“An Unprecedented Level Of Inventory”: In Florida
The St Petersburg Times reports from Florida. “Subprime companies found fertile ground in the Tampa Bay area as home values soared in 2004 and much of 2005. The old rule of thumb, no mortgage within seven years of a bankruptcy, went out the window as lenders scrambled to make loans to borrowers they once would have shunned. ‘It’s risk vs. reward,’ says Richard Doyle, a Pinellas County real estate agent. Lenders ‘get higher interest in return for higher risk.’”
“Among Doyle’s clients is a resident of upscale Belleair Beach who got a $576,000 loan at 8.65 percent interest from Fremont in 2005 even though he had filed a personal bankruptcy four years earlier. He defaulted on the payments, and the house is now in foreclosure, slated for public sale in April unless a buyer can be found before then.”
“The property was originally worth the loan amount, but housing values have dropped in Pinellas ‘absolutely without question,’ Doyle says. ‘There’s an unprecedented level of inventory.’”
“In 2002, Hattie and Jerry Jones bought a house in the Port Tampa area with a Fremont mortgage at 8.9 percent. On his Social Security and her modest wages as a nurse’s aide, the Joneses can barely make the $603 monthly payments, which don’t include taxes or insurance, and keep up with their other bills.”
“Mounting debts forced the couple into bankruptcy court two years ago. They are determined to hang on to their home, even though they realize they would have been far better off renting.”
“‘I don’t want to walk away, but I sure feel like it,’ Hattie Jones says. ‘Buying a house is not really for people who don’t have money.’”
From Bloomberg. “The experience of Beth and Fabrizio Faieta, who have bought five homes in the Fort Myers-Naples area over the past few years, provides a tale of what happens when home prices sour.”
“When the Faietas arrived in the Fort Myers area from Massachusetts 2 1/2 years ago, homes were in high demand in the Sunshine State. ‘We had to put in offers the same day we saw them or they were gone,’ says Beth, who was a part-time real- estate agent in Massachusetts.”
“Although they have had no problem renting the Bonita home, with the slack market, they have had trouble selling it on their own. They recently signed on with a local real-estate agent and have reduced the asking price of almost $400,000 to $359,900.”
“‘We purchased the house with the thinking that we would like to keep it long term,’ Beth says. ‘I am not happy to sell it. I am also not happy that we are putting our other properties up for sale.’”
“Within sight of the Faietas’ property are three similar homes for sale. According to the Naples Area Board of Realtors, there are 11,000 houses on the market, an 18-month supply, and more than 2,900 homes under construction in neighboring Lee County.”
“Doug Brunner, a real-estate agent in Bonita Springs, says: ‘Two years ago, it was common to see sales contracts written at 90 percent of the original list price. Now it is common to see listings reduced by anywhere from 20 percent to 33 percent before an offer is made.’”
The Herald Tribune. “Steve Noriega and Robert Byrne had a vision for taking laid-back, beachfront properties to the next level of luxury and sophistication. They convinced more than 30 individuals and 20 banks to help them pull it off.”
“All told, Noriega and Byrne borrowed $43 million, using $26 million of it to buy two dozen properties from Anna Maria Island to northern Longboat Key. They then submitted plans to build 33 condo units and 15 homes.”
“Five years later, all they have to show for their grand vision is a partially constructed luxury home, four duplex apartments, a Chapter 11 bankruptcy filing citing $33 million in unpaid debts and a collection of angry investors.”
“‘I have never been as disappointed in a person in my life,” said Patricia Hart, a retired schoolteacher who mortgaged her house to invest more than $500,000 with Byrne. ‘He portrayed himself as a dear friend, and as far as we knew he was on the up-and-up.’”
“Paul Collins, now an agent in Sarasota, helped Byrne buy 25 units in Bradenton’s River Club condo in 2000. Collins forfeited his commission with the understanding that he would make much more when the units were resold.”
“‘I was foolish enough to think I would get paid,’ Collins said after Byrne sold the units without him. ‘In the end, I was left with the impression that he was not very trustworthy.’”
“Southwest Florida community bankers say the monumental loan problems faced by Coast Financial Holdings should not reflect poorly on community banks in general.”
“Nevertheless, Southwest Florida’s 21 community banks do have something in common with Coast: Their noncurrent loans and loan loss reserves have risen sharply over the past year.”
“Southwest Florida’s 20 community banks, not including Coast, reported a 595 percent increase in noncurrent loans, from $4.1 million December 2005 to $28.5 million in December 2006, and a 43 percent increase in money set aside to deal with future loan problems, from $29.3 million to $41.9 million.”
“‘Real estate lenders became intoxicated with the market,’ said Jody Hudgins, who heads up Florida banking operations for Pennsylvania-based FNB. ‘Now they’ve been sober six months, but problems are starting to show.’”
“Community bankers say those loan problems might worsen this year because of the continued softness in the economy.”
“What is more, profits for the 20 area community banks excluding Coast are likely to fall in 2007. ‘We are going to see continued pressure on bank earnings,’ said Community Bank of Manatee Chairman Bill Sedgeman. ‘Loan loss reserves will increase. That’s inevitable.’”
“Then there’s the problem of the inverted yield curve. ‘Banks historically make money by issuing relatively short-term CDs and lending the money out through longer term loans,’ said Steve Jonsson, CEO of Bradenton-based Flagship National Bank. ‘But we can’t do this as profitably now because short-term interest rates are higher than long-term rates.’”
“Community bankers say the reason certain banks are having loan problems and others are not has to do with who they lend to. Take Port Charlotte-based Peninsula Bank. Three of its problem loans, totaling $1.7 million, were made to James Russell Crain, who has defaulted on millions of dollars in loans over the past decade.”
“Thanks in part to Crain, Peninsula’s noncurrent loans rose 1,827 percent, from $275,000 in December 2005 to $5.3 million December 2006.”
“The Bank of Commerce’s loan problems are also largely connected to a single borrower, serial condo converter Warren Hickernell. Hickernell took out four loans from the Bank of Commerce between July 2004 and December 2005. He then used the money to convert barrier island motels and Sarasota apartment buildings into condos or condo-hotels.”
“But the market for condo conversions dried up in 2006 and all four of Hickernell’s loans are now in default. As a result, the Bank of Commerce’s noncurrent loans rose 1,896 percent in 2006.”
“Community bankers predict an increase in problem loans in the year ahead and a decline in profitability. ‘2007 will be a tough year,’ said Flagship’s Jonsson. Community Bank’s Sedgeman agreed. ‘I’m concerned for our industry.’”
“Auctions have become a more familiar phenomenon in Southwest Florida and the state as a whole with the cooling housing market. Some of the trend is an outgrowth of owners who need to move properties quickly, while another driver is banks auctioning properties after foreclosure.”
“Marsha Wolak’s first area ‘mega-auction’ is scheduled at the Sarasota Hyatt on April 15. There will be more than 30 properties up for bid, including several multimillion-dollar luxury homes. ‘We do take ordinary properties,’ Wolak said. But the business also takes ’sellers who need to sell in this difficult time, too.’”
“‘We also specialize in short sales, which is when the bank takes less than the mortgage due, to close the sale in a market like this,’ she said.”
From CNN Money. “The once red-hot Florida housing market leads the nation in delinquencies, according to RealtyTrac.”
“There were more than 19,144 properties in some stage of foreclosure in February in the Sunshine State, up 63.5 percent from January and nearly double the number a year earlier.”
The Naples News. “Tuscany Reserve is a little less exclusive. Built for affluent second home buyers, the luxury golf course community in North Naples has been repositioned to offer more homes at a lower price, reflecting a tougher market in Southwest Florida.”
“When the developer, Bonita Springs-based WCI Communities Inc., conceived the project, it expected to sell homes for $2 million to $5 million, with golf memberships in the range of $200,000.”
“In the fourth quarter, WCI reported a rare quarterly loss and $118.3 million in impairment charges. The charges included an $84.9 million write down for Tuscany Reserve, reflecting a market loss in value in the community.”
“‘The community never really gained traction,’ WCI’s CEO Jerry Starkey said.”
“‘Basically it’s a result of the market. The market was telling us that this community needed to be more reasonably priced,’ said David Fry, chief operating officer for WCI’s traditional homebuilding division.”
“The average selling price in the community was more than $2.5 million, he said. Now, it’s $1.5 million, reflecting the new housing options WCI is offering. ‘People can get into the community for less than $1 million,’ Fry said.”
“In the first seven weeks of marketing the new products, Tuscany Reserve saw 25 percent of the traffic that it had all of last year.”
‘The Rev. Victor Caviedes, parochial vicar in Fort Myers, noticed the same labor slowdown a couple of months ago. ‘This has never happened before here,’ he said. ‘Laborers gather early in the morning in certain areas to get construction work, like the corner of Ortiz and Tice Avenues. By 10 a.m. only about 5 percent of them remained there, but now I see that around 30 or 40 percent get no work.’
Its happening here also….Home Depot parking lots now full of laborer’s…One year ago if you went there after 9:00 AM they were all gone….
Also found this on marketwatch:
“”The housing number was so far off forecasts that even with the bad weather we saw, it raises a lot of red flags,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services.”
Now it’s the BAD weather? Earlier reports credited GOOD weather for an uptick in winter activity. This stuff is kooky.
I posted this to the wrong thread. Sorry.
‘Buying a house is not really for people who don’t have money.’
That pretty-much sums up the bubble.
“That pretty-much sums up the bubble.”
So you mean $500K on a home is too much to spend as a waiter?
“Buying a McMansion is not really for people who work at McDonald’s”
You pretty much have to own a McDonnalds to afford a McMansion.
You pretty much have to own a McDonnalds to afford a McMansion.
=================================
well, um ….YES…. back in the GOOD OLD DAYS of 1999!!!!!
As BanteringBear mentions below, this is a subtle but important difference. Very very few who purchased a home during the bubble own their home outright - regardless of the home price doubling in appreciation.
The public is lost on the difference of signing a contract/mortgage to purchase a home, and actually owning it when it is completely paid off (e.g. 30 years from now).
These are not one and the same.
“You pretty much have to own a McDonnalds to afford a McMansion.”
Possibly, but you only have to work at one to buy one.
Would you like to supersize that McMansion for only 99 Cents more?
Please pay @ the 1st window.
You beat me to it! What a brilliant observation of the insanely obvious…..and they actually quoted them in the article. DUH!
It’s like there’s news in someone saying fire is hot and you will burn your hand if you stick it in the flame…..
“It’s like there’s news in someone saying fire is hot and you will burn your hand if you stick it in the flame …”
Some people learn in no other way. Some people get badly burn’t and still don’t learn.
BTW, if you want people to place their hands on a wall stick a “WET PAINT” sign on it.
“Buying a house is not really for people who don’t have money.”
Sad. Until recently, you needed more money to rent (deposit, first + last month’s rent) than to buy (no money down, no closing costs, cash back at closing). How did people expect this to work out?
‘Buying a house is not really for people who don’t have money.’”
no sh!t, stupid….too bad you have to feel pain before you figured out this (what should have been obvious) truth….
Here comes the pay back time.
and pay you will
damn links
http://www.newsday.com/news/opinion/ny-opmor205137262mar20,0,2597234.story?coll=ny-viewpoints-headlines
Damn editorial. How about funding the bailout with a tax on cash downpayments by people who have saved?
Inflation has the same effect but nobody really notices it.
Here’s the line that struck me: “Before we engage in the usual finger-pointing over how we got into this mess, let’s agree on an aggressive course of action to mitigate it.”
NO - let’s FIRST figure out how exactly we got into this mess, and make our decisions as to who is responsible for cleaning it up, and how to keep such things from happening in the future.
If this were a house on fire - yes, you first put out the flames, and then you investigate the arson. In this case, we have enough time to really make a determination as to who is really to blame here, and how things should be fixed.
Of course, the mortgage finance industry would be well-served to take voluntary steps to decelerate the speed with which people are losing their houses, thus helping to preserve asset values and industry credibility.
But just throwing money at the problem is not the way to go here - whatever amount they come up with will just be a short term band-aid that will only help some borrowers and lenders.
No no no - a thousand times no!
This is the editorial staff of Newsday responding to all their Long Island friends running investment banks, hedge funds and other financial companies dependent on MBS and this seven-year massive fraud.
All are looking for one last sucker to sell this b.s. housing market to, and they see only one entity dumb enough to buy in today’s market: Uncle Sam.
Let ‘em burn, I say. I know it’s going to affect all of us, but they’ll bear worst of what is coming.
“Many families will find that they may have to consolidate their living space if they hope to hold on to at least one viable residential dwelling.”
OK
“Many families will find that they may have to consolidate their living space if they hope to hold on to at least one viable residential dwelling.”
Was the word “rent” stricken from the English language sometime recently? Do I need to buy a new dictionary? How did this happen without me getting so much as a memo about it?
“Many families will find that they may have to consolidate their living space if they hope to hold on to at least one viable residential dwelling.”
Are they kidding? Hope to hold on to at least one? Bailout people that bought multiple homes when they can’t even afford to service the debt on one?
“‘I don’t want to walk away, but I sure feel like it,’ Hattie Jones says. ‘Buying a house is not really for people who don’t have money.’”
Line of the decade, right there. What a bit of personal wisdom that should be imparted on everyone before wading into their home purchase.
Honestly, here is what they should do to stop this from ever happening again.
When you walk into a 500K home, the first thing you are asked is “do you have 50K to close with”. The next question is “do you make over 150K a year”? If the answer to either question is “No”, just walk out now.
If people would just realize there is no reason to even look at a home over 3X their income, the world would return to normalcy MUCH faster.
“If people would just realize there is no reason to even look at a home over 3X their income, the world would return to normalcy MUCH faster.”
Mike, you optimist!
And 3X income should be considered an absolute maximum, along with a 20% down payment. I would feel uncomfortable at over 2.5X my income in terms of mortgage debt personally. There is no way that folks with 5 - 10X their annual salary in terms of debt will make it. Not given salaries are not rising.
“along with a 20% down payment.”
Closing costs are a bear in Florida especially. I think 10% of purchase price to close would heal our wounds. Remember that would actually be a 6% down payment. The rest just in costs. Tack on PMI until we get to 80% LTV and life is good. That’s where I think we need to end up in all of this.
I have said it before, and I will say it again. If 20% downpayment were a requirement, CA, FL, NV, and most of the other high priced housing markets in the US would just sieze. Stop totally; no movement at all except for a slow crawl of prices downward. Homeowners would see their homes 1/2ed in value overnight in S. FL, I am 99% certain of it.
Let me tell you, now living in a McMansion neighborhood, where all my neighbors homes are 500K+, I can tell you, not ONE of the people I have met here has 100K in the bank. Not one, out of the 20+ I have met. Most are skating by on day to day, with probably under 10K in the bank, and nowhere near the 20% in liquid assets.
10% will be like a nuclear weapon going off over the bubble areas. 20%? You might as well just annex the bubble areas to Mexico and then bomb them. That’s about the effect it would have on housing values.
“10% will be like a nuclear weapon going off over the bubble areas”
So the $500K McMansions become $300K McMansions. The $250K “Starter Home” becomes the $150K “Starter Home.” and the $200K condo becomes the $125K condo.
What am I missing?
“What am I missing?”
Lower numbers.
Is that bad? It’s like a neutron bomb — equity evaporates but the buildings remain standing, with people in them. Perhaps the same people, perhaps not.
We aren’t missing anything.
The guy who bought for 500K is missing 200K.
That’s the problem, and then the ripple effects through the economy as well, but the major problem is the 200K the guy who spent (well, borrowed) 500K is out.
“The guy who bought for 500K is missing 200K.”
The guy who bought for $500K was not bright. He should have known that we weren’t running out of land any time soon.
The economy will suffer. My job more than likely won’t. The guy stuck with a $500K loan on a $300K home will leave the keys. Supply and demand will return to normal eventually. Story over.
The guy who bought for 500K is missing 200K.
Doubtful. His bank is probably missing 200K. He’s missing the tax on 200K, if he doesn’t declare bankruptcy.
It’s funny, with house prices so high, there is NO WAY I’d be willing to part with my hard-earned down payment money, and risk losing it in a downturn. People with down payments should be really scared about handing over their money unless they get a really steep discount. So if prices don’t fall, and people are required to put 20% down, you have the situation where:
1. Most people can’t afford a down payment. We were already scraping the bottom of the barrel in some areas with the no money down, no closing costs, cash back at closing crowd.
2. People that CAN afford the downpayment won’t want to risk it.
The only people left in the market will be current homeowners, either trading to each other, or extracting equity to help give their kids an astronomical down payment.
“That’s the problem, and then the ripple effects through the economy as well, but the major problem is the 200K the guy who spent (well, borrowed) 500K is out.” O.K., I agree with this, but the full story is that the 200K didn’t evaporate, the GF FB simply transferred it to the seller who is 200K richer and can spend that money. The thing is the smart folks who actually have and know the value of money probably don’t blow it all on Hummer and other toys. They actually invest it. So I guess the economy will still go downhill.
Just a minor point: it’s a matter of the size of the mortgage, not the price of the house that matters. If you’ve got $500K in cash, go ahead and buy that $500K house (if you think you can afford the taxes and upkeep, of course)
“If you’ve got $500K in cash, go ahead and buy that $500K house (…)”
Hahahahahahahahahahahahahaha!!!!!!
*breathe*
Hahahahahahahahahahahahahahahahahahahahahaha!!!!!!!!!!!
“it’s a matter of the size of the mortgage…”
So, size DOES matter!
But David liareah said if they didn’t buy, they would miss the gravy train. Remember?
Buy now or be priced out forever.
Real Estate is your best “investment”. You can always re-sell after the “appreciation” goes up 20-30% and reap a huge profit.
What’s all this talk about financial responsibility??
the people who profited the most were the people who bought the MOST they could get.
Until now. They should have SOLD sooner.
David didn’t explain the game. He said the market was going through a minor correction and we would be back to constant price increases very soon.. Are you missing the Real Estate gravy train??
“Real estate lenders became intoxicated with the market…Now they’ve been sober six months, but problems are starting to show.”
Those looking to bash the bureaucrats should know this. About a year ago the FED, OCC etc. proposed a policy to limit the share of their capital banks could lend for commercial real estate and residential construction, and force the banks to hold greater reserves.
The banks screamed, because construction lending has been highly profitable, and went running to Congress. Last I heard the regulators were blasted and were negotiating back the restrictions.
Of course this was before sub-prime blew up, but I’m not even sure that would have made a difference.
And, BTW the WSJ has an article today on residential construction lending being the next potential financial lossmaker, following subprime.
residential construction lending being the next potential financial lossmaker….
I would not be surprised given all the “Wannabee” developers that have entered the market over the last 3 years….In the central valley of California, most of these types are going to get their A$$ handed to them in the next 6 months….
Just a bit of research shows something interesting in this regard on one of my favorite Hovnanian developments where a friend bought and prices are plummeting. Prices were in low $300’s in 2005, now most of these are going for $235-240k. But there are “outlying” prices lately. Investigation reveals:
Those who borrow only 80 or 90% to buy these units and finance through Hovnanian are paying a lot less than those who borrow 100%. Case in point:
All sold by Hovnanian, 2006, financed via K Hovnanian Am. Mort:
Unit 200, financed 90% sales price $234,900.
Unit 162, financed 80% sales price $234,990.
Unit 166, financed 80% sales price $240,000.
Unit 185, financed 100% sales price $262,000!
I find it interesting that people who had 0 down payment paid more for a unit . I think a investigation is needed on the sub-prime lenders and the builders .This is a major red flag as to the fraud that was going on . In other words ,how did the sub-prime lender come up with the higher appraisals when they had comps alot lower ?
People with Zero down DO PAY MORE FOR THE HOUSE/CONDO. In order for the programs to work in a hot market, the sellers will increase the sales price to offset buyers closing costs paid by the seller.
If buyers qualify for a 100% deal, they should ask the seller for closing costs to be paid and not increase the price. Guess how well that will go over in a flat or declining market.
The subprime lender is, in this case, more or less the seller; I would guess both are under the legal/finaincial umbreall of KHOV. So they can take an appraisal, or they can decide none needed, depending on whether they want to repackage that mortgage for later sale.
If the mortgages are destined for repacking into a MBS, I would hope they have a proper appraisal, but if Hovnanian American Mortgage plans on holding that peper themselves (till foreclosure!) then it’s their problem/profit/loss/whatever.
Now as for closing costs, I’ve seen such things happen, but this example is a bit much for closing costs alone! $25k is pretty unreasonable for closing on places like that one.
How much of the mortgage market is construction lending? I have know people whom have tried to get these loans - until recently it has been very difficult.
In times past, you have to own the land outright and have some cash on top of that.
How much of the mortgage market is construction lending?
Likely a small part in that most of the mortgage’s are resale…I think the point is that any “New” construction including land development is Very vulnerable in this environment because the loans were likely based on appraisals that were made a year or two ago…Residential lending is a high risk, high reward business for lenders and even though they do require substantial equity investment by the builder/developer that equity can evaporate quite quickly….
New home sales at 7 year low. Look out kids if the stock market just put in a failing rally.
“All 12 months of the year.”
7 year low?? Well, let’s just get the “bottom must be in” stories over with. How many “experts” will say that today on CNBC?
“‘I have never been as disappointed in a person in my life,” said Patricia Hart, a retired schoolteacher who mortgaged her house to invest more than $500,000 with Byrne. ‘He portrayed himself as a dear friend, and as far as we knew he was on the up-and-up.’”
Not, $5,000, not $50,000, but $500,000 in home equity, from a lowly schoolteacher. and these people are teaching the next generation.
There is a very big lesson to be learned by Patricia - never wager what you do not want to loose. There are TONS of people whom have taken out home equity loans to become a new class of real estate “investors.” These people have no experience in property management, home repair, or long term real estate investing (based on cash flow NOT appreciation). Not only are these people going to loose their “investments” but maybe even their homes.
It’s just like the late 90’s when everyone was doing margin calls on the NASDAQ. Not only did they loose their short term investment (Pets.com stock) - they also lost a sizable portion of their long term investments (the Exxon stock that was inherited).
Roger, I would be willing to bet anything that over the past several years at Patricia’s school all the talk in the teachers lounge has been about real estate. All Patricia’s fellow teachers have been talking about how prices will keep going up, and they have all been talking about how much money they have made. Maybe some of the teachers are driving expensive cars and are taking big fancy vacations too. Bottom line is all the teachers were feeling wealthy and comfortable.
After years of listening to the other teachers, Patricia probably became convinced that prices would never fall and she was going to make a lot of money too. Then Patricia took out her equity and now it’s gone. She can’t fathom what happened to her due to so many years of teacher talk about making so much money. Bottom line is Patricia got greedy and then got burned.
“A RETIRED schoolteacher” (and not “lowly,” btw)
Not content with her bubble gains, and instead of taking advantage by cashing out, she decided to borrow against her home and roll the dice. This is how busts happen, IMO.
School teachers are part of the working (lower) class.
So yes, lowly is fitting.
I
the best teacher is experience.
sounds like she is loaded. there is more to this story than her being a lowly teacher. think about it, $500,000 in EQUITY, for a teacher?
We had that discussion today..how much would you need to retire with a reasonable income? Seems she will be back at Micky-D’s serving fries now, or the luch lady at the school. Too sad but all too pridictable….
$500,000 in EQUITY, for a teacher?
What’s the mystery? Many retired people are (or were) in the same position. Obviously she had bought the house for $50K or so decades ago and had probably paid it off. She was all set up for a comfy retirement - but no, she had to roll the dice in the hope of joining the rich and famous. She lost.
“‘Real estate lenders became intoxicated with the market,’ said Jody Hudgins, who heads up Florida banking operations for Pennsylvania-based FNB. ‘Now they’ve been sober six months, but problems are starting to show.’”
Unfortunately when an alcoholic sobers up, often they find that their liver looks like hamburger…The same with these banks….The bad loans are their liver and not a pretty site.
Holy crap.
The new numbers came out for new home sales. They were described on CNBC as “awful” and the Dow is in a sharp drop on these numbers.
The quick and dirty; sales down, foreclosures up, prices up.
I don’t think I have ever heard them say “awful” about the home market before. Another turning point?
“Mounting debts forced the couple into bankruptcy court two years ago. They are determined to hang on to their home, even though they realize they would have been far better off renting.”
Those of us that are sitting out the bubble realize this every day, and without the trip to Bankruptcy court.
prices up.
That has me scratching my head. More bottom line destroying incentives thrown in, I guess.
They actually metioned that this is probably the result of the incentives thrown in with the price of the home.
It does boggle the mind, but give it time; again, we are in the early innings, the prices will drop, it just takes time to reflect it in the data.
Western sales were up while other regions were down. As a result, the higher priced region was more weighted in the median price.
Western sales were up
Including California? Impossible.
Yes, including California:
Across the regions, the West saw the only increase in new-home sales with a 24.6% gain. In the Northeast, new-home sales fell 26.8% while they fell 20% in the Midwest and 7% in the South.
http://www.usatoday.com/money/economy/2007-03-26-new-home-sales_N.htm
That has me scratching down to the cerebral cortex.
From Bloomberg, YOY prices down 0.03 pct.
I mentioned in another post (sorry to repeat) that I think the wealthier areas are going to zig-zag downward in price as people with $ jump back in at the various perceived bottoms of the market. Gonna be lots of bottoms, I’d bet. In poorer areas, the drops will be more precipitous.
WEST ? ” got to be BS
By region of the country, sales were up 24.6 percent in the West, a rebound after a 25.8 percent plunge in January.
Sounds like several knife catchers got in under the wire before subprime stopped funding on 2/28. Cancellations are not figured in yet either.
On CNBC realty check : said ‘Didn’t include 40% cancellation rate”
Yep, that’s what I heard…
‘It’s risk vs. reward,’ says Richard Doyle, a Pinellas County real estate agent. Lenders ‘get higher interest in return for higher risk.’”
To bad they screwed up the risk/reward calculation by a factor of 5
The problem was never actually the selling of subprime mortgages or no-doc loans. The problem always was that nobody priced them right. And this failure went all the way up the food chain, right up to the derivatives market. Adding an extra 4% interest for 100% financing and a Fico of 500. I don’t think so, add another 10-20% to that number.
“But then they wouldn’t be able to afford a home at that rate!?”
Well guess what, that’s how it suppose to work
How do you adequately price interest (return on capital) when the real risk is RETURN OF CAPITAL ??
That seems to be the big issue with most of the problem loans. Probably their assumptions allowed them to price in a certain number of defaults per every 100 loans they made - obviously, they are seeing way more defaults than the pricing model assumed. The rate adjustment issue for all these subprime borrowers is turning out to be a much bigger risk than anyone assumed, as well.
M78
All of this is very scary.
Reason being is the logic. Via easy money, we have created a debtor society that became dependant on home appreciation to fund people’s lifestyles. Now that the party is over, you are going to see a massive correction. I mean massive.
This is like running a business, you can either run at a profit or run at a loss. Housing is running at a loss and so is the average American. The FED says inflation is tame, but what did I pay for a gallon of gas before the Iraq war? My house has tripled in value. The cost of a good pair of sneakers is 120.00. But yet my salary is relatively the same.
I do not blame the lenders. I blame the FED. What has been going on is very simple to average person with half a brain. The FED blew it again and now they are going to over-react with tougher lending standards which will only contribute to the homes on the market, foreclosures and bankruptcies.
This is going to be a huge mess. The only thing that will save us, penalizing Americans again, is a brutal recession and a lower interest rate environment. It’s coming. A bad recession is definately coming.
why do they always blame hedge funds? they do not package loans and do not cheat over and over and over again to get a point or two here and there from a borrower or a lending institution.
(from the newsday link above)
“‘I don’t want to walk away, but I sure feel like it,’ Hattie Jones says. ‘Buying a house is not really for people who don’t have money.’”
Bingo! the quote of the decade!
Completely off topic here but I just have to say this to someone: Granite countertops do not add that much real value to a house - go out and replace your countertops with granite if it means that much to you. I’m sooo tired of people upping their house prices $25K because they replaced their Formica with granite and replaced their old Sears appliances with new stainless Sears appliances (which ain’t that much more expensive than white these days). Ok, ‘nuf venting….carry on.
I hate stainless steel appliances. They look good for five minutes tops after you clean them.
Isn’t granite vulnerable to damage by things like lemon juice? Which means that Slim will have to ditch that fresh-squeezed lemonade habit in a granite countertopped kitchen.
Agreed, I don’t like stainless appliances - the kids need to be able to touch things, textured white is great for us.
Granite is a big minus for me. I’m clumsy and I don’t want everything that touches my counters to shatter. Granite also will chip if you drop a cast iron pot on it - then what? Formica is great stuff, hard to scratch you can cut on it, it’s fairly forgiving with glass and pyrex, and if you really mess it up it’s relatively cheap to replace.
I looked at some granite slabs yesterday. (The place was next door to a greenhouse I visited). Some of the material is drop-dead gorgeous, with iridescent accents that look otherworldly. It was almost difficult to accept that these beautiful specimens were mined from Mother Earth.
My point: No way could I see myself cracking eggs on a countertop so beautiful. Certainly the material could be used as an accent piece somewhere in the home, but from a functional standpoint, I can’t see it being useful in a kitchen such as mine, where actual cooking and food prep would be done.
When I was finishing my first house (my wife, and engineer, built most of it- and when I say built I don’t mean contracted out- we put in everything but the plumbing ourself) we went to get formica countertops. Our method of choosing the right patter? We got a big pile of pattern samples, tried to scratch the hell out of them, and then picked the one that didn’t show the scratches. Turned out to be nice looking anyway. We had zero interest in granite…
I’m a big fan of Silestone myself - nothing penetrates it, looks beautiful, and costs about the same as granite. Comes with a 10 year warranty. I’ve never had a problem with it and it looks beautiful.
I’ve used it in 3 renovations in the past 4 years, including our current
place and I love it. Only problem is that the ordering/installation process takes several weeks.
FWIW
M78
OK, I’ll say it…I used to LOVE stainless steel, before it became the “in” and “upscale” thing. The reason…I came from a food service background (yes, including “do you want fries with that?”), and I liked the professional look and feel of the Vikings and Wolfes (I *love* big ol’ gas burners). However, now everything is stainless, without the ‘food service’ feel. *Sigh*.
Maybe I’ll get a model with a wood paneling or nalgahide face when I eventually do buy back in…
My fave Florida bubble phenomenon is the trend of people trying to rent rooms in their homes. Ah, a return to the good old days of American boardinghouses!
Problem is, they don’t serve meals and the rents they are asking are almost as much as renting a one bedroom apartment.
Palmetto, I have noticed that too! High rents for rooms in Florida - I would never pay that much for a room. Just rent a small apartment and have your own place. These people are desperate for money.
This may be off-topice, but …
Today is my blog’s two year anniversary and Ben Jones left a comment on my very first post:
Two Years!
Hey Ben!
t’s weird to think about that time when it would be 0 comments, 0 comments, 0 comments at The Housing Bubble for post after post, day after day.
does anyone think that 80% of speculators or flippers actually had a job as a lender, real estate agent, appraisor or other job directly involved with the industry???? Just a feeling I get…..
The percentage is probably different but there is no question, those in the industry are some of the largest cool aid drinkers. The culture in real estate has immense peer pressure. Immense.
not all of us…
The Dow is taking a 100 point beating due to home sales numbers….man, they’re messing with my dead-cat bounce!!
Don’t worry — the PPT came in at 100pts down. They won’t let the controlled burn turn into a firestorm again this time.
“They won’t let the controlled burn turn into a firestorm again this time.”
Living in Florida, I’m very familiar with controlled burns. One major fire was set off in Sarasota County by a “controlled burn” that got out of control. Lotsa scorched earth. Controlled burns don’t always do the trick and sometimes they end up causing the exact problem they are supposed to solve.
My major question: Does anyone know what phenomena could render the PPT’s efforts futile?
Hyperinflation would do the trick.
This is off topic, but I went to the Florida Sportsman’s boat show in Jacksonville yesterday. Very light crowd. The seating for the fishing pro’s programs were at best half full. Two things stand out. First, the pricing on the boats was way high. People were shaking their heads and laughing. Second, the sales people were extremely aggressive, people had to actually walk away from the boats. When I mentioned how high the prices were, the response was always that they could provide financing with low monthly payments. They’re talking a ten year loan on a boat? I think that the housing bubble has now caused a “toy” bubble. I need to start watching the stocks of the boat manufacturers, motorcycles, etc.
Same thing here…We are in the market for a upgrade on a bass boat…Of course, the one that best suits us is close to 50K….I think I will take the polish out and shine my tracker up…It fishes just fine….
lots of people have 30 year loans on boats and cars now
I’m pretty sure 10 year loans on boats have been around for a very long time.
you can get a 20 year loan on a new boat and RV . . . perfect for the howmuchamonth crowd.
You always get the maximum amount of time for a boat or RV loan, you never know when times might get rough. You should double or triple payments though to pay it off in 5-6 years.
The stock market “should” go down another 300 pts today in my opinion. Banks are always last to the party and it is a tell tale sign. Citibank is possibly going to layoff 15,000 people?!? WOW. Over 11,000 jobs were lost in the mortgage industry this week alone.
Also, I am curious, how do they calculate all the people who took out HELOC’s to continue paying their mortgage, and support their lifestyles, over the past 5 years??
On Yahoo,! their “experts” are calling the drop in new house sales in Feb. a “surprise.” Where have these people been for the last three or four years? They need to go into a Lowe’s or a Home Depot themselves, instead of sending their illegal Hispanic help to do their shopping for them, then maybe they wouldn’t be so surprised at the lack of customers.
First domino: subprime. After this, Alt-A and liar’s loans, HELOCS, then prime borrowers will all share in a NASTY downturn.
This onion’s getting stinky in the middle.
MORGAN’S ROTTEN NEW CENTURY FIRE SALE
Morgan Stanley is in the process of holding an auction for $2.48 billion in rotten mortgages from subprime lender New Century.
The loans represent the collateral given to Morgan for a $2.5 billion credit line the firm extended to New Century. As the Irvine, Calif. -based company sank deeper into dire straits earlier this month, Morgan assured the market that the loans and repurchase agreements it had made to the company were in order.
It appears that Morgan has less confidence in the health of this rotten collateral now that it had two weeks ago.
Now, Morgan does not want to draw attention to the sale: It announced the sale of the 13,200 loans in a small public auction notice in a print ad Friday.
man, next thing you know blackstone will go public.
This is tongue in cheek, right ?? You know they’re doing exactly that, it was announced last week. (An advance “sorry” if I’m reading you too literally).
M78
“Among Doyle’s clients is a resident of upscale Belleair Beach who got a $576,000 loan at 8.65 percent interest from Fremont in 2005 even though he had filed a personal bankruptcy four years earlier. He defaulted on the payments, and the house is now in foreclosure, slated for public sale in April unless a buyer can be found before then.”
Will this guy be one of the beneficiaries of Senator Dodd’s proposed subprime bailout?
Will this guy be one of the beneficiaries of Senator Dodd’s proposed subprime bailout?
Yes, I hope so. You see, I have pretty much completed my plan for profiting from such stupidity. A large component of this plan is foreign currency.
The problem isn’t the sub-prime loans or the option ARM’s. The problem was that housing costs went crazy high when interest rates went crazy low. If these people had bought their houses at 2001 prices then there wouldn’t be an issue, they could afford their mortgages, or sell their homes.
I work at a title insurance company in Texas and we are having a wild and crazy month. We’re getting daily emails from underwriting - we even got an email from underwriting with a link to the ML-Implode blog saying to keep an eye out for any of our current lenders! Today we got an email telling us to keep an eye out for Indymac and Hibernia.
We have an escrow unit that handles Fannie Mae foreclosures, and their business is through the roof. The marketing guy who handles lenders has been pulled off the lender beat and told to start hunting the loan servicers who are going to need title work on foreclosures.
On top of all that, of the four contracts I received today, 2 are short sales.
Everyone in my office who has a mortgage refinanced in 2004 to a nice low 30 year fixed. We can all just sit back and watch the carnage and hope that not too much splatters us.
You are right on the front lines. Keep your head down and keep an eye out for friendly fire! Thanks for the report.
thanks.
great info
Corrected:
“‘I have never been as disappointed in a person in my life,” said Patricia Hart, a retired schoolteacher who mortgaged her house to invest more than $500,000 with Byrne. ‘He portrayed himself as someone who was going to make me rich, Rich, RICH, and as far as we knew he was on the up-and-up.’”
$500,000K ‘investment’, from a retired schoolteacher? In a speculative venture? Some people are sure acting ‘rich’.
OK. There is no mention here of a spouse. She’s probably retired, or even widowed. Whatever the case, she has $500,000 to invest. If she is a retired public school teacher, she probably has a nice pension until she dies. She is not greedy, she’s stupid. Invest the half-million in a conservative CD type 5% interest thing at the bank… I dunno what to say, really. I am always at a loss for words on this board. The desire to be “super rich” instead of being happy with ” a nice roof over my head, decent car, a nice vacation every year or two”…
“She is not greedy, she’s stupid. Invest the half-million in a conservative CD type 5% interest thing at the bank… The desire to be “super rich” instead of being happy with ” a nice roof over my head, decent car, a nice vacation every year or two”
Ummm - that’s the definition of greedy stupidity. This retired government employee who made her living brainwashing/intellectually stunting public schoolchildren didn’t ‘have’ $500K - she withdrew it from house equity (borrowed it) because she wanted to get rich quick.
I
Um, I’ll bet the 500k was money borrowed on her paid-off home. Invest it in a CD? More like she should have not taken out another mortgage.
Oops. Crisrose said it already. I’m a bit slow today. Need. More. Coffee.
Didn’t she bother to have the whole thing vetted by a lawyer ?? Guess not…. I’ve learned that you need the legal help going into the deal - when you wait until after it blows up, it’s often too late, either the security is disapated or the contract you signed is inadequate to protect you.
M78
“Three of its problem loans, totaling $1.7 million, were made to James Russell Crain, who has defaulted on millions of dollars in loans over the past decade.”
It’s almost as if, at some point in time, banks were loaning at gunpoint, telling people “take this loan or we’ll blow your head off!”. So many institutions trying to be the most efficient at giving money away, hoping to make it up in volume…
“The average selling price in the community was more than $2.5 million, he said. Now, it’s $1.5 million, reflecting the new housing options WCI is offering”
I can’t believe that a house in such an obviously upscale community can’t fetch $2,500,000. Look at the name: Tuscany Reserve. It has the word TUSCANY for G*d’s sake! That alone should be worth $1M per house. Maybe they should have called the development “Tuscany ESTATES”. Then they would have been able to keep selling ESTATES at the $2.5M price. They wouldn’t have had to increase the size of the lots…today, “Estate” means “costs a lot”.
WCI sucks. I bought a condo from them in Burnt Store Marina in the late 90’s, and I felt the company treated me very poorly. It was the first time I saw a developer cut prices to move unsold inventory. I mean, OK, if you have to, you have to, but I got the feeling that they just wanted to move on. In our case we had purchased pretty early, and they had increased prices after we were locked in - but at the end, when they still had several condos left to sell, they basically dropped the prices back to the level we had bought in at.
WCI basically used Burnt Store Marina like a pimp uses a whore. WCI has been out of Burnt Store for about 4 years, but the effects of their ownership continue to linger on. Here’s another instructive little tale that talks about the sale of the golf course - one of the central ammenities in the community - which WCI sold to a local Cape Coral developer after they had finished completely selling their inventory. Now guess what - after running the course for a year, the developer (Will Stout/Realmark) says it’s not profitable and he wants to use the land for construction of condos and houses. What a disaster - I’m glad I’m out of that place (sold in 2004, a few months before Hurricane Charley rolled through the place).
Here’s a more complete outline of the situation there, in case anyone’s interested. For me, I loved the golf course - you were usually out alone, I always went in the afternoon and walked, felt very peaceful and isolated. The HOA had a chance to buy the golf course in 2005 (I think), but they didn’t do it (too many residents objected - “I don’t play golf, why the hell should I pay for a golf course” - because having it enhances your property value, dingus) and instead it went to Realmark. More “pave paradise, put up a parking lot” now……sigh….
M78
http://www.sun-herald.com/CHNewsstory.cfm?pubdate=031607&story=ch2.htm&folder=NewsArchive2
There was a similar article in the Herald Tribune, but this has a few more details. Anyway, to set the table,
WCI purchases various tracts of land in Burnt Store Marina (BSM or Section 22) back in the early 90s. Theyhad so much it took them almost 15 years to develop and sell out all of it, but they finally sold out of all oftheir developable holdings in 2004. They then had various assets remaining, some administrative buildings,
a few odd parcels, and the crown jewels - the marina itself, and the golf course. Mind you, WCI ALWAYS
marketed the development as “Burnt Store Marina GOLF AND COUNTRY CLUB” and prominently featured the golf course in it’s marketing material. There was NEVER any indication of the fact that the golf course (or the marina) was owned independent of the rest of the development. Well, guess what….after WCI finished selling out, they advised that the golf course was running at a loss and they decided to sell it. They first offered it to the Section 22 HOA, but for the HOA to buy and run it would probably have required an assessment of all homeowners of about $3000 to buy it and probably about $500 per year to subsidize the operating loss of the GC. So WCI instead sold it to an outfit named Realmark (read: Mr. Will Stout, who is a big developer in Cape Coral). That happened about a year or so back. Now Mr. Stout declares that the place is a loser, he wanted to develop at least part of it for condos anyway, and now he’s just going to stop operating it altogether,which means it’s probably going to go straight to hell in about 3 weeks. I don’t really blame Will Stout (although it was a completely opportunistic grab of the land). This really goes back to the way WCI (and actually, General Development before them) structured the ownership. Also the HOA for not buying it when they had the chance two years ago. But there they are. WCI sold the property to a rapacious developer who now is going to try to maximize his return and basically ruin the place. There are a lot of homes with nice fairway views, but that all is about to go away I think. It’s too bad, because it was always very pretty there. I played the course often,always walked it, and it was always very enjoyable. It’s a real sin that it’s probably going to go away. Also,this turn of events can do nothing but hurt the property values - especially for “golf course view” property. Every day I thank God that we sold our place….
That’s funny, WCI did the same thing here in Bal Harbor (Miami Beach). Built a condo on the ocean inlet, told everyone they had that wide open view on the north-east corner. Once completed and sold out, they are now building a larger tower next to it on the inlet. I’m sure the folks who bought on the north side of the first tower are furious, their view is even worse than the south side now. They really had to squeeze that last tower in and it’s really close. I doubt those in the middle units see the sun at all during the day.
I thought that WCI basically just screwed over BSM buyers to more or less subsidize the rest of their operations. WCI bought out the BSM property from the RTC for about 8 million dollars in the early 90s - that was for the golf course, the 450 slip marina AND a whole bunch of land. We bought a condo on the inland side of the marina basin - in the middle of the marina was a manmade island that they were building on. So whatever was built there, if it was high enough, would potentially block a direct view to the ocean. We asked the salesperson what was going to be put in on the island and would it block the view of the condos they were selling - she answered “There’s been no decision yet”. Of course, 4 years later, they announced the final phase of the development, a 4 tower complex called “Grande Isle”, which completely blocked the view from our condo. The only positive thing was they were priced so much higher than what we purchased that it dragged the whole market up when they were finally announced - and, I guess so many people bought them as specs that now there’s about 70 (out of 240) on the market for sale. The condo fees are up around $800/month per unit and property taxes are minimum $6K/year. Throw in utilities, insurance and maintenance and you’re probably looking at a $1500/month nut BEFORE you pay mortgage. If you buy them as an investment, you could count on maybe 3 months a year in season, maybe $9000 gross per year. It’s a gigantic loser - the numbers are so bad that even if you got the unit for free, it would be too much. The only possible reason to buy would be for your own use OR for massive capital appreciation. And if you wanted it just for use, you’d still be better off renting - you wouldn’t have to worry about disposing of it when you got bored with the place (which you would - Burnt Store is in the middle of nowhere down there). But I digress…..
Like I said, I’m kind of surprised to hear that WCI continued to treat their first-in buyers in other places like shyte, but then again, it fits. It’s like dating someone you know is an alcoholic - why would you think they’d stop drinking just because they’re now with you ??
The BSM condo was our first investment in Florida. It was quite a learning experience. We made a lot of mistakes, but basically it worked out OK and it exposed us to some other opportunities in Florida which worked out very well. Plus, it helped me build a “portfolio” of moderately interesting stories that I can share on places like this.
Anyway, tks your comments re WCI - man, they really are unbelievable. I hope Carl Ichan shreds them to bits - they won’t be missed.
M78
Thanks for passing your experience on to the blog. I will make sure I pay attention to the ownership status of any major attractions present in the area of any future purchases.
“…but for the HOA to buy and run it would probably have required an assessment of all homeowners of about $3000 to buy it and probably about $500 per year to subsidize the operating loss of the GC. So WCI instead sold it to an outfit named Realmark (read: Mr. Will Stout, who is a big developer in Cape Coral).”
Maybe this is a blessing in disguise. When Realmark goes BK, they might be able to pay less for the golf course.
I had the same thought. Realmark is (as far as I know) completely private. I think that they’ve been pretty successful and they’ve moved most of their product in the past, no huge inventory, etc. So I think a cheap pick-up from an eventual possible BK liquidation is a long shot. The golf course is too important to the community to risk waiting, so they have to deal with the 800 lb gorilla. The only saving grace is that the gorilla is stuck with them too - the golf course is zoned agricultural with an exemption for a golf course and I think it might be difficult to get the zoning changed - and now, you can be damned sure that if he tries, there will be many residents showing up at the hearing to express their opposition.
M78
Hi All - Funny to read the article from the Herald Trib regarding auctions. I had previously posted about an auction of a 4,000 sf house
going on the block in the Founder’s Club in Sarasota (yes, it’s as stuffy, pretentious and upscale as it sounds - the HOA’s motto is “release the hounds”) - that home was auctioned this weekend. I did not get the final results (I wasn’t there and they didn’t want to disclose until the sale closed), but it went for over a million. My max bid was going to be $500,000, but the opening bid was well above that (they said it was around $900K). They had 11 qualified bidders, which for a house of that cost was (I think) pretty good turnout.
The Marsha Wolack auction, which will take place on April 15th, includes a condo in a golf course community (Heritage Oaks), which I know quite well (we have a villa there). Since this info is on this blog, and it’s all public info, I can report what I’ve learned about this sale -
I checked the public records to see what the present owners paid and what their mortgage was. Looks like they paid $314K for the place in’05 and took out a $248K first mortgage. The mortgage terms are horrific - it was a 1.375% intro rate for the first year of a 30 year mortgage, on the first anniversary it readjusted to 1 year treasuries plus 3.050%. So the mortgage went from 1.375 to about 9% !!!! I didn’t think that ARMS came without some maximum annual cap - i.e., the rate couldn’t adjust more than 2% year to year !!! This was shocking. Then, as I looked through the public records, I noticed that these sellers had several properties and the addresses looked familiar. Guess what - that’s right campers, I was able to match three more of their properties with three properties which will be sold at the April 15th auction !! And they have loans with the same bank on all of them, probably the same horrific terms. The total price they paid for their inventory is about 2.2 million dollars, if it’s all structured the same way (I didn’t look at all of it), they may have faced readjustments of about $10,000/month in loan payments on their entire portfolio. Also, I didn’t check if they had second mortgages or HELOCs or anything else.
Man, I never realized just how awful some of these readjustment terms could be - there must be a lot like this out there - it’s like living in a landscape of radioactive waste. I knew there could be some problems with ARM readjustment, but like this ???!!! Hokey Smokes Bullwinkle !!!
Oh, also, found the following, which thought y’all would like:
http://money.cnn.com/2007/03/23/real_estate/february_foreclosure_fall/index.htm?cnn=yes
Which bank holds the loans?
“Sunbelt Lending Services Inc.” That’s the major lender.
There’s a lot there,though. Very messy situation. They’re probably
looking at a short sale for these properties. I guess the bank forced this, and they will take what they can get at auction. There’s no sales to speak of these days in Heritage Oaks, there’s like 45 condos on the market (plus 25 homes, club homes and villas), about 10% of the total inventory, and there’s been maybe 4-5 sales since the beginning of the year, and actually, nothing sold for months since last summer.
So the seller and the lender are both gonna lose some equity, but I guess the bank just wants it off their books anyway.
M78
They are a subsidiary of PHH Corp. PHH failed to file their financials, they need to restate earnings for the past few years, while Sunbelt is busy lending $2M+ each to a bunch of FBs.
So PHH must be tanking, right? Nope, Blackstone and GE came along and bought them out at their all-time high.
There is way, way to much liquidity out there. And Helicopter has the hose out.
Diversify, people. Foreign holdings, FXY, FXE, precious metals, etc. Whatever you do, do not hold U.S. dollars.
The infatuation Florida builders and developers have with Italian names is a pet peeve of mine. I doubt more than a handful of buyers have been to Tuscany or have any idea what it looks like.
I haven’t been, but I’d be willing to bet that the area around Florence looks nothing like Naples, Florida.
I like Via FBer. Lake ToscaNO. Villa da Subprimo. Bellagita. Lago del BadaBING.
Oh, come on. There are a lot of leaning buildings in Naples, FL, just like in Pisa…
“Then there’s the problem of the inverted yield curve. ‘Banks historically make money by issuing relatively short-term CDs and lending the money out through longer term loans,’ said Steve Jonsson, CEO of Bradenton-based Flagship National Bank. ‘But we can’t do this as profitably now because short-term interest rates are higher than long-term rates.’”
How long has this dude been in banking? Ever hear of the S&L crisis? Fixed rate, long-term loans on the books and short-term rates go up = Negative net interest margin.
Match fund you idiot and you don’t have a problem. Or don’t portfolio long-term loans, remain asset sensitive . . . it’s really not rocket surgery.
Back to RE, anyone else see or hear the 50-year loan commercials. They tout its better than an I/O because you are paying principal and better than 30 year because more affordable.
$200,000 loan at 6%:
Monthly P&I for 30 yrs is $1,199.10
Total payments for life of loan $431,676
Monthly P&I for 50 yrs is $1,052.81
Total payments for life of loan $631,686
Yeah, that’s a great deal when compared side by side. NOT
“serial condo converter Warren Hickernell”
“SERIAL CONDO CONVERTER . . .”
Now they’re officially being categorized as criminals.
I was out & about today and thought I would just stop in to one of the new home communities in Tampa (Seffner), The Hammocks. I walked into the model for Inland homes and the sales woman said “You really should jump on a home now. The prices will be going up this summer!!” I looked at her and said “Um, have you LOOKED at the market lately? I think we’ll be JUST FINE” She just kind of stared at me blankly. I guess they think that buyers don’t do their homework.