print edition
Rising house prices have hidden a multitude of sins
IT SHOULD have been a warning sign to Britain’s mortgage lenders, but news of the meltdown in America’s subprime market (see article) has prompted only self-congratulation. With straight faces, lenders, rating agencies and investors have counted the reasons why mortgage lending in Britain is as neat and orderly as the terraced Victorian houses it often finances.
One sign of confidence was the bond sale last week by Kensington Group, a British mortgage lender, to people with dubious credit records. While New Century, America’s second-biggest such mortgage lender, was shuttering its offices as clients defaulted on their loans, in Britain investors queued to throw cash at Kensington. Bond buyers wanted twice as much as the £800m-worth ($1.5 billion) of mortgage-backed bonds on offer and blithely accepted a lower rate of interest than they had demanded on similar bonds sold by the firm last June.
http://www.economist.com/opinion/displaystory.cfm?story_id=8892794
P.S. I predict the U.S. subprime tsunami will wash up on the shores of England before long…
Global boom. Global bust.
Global boom. Global bust.
Its unraveling fast. Mortgage MBS buyers just warned customers that in two weeks they’re tightening the purchase requirements, again. (sorry, lost the link).
Will this just keep tightening in two week incriments?
Got popcorn?
Neil
> Will this just keep tightening in two week incriments?
Yes, until it get’s back to boring old ‘traditional’ requirements. Of course arriving via the traditional overshoot.
It might be coincidence but I’ve noticed an increase in nervousness in traffic, in the huge housing bubble region where I live. I see more people driving erratically, honking horns more often, putting the breaks on aggressively, and lots and lots of accidents. I live close to a major avenue and I hear crashes every week now, day and night, which was something that I never heard before. I think that this housing bust is taking a toll on FBs and other related parasites of the housing boom. Have you guys noticed any difference where you live?
Sorry, no. Traffic where I live is better this year than last as far as manners and courtesy on the road.
Oh yeah, especially when you’re on a bike. All the same, that’s why I bike - there’s too much liability driving amongst all the HELOC’ed masses. Imagine a collision with a deseperate FB, it ain’t worth the stress.
Lottsa random shootings, daylight smash and grabs from high end retailers, and car lootings in Beantown.
Anybody makin’ the decision to abandon the ‘burbs and move to an urban centers while springin’ for a mega buck condo for the cultural and aesthetic ambience is on serious drugs.
somewhat, though I’d attribute it to the fact that people are paying more for things, and not getting any real wage increases.
the GOP funny-money days are coming to a close. that upsets folks. party over.
This is yet another factor in the bust. Even though employers are making super profits, they aren’t giving cost of living pay raises anymore.
OMG!!!!! I just said the same thing to my wife yesterday! DEFINITE change in behavior here in Council Bluffs, IA and Omaha, NE. Lots more red light running, erratic speed, drivers taunting others to get them to fight. Wacky, wacky people.
A guy drove into another car up here in Mass apparently because he was delayed in leaving a McDonalds……no actual reason was given.
Maybe you’re right…..my wife’s car just got hit the other day too.
I got STUCK on Friday (we rent) with a real estate agent behind my vehicle in the driveway here in No. VA — I needed to get out to get my kids at school. It was raining, and it started sleeting. I was getting anxious. The agent said “oh, it’s not sticking” . . . 15 minutes later, my van crashed onto its side after an uncontrollable skid. Thankfully my 2-year-old was strapped securely in his car seat.
Now *that’s* a stupid housing bubble car accident. Grrrr.
Speaking of Northern Virginia — drove through Rosslyn (in Arlington, right across from Georgetown, DC, for those of you who don’t know the area), and saw the spot where the much advertised super-luxurey Turnberry Tower was going in. It’s right there in the middle — views will certainly be less expansive than all the print ads I’ve seen, or that their website suggests.
http://www.turnberrytowerarlington.com/
I’m sure it will be a nice building, and it’s a solid location — but I don’t know if super-luxury works in DC unless you’re right on river, or in Georgetown.
Look forward to seeing how these sell.
If it hasn’t been built yet, it may never be. What educated builder isn’t looking for every possible escape outlet at this point? If they can graph a ten-year chart, then they already know about the ridiculous prices, the inventory overhang, and the population slowdown in NoVA. Carrying through with a condo project into this situation just seems ludicrous, unless there’s so much money sunk into it already that you’re toast either way. Then, what do you have to lose? But all others, they’re pulling the plug.
“Metalsky said he had a customer with a very low credit score, but a 20 percent down payment. It would have been easy to find a lender at the beginning of the year. ‘Now I can’t find anybody. Now I would have to have 40′ percent down, he said.”
The banks are so hung up on credit scores they miss the whole point. If this guy has 20% down, he is a better risk than joe 750 fico and no down. Think about it. In order to get a very low fico, you have either never gone in for credit and are probably like my folks with half a mil in cash and no credit at all. I would definitely consider them primo rate AAA credit risks despite I am certain a low fico. OR … You had good credit and now have BAD credit. You know like all the borrowers holding interest only loans in areas like San Diego, who WILL default in droves as their rates reset and in many cases double their payments along with the sub prime group.
1.
“The area’s inventory of unsold homes was also up in February, to 3,646, from 2,526 a year ago, and from 3,389 in January. At January’s sales pace, that means there’s a 10.2-month supply of homes on the market, down from 11 months in January, but up from 8.9 months a year ago.”
If 2526 homes represents 8.9 “months of inventory” then 3646 represents “12 months of inventory”, or a 33% increase in inventory over last year.
2.
“But it’s hard to ignore 26 percent increases in both prices and sales, industry insiders say.”
The selling prices of homes in Bucks are down, not up. Prices are not up 26 percent. They are down, and quite a bit. All the median price number means is that more high priced homes have been sold.
Sales are not up 26 percent.
3.
This column could cause some unsophisticated person to go out and purchase a property because they “will otherwise be priced out of the market”. We are in the midst of a substantial housing market correction and people who are now buying at inflated prices based on incorrect claims of a 26% price increase could easily lose their life’s savings. Do you really want to faciliate this by providing incorrect information as provided by real estate agents?