So Many Choices, “Buyers Enjoy Some Advantage”
The News Tribune reports from Washington. “Downtown Tacoma’s condominiums have helped to transform a once-troubled downtown where few previously wanted to live. Today, a patchwork of exposed steel, scaffolding and cranes showcases a decade of marketing, recruiting developers and trying to convince buyers of the area’s merits.”
“Dozens of condo buildings have gone up or been renovated in the city’s downtown core. As of December, all six neighborhoods surveyed averaged 14 months of condominium inventory, which measures how long it would take to sell everything built and approved.”
“Buyers enjoy some advantage and prices don’t appreciate as quickly, said Deanna Sihon, the study’s author. Tacoma also is subject to a hesitation common in areas remaking themselves and having to overcome long-held perceptions, Sihon said.”
“‘People are being careful and almost waiting to see, gosh, is this renovation and this new place really happening?’ she said. ‘It is in Tacoma.’”
“‘I think everyone would like the strongest sales possible. You’d like to see them fly off the shelf, and they’re not doing that right now,’ said consultant J.J. McCament.”
“Since 2004, nearly 400 condos have been sold downtown with another 525 for sale and about 1,500 proposed.”
“A year ago, a hot market meant condo shoppers had to make rapid buying decisions, said real estate agent George Pilant. Not so now. ‘Buyers have so many choices they don’t feel a sense of urgency,’ he said.”
“But condos are a niche product that at higher inventory levels, he said, raise this question: Will good-paying jobs needed to sell such downtown housing continue to be created? ‘I suppose that’s where the gamble is,’ said Paul Turek, an economist with the state Employment Security Department. ‘In the Tacoma area, we have some high-paying jobs. Whether there’s enough to support the building of the condos remains to be seen.’”
“For some buyers, the hesitation has little to do with a good job or affording a condo but leaving behind a house. Realtor Marilyn Tennison said she and husband (have) pondered the possibility of condo living and like the idea of a low-maintenance home. Rather than buy immediately, the couple likely will first lease a condominium, she said.”
“‘It’s difficult to think about going from a house to a condo,’ she said. ‘Because in many ways it’s like an apartment.’”
“Soon-to-retire Eric Johnson is doing the condo life times two. He’s buying one in Miami and last year purchased a 1,200-square-foot town home at City Steps. He plans to sell his Northeast Tacoma house. ‘As you get older you realize this: Less is more,’ he said.”
The Herald from Washington. “On paper at least, downtown Everett is poised for explosive growth. Nearly 800 new downtown condos and apartments are in various stages of planning. The city’s population is expected to grow from 101,100 to 123,000 people.”
“There’s a good chance some of the projects scattered across a dozen development sites will not get off the ground, officials acknowledge. ‘We’re going to look out across this city in a few years, and I will be surprised if we don’t see cranes,’ Everett Mayor Ray Stephanson said.”
“Buildings now in the planning pipeline include $1.1 million bay-view penthouses. All of this does not include 660 upscale condos, shops and restaurants being constructed on the marina, or up to 1,500 condos planned for the Lowell neighborhood along the Snohomish River on a former mill and landfill.”
“Developers in Everett talk about ‘pent-up demand’ and say they aren’t deeply concerned their projects will create a glut of vacant condos for sale, as is the case in Las Vegas and parts of Florida.”
“‘I’ve always said Everett is the best kept secret in Washington, and people are finally starting to see that,’ said Donna Corpus, owner of Studio Donna. Corpus and her husband bought the salon’s current building and began quietly assembling other downtown properties.”
“They hope to begin construction this year on Colby Tower. With Sub-Zero refrigerators, Wolf gas ranges and other luxury accouterments, condos are expected to range from $950,000 to $1.1 million.”
“‘We’re just hoping for something kind of special and elite for people who want that,’ Donna Corpus said.”
“Anthony Aversano, (a) remodeling-contractor-turned-developer, said he’s trying to stay positive, but he thinks Everett’s downtown building boom could fizzle if the cooling housing market nationwide turns into a dot-com-style bust.”
“‘It’s going to come down to economics,’ Aversano said.”
The Register Guard from Oregon. “People looking for houses to buy in Lane County right now are enjoying more of a buyer’s market than the area has seen for years, with more homes to choose from and more time to make up their minds.”
“The number of houses put on the market in Lane County last month jumped by 25 percent, compared with February a year ago, according to the Regional MLS. Buyers had about 1,500 listings to choose from in central and eastern Lane County. That’s an increase of 9 percent since December, and a whopping 39 percent more than the number on the market a year ago, in February 2006.”
“Broker Norm Brock says both buyers and sellers should take care when trying to read the local real estate market. ‘At the moment, things are slowing a bit, and the number of houses on the market has increased, but it’s a situation that could turn around quickly,’ Brock said.”
“The time it takes to sell a house also has slowed substantially, giving many buyers more time to think about their purchases. The inventory of homes for sale also is higher than it’s been for years, with more than 5.5 months worth of homes available for the first two months of this year.”
“‘We’ve gone through this kind of slowdown many times before, then all of a sudden it turns around and the market heats up again,’ he said. ‘I think we’re in for a good year all the way around - I think everyone’s going to be happy.’”
The Associated Press. “It’s a popular refrain from many in the West. When Californians move in, it’s always their fault when things change. They infect the rest of the region with their…questionable driving and make housing prices soar.”
“Sure, it’s been 30 years since Oregonians first slapped ‘Don’t Californicate Oregon’ bumper stickers on their cars, but ‘Californication’ is still alive and well.”
“Yes, Californians drive up housing costs, and some can even be blamed for falling prices because of the many investors who snapped up cheap houses, then wanted to sell, creating too much inventory in cities like Las Vegas and Phoenix.”
“‘Home prices go up and we all blame Californians,’ said Jay Butler, at Arizona State University Polytechnic. ‘They are sort of like the West Coast version of the New Yorkers. They have the attitude.’”
It’s interesting that both of these condo areas were sparked by tax subsidies.
Builders made the same mistakes as rookie speculators. They based their decisions on low prices (land, tax incentives) and ignored location and demand. I worked in downtown Tacoma for ~9 months, and no way in hell would I live around there. The difference between day and night is like Jekyll and Hyde. Tacoma is one of the most dangerous cities in this country. Lots of crack dealers, whores, pimps, addicts, and sleazy crooks and opportunists in general. I imagine this condo craze will be a bust. Pierce county inventory is going through the roof as we speak. The speculators ran wild there. Lots and lots of toxic loans and smarmy deals.
Tacoma is my hometown. And BB is right, it’s a pit. It figures they can’t even do the housing bubble correctly.
“Tacoma is one of the most dangerous cities in this country. Lots of crack dealers, whores, pimps, addicts, and sleazy crooks and opportunists in general.”
Posts like this just amaze me. Tacoma Washington? Dangerous? The description of Tacoma makes me think it is far less safe than New York City.
I would have thought Tacoma would be a quaint Pacific Northwest city. Obviously, I have never been there. This blog makes for a great education.
It’s not quaint. It is stinky.
A relative of mine, a long-term Seattle resident, refers to Tacoma as “Tacky-aroma.”
“The description of Tacoma makes me think it is far less safe than New York City.”
That’s because it is. Compare the two crime indexes. The US average is 325.2 (Higher means more crime, lower less crime). Based on 2005 data, NYC is at 275.2, Tacoma is at 732.7.
Murders about equal at 6.7 per 100k people.
Rapes in New York 17.6 per, Tacoma 62 per.
Assaults in NYC 349 per, Tacoma 615.3.
Robberies in NYC 308.7 per, Tacoma 356.5 per.
Burgleries in NYC 289.8 per, Tacoma 1681.7 per.
Thefts in NYC 1509.9 per, Tacoma 5160.8
Auto thefts in NYC 229.5 per, Tacoma 1838.2
Draw your own conclusions.
Dang those are on par with the east side of DC and PG county. I’ve spent enough time in both to have known better, but I didn’t think Tacoma was that bad.
There are some decent jobs in Tacoma. Its port is bigger than Seattle’s and if there’s one thing Americans do well it’s demand stuff that comes in on boats from Asia. Also, the Frank Russell Company is in Tacoma and quite a few people there make serious bucks (I’d much rather work for Russell than WaMu, for example).
That said, it is a rather ugly, depressing place, and crawling with derelicts 24/7.
Almond Roca is made there. And the Smelter is very stinky and the CRIME is horrendous….
Lots of gang activity on the outskirts of downtown, very slowly being pushed out by gentrification around one of the medical centers. Remember also that Tacoma’s a BIG military town (3 bases) with the off-base crime activity that goes with that. Don’t expect retirees to fill up the expensive downtown condos, since there’s so many areas very close by with lots more natural beauty (Gig Harbor, etc) that have condo and townhouse options.
Tacoma is a port town that used to have (well still has but they don’t smell nearly as bad anymore) tons of paper mills and a sewage treatment center. So you have several things that kept many of the neighborhoods more undesirable than the rest of Seattle. Because it’s a port town there’s money and lots of single guys working or trucking through who drive up demand for many types of illicit goods. The other big surprise is Yakima on the other side of the mountains. After Miami got shut down, it became the main import location for almost all the cocaine that ends up in most of the the northern US, so what was a fairly quiet farming area is quietly swimming in drugs and violence.
Kind of like my kids loved nothing better than to take a ride into Boston for the day (when we were CC residents) But they call our local city Scare-a-cuse and ask me not to drive in there. It’s too bad. There grandmother has fond memories of growing up on the north side and going to a school that now only seems to make the news for its stories of violence.
Does anyone know if PMI covers negative amortization for the lender? e.g. if the loan balance baloons from $300k to $350k, will the PMI cover the extra $50k if the borrower defaults?
PMI is why 80/20 loans were so popular. In order to avoid paying the fee for the insurance, the mortgage company simply loaned the buyer 80% of the house value - then gave them a 2nd mortgage for 20% of the value at the same time. I’m betting that seller’s of private mortgage insurance haven’t been getting a lot of business lately. Why should the lender let the insurance company have the money when they could simply charge exorbitant rates to the borrower on the 20% portion of the loan.
City councils are idiots. The Sacramento city council used almost all their development funds and structured a loan for two different luxury condo towers that will never be built. Fortunately, the city loan is contingent on the developer obtaining construction loans, but the development funds are gone. What a terrible waste.
“Soon-to-retire Eric Johnson is doing the condo life times two. He’s buying one in Miami and last year purchased a 1,200-square-foot town home at City Steps. He plans to sell his Northeast Tacoma house. ‘As you get older you realize this: Less is more,’ he said.”
Yes, Eric, less is indeed more. So, why did you buy two condos? Have you mastered the art of being in two places at one time? Or is one of them an “investment”?
He could have a winter condo and a summer condo, which is more of a Northeastern thing because our weather is so terrible in the winter, but it does make sense. Seattle winters can get pretty dreary.
I’m a little surprised that he didn’t sell his house first, though. Even if it’s paid for, there are still carrying costs.
But carrying multiple mortgages is the new paradigm, Ann. And, as for paid-off houses, that is SO 20th century!
Lereah agrees: “If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years. It’s as if you had 500,000 dollar bills stuffed in your mattress.” —Lereah, LATimes, August 28, 2005
even better quote, this one from a realtor.
“If they’re upside down, they should do everything they can to stay in the house,” Niemoth said. “They are going to have to let this market run.”
Barring that, a seller could use a lease with option to buy to cut their losses.
“If you’re paying $2,000 a month for mortgage, taxes and insurance, but your market will only allow a lease option at $1,600, go ahead and lease-option for $1,600.
“That way, you’re only bleeding $400 a month.”
http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20061130/BUSINESS/611300774
“If you paid you mortgage off, it means you probably did not manage your funds efficiently over the years. It’s as if you had 500,000 dollar bills stuffed in your mattress.”
No, you get to enjoy the benifits of “imputed rent”. Your STANDARD OF LIVING can equal your mortgage-burdened or renting neighbors while your COST OF LIVING of doing so is much less than theirs. This imputed rent acts like a tax-free dividend.
Let us not forget this 2006 gem from Anthony Hsieh, CEO of Lending Tree: “If you own your home free and clear, people will refer to you as a fool. All that money sitting there, doing nothing.”
He’s clearly speculating. He could rent a nice house/condo in Florida each winter for much less.
“He plans to sell his Northeast Tacoma house.”
Yah, this moron’ll sell it all right. Just not at the price he was planning on (dreaming of). Of course, the Foolish Lenders might end up selling all 3 of them for him.
Got diversified assets?
“‘Home prices go up and we all blame Californians,’ said Jay Butler, at Arizona State University Polytechnic. ‘They are sort of like the West Coast version of the New Yorkers. They have the attitude.’”
It will get really interesting if California flippers ARMed with subprime and other high-risk mortgages start catching the blame for falling home prices in the massively overbuilt desert southwest.
In upper Wisconsin, we blame the FIBs (Friggin Illinois B*****ds). Its the American way - blame everybody but yourself!
What people don’t understand is that all the Californians that are invading are doing it with borrowed money.
Once the actual bill comes their nowhere to be found.
I’m a Californian and I feel like I’m the only one with money saved up.
“What people don’t understand is that all the Californians that are invading are doing it with borrowed money.”
It’s called LEVERAGE buddy! C’mon, get with the program. We are all RE experts here now.
BTW, you know any good appraisers? I got some mortgages I need refi’d and need an appraiser with an “open mind”.
a ‘motivated’ appraiser, you mean…
EVERYBODY is Motivated, and EVERYBODY has an OPEN MIND on the way to the commission only gutter!
My saved-up money is driving me out of California. Cannot stomach the idea of ever claiming residency here and paying the exorbitant state income tax. Next stop Pennsylvania (3% flat).
Texas 0% flat
No taxes in Wyoming, either. Or accents!
‘Californians drive up housing costs, and some can even be blamed for falling prices because of the many investors who snapped up cheap houses, then wanted to sell, creating too much inventory in cities like Las Vegas and Phoenix.’
I think the AP did blame them for that.
When people talk about Californicators, if they are talking about people with CA DMV registration, then who could argue… The people that grew up in CA are more like people from Ohio or Texas. They are actually the first recipients of the Fornication…From the 20 somethings, arriving to “Be Somebody” from the rest of the States. They generally move on and give someone other State’s residents the pleasure.
Gold Rush mentality….
any place OTHER than California was getting “credit” for the run up in prices, so its only logical that the flipside be true.
of course here in CA (Bay area particularly) some of the “credit” went to wealthy Asian or Middle-Eastern immigrants driving up prices (and to a lesser extent, people even credit illegal immigrants as well). needless to say that logic doesnt work well. in my experience most immigrants have less income or desire to build debt than us non-(recent)-immigrants do.
as SD, Sacramento, IE, and other inland areas tank people in the bay area have their nose turned up with a “my shit dont stank” attitude. it seems like it will be a slower/delayed decline here. once all of the locals’ “investments” bleed them dry, they will need to sell or foreclose here, but it will be the last thing to happen IMHO.
btw, i also feel like i am the only one saving, and one of the few who acknowledges that houses are significantly overpriced
meant to say “in any other place, CA was getting “credit”
any place OTHER than California was getting “credit” for the run up in prices, so its only logical that the flipside be true.
of course here in CA (Bay area particularly) some of the “credit” went to wealthy Asian or Middle-Eastern immigrants driving up prices (and to a lesser extent, people even credit illegal immigrants as well). needless to say that logic doesnt work well. in my experience most immigrants have less income or desire to build debt than us non-(recent)-immigrants do.
as SD, Sacramento, IE, and other inland areas tank people in the bay area have their nose turned up with a “my shit dont stank” attitude. it seems like it will be a slower/delayed decline here. once all of the locals’ “investments” bleed them dry, they will need to sell or foreclose here, but it will be the last thing to happen IMHO.
What I’m waiting for is a MSM connection between the speculator and the subprime mess. They are still getting their heads around the risky lending thing at this point.
they also seem to be missing the somewhat tautological statement that if you are purchasing RE on credit without the ability to stay cashflow positive, while HOPING that rising prices will save your ass, then sir, you ARE speculating, whether or not you are a professional SPECULATOR
Well that was the idea one year ago as my Chinese friend explained it to me. I wonder how thats working out for them?
Good point Ben,
One of the few articles like that I’ve seen are showcasing Casey Serin but they seem to treat him like the only guy in the country doing that. He’s part of a very very large herd.
That is why I keep raising the question of whether Senator Dodd will explicitly target his bailout at Casey Serin style investers, or if he will only do so inadvertently as he tries to help “save our homes.”
this election ‘year’ bs will only fvck innocent bystanders - like the posters of this blog.
i feel like doing a 1 million person march on washington…. posters on this blog: take up placards!!
meant to say “in any place other than CA”
“of course here in CA (Bay area particularly) some of the “credit” went to wealthy Asian”
We had lots of people from Vietnam come to the Bay Area in lates 70’s, but prices did drop. There was no cheap credit and foreign diplomas were worthless.
In fact, we saw HK immegrants in 1991-95 buy homes in Cupertino and Santa Clara, but still prices did decline and remained flat during that time period.
Asians are penny wise, heavy savers and lowball experts!
Imagine if your culture had been @ the capitalism game, for as long as the Chinese?
I find your posts as greatly valuable as Mac Aurthiers..
Aladdin Sane: I agree most people (outside of the Chinese ) do not realize that the great traders of the last two thousand years were Chinese. Some of the great trading houses are still in existence. We have 250 years of trading in this country and most do not know the ownership of the Federal reserve.
D’oh
Except when it came to Pebble Beach Golf Course
Hey that is not fair! That was to meet a margin call ‘cuz the Jap RE dropped 40%. my bad! LMAO
“Broker Norm Brock says both buyers and sellers should take care when trying to read the local real estate market. ‘At the moment, things are slowing a bit, and the number of houses on the market has increased, but it’s a situation that could turn around quickly,’ Brock said.”
wow, he’s right, it could turn around any second now. Gee, maybe I should buy. I make 6 figures, have a great credit rating, and cash in the bank…..Oh, wait, still can’t afford today’s prices……
oh well, maybe next year!
Geez
Yeah, I loved that “turn around quickly” comment. Noting once again that ARM resets will double from $25B/mo to $50B/mo by the end of this year, I think the “turnaround” could be from slightly-below-horizontal to straight down vertical.
“‘They are sort of like the West Coast version of the New Yorkers. They have the attitude.’”
And how many of these Californians talk with an ” NY or North Eastern accent”?
A pretty good chunk of them…You cant miss the “hook” for some!
Its always money! money! money!
As many one of many real native (Californian), I rather go hit the waves…
““Yes, Californians drive up housing costs, and some can even be blamed for falling prices because of the many investors who snapped up cheap houses, then wanted to sell, creating too much inventory in cities like Las Vegas and Phoenix.”
Yes, I could say its the East Coast folks that come to California that drive prices higher. They are the ones overpaying for homes using exotic loans. Yes we been invaded by East Coast arrogant left-wing elitist, who are now spreading into other states.
This is often missed by people not from California. The “Californian” they hate is not actually from California, but a transplant from someplace else in the US who wanted to live “like a Californian”. They bring the attitude with them.
Seems like most of the Californians that came to my part of Florida to invest or speculate were from Sandyago. They might originally have been from elsewhere, but they came to Florida from SD. But just to invest or speculate, they didn’t live here and made a big point of saying so. Quite smug, the ones I ran into. Wonder if they’re so smug now?
Hard to be smug when a Florida alligator has you by the short and curlies.
So true. The worst drivers are actually from some other state who has a whacky idea of what its like to be a California driver. The worst drivers are actually in those states (like NM) with a high rate of DUI drivers and uninsured drivers (40% in NM).
I think that a lot of the former “Californians” who post extremely negative (emphasis on “extremely”) comments re California are actually from somewhere else and are NOT native Californians.
In any event, many homeowners from around the nation took advantage of the run-up in real estate. And now that its all coming down, its all California’s fault? There are many of us in CA who refused to pay outrageous prices and who rented instead. The many posts on boycotthousing.com are examples of those Californians who refused to go along with the run-up.
~Misstrial
I repeat my post above…
When people talk about Californicators, if they are talking about people with CA DMV registration, then who could argue… The people that grew up in CA are more like people from Ohio or Texas. They are actually the first recipients of the Fornication…From the 20 somethings, arriving to “Be Somebody” from the rest of the States. They generally move on and give someone other State’s residents the pleasure.
Gold Rush mentality….
I’ve been all over this country, and I’ve yet to find a place lacking its share of horrible drivers.
While driving a rental truck in Baltimore, I was cut off by a cop who nearly sent me off the bridge into the water.
I was doing 55 mph on a surface street in Chandler, AZ only to have a blue hair enter the roadway doing approximately 3 mph. If not for my lucky lane change, her life would have ended.
In Reno, NV, I saw an old man rocket out of the cemetary in a Cadillac doing 45 mph in reverse just in time to t-bone an unsuspecting driver.
In Tempe, AZ I watched a pickup truck pulling a hot dog cart enter the intersection against a red light doing at least 60 mph. The collision with the poor car he t-boned was so violent that the truck and cart launched a good 10 feet in the air.
I have never seen worse drivers in the rain than in Seattle. Go figure.
While passing through Portland, I just missed an 18 wheeler who lost his entire load of FORKLIFTS. It was by the grace of god that nobody was killed.
Bad drivers, they’re everywhere.
My experience working retail in tourism towns is that no one could look down there nose at you like Californians. They might have originated from somewhere else but they were used to people jumping to attention when they entered a room and didn’t seem to understand that in some parts of the country first come is first served.
yes, “there” sb “their”
Goodness, you need to mellow out, dude. Go surfing.
Louie Louie,
My thoughts exactly! We natives get the blame, but few people realize that the same thing was done tour state. All of the out of staters from places like New Jersey and Iowa and Texas came here years ago and ruined what was a pretty damn fine place to live and raise our families. These are the same “Californians” (not) that are invading other places with the money they made by driving up our home prices to insane levels. As a third generation native, I am really tired of California bashing. Native Californians are just like people from anywhere else- we just want to be able to raise our families, enjoy life and not be inundated by outsiders constantly looking for the “California” lifestyle.
Trishyla
We are all about the same type of Americans, anywhere you go in this country. What motivates us, is similar, in any state. Greed, status, the chance to get ahead, or the chance to secure a better future, for ourselves or our families.
Lord knows, that our government is constantly putting obstacles in our paths, to achieve a viable future for ourselves, and our families. With the overseas wage arbitrage, and the importation of cheep illegal alien labor, it’s no wounder we engage in such things as real estate speculation, if given the chance.
I think, many of us, did not use common sense in this current folly of RE speculation. Too bad. Suck it up. Try to understand the root cause of this folly. Why the old ways are no longer working. Why we had to resort to such insane folly.
We are all to blame, because we have allowed ourselves to become stupid, as a nation, and chose to nothing about it.
Speaking as a left-wing, elitist Californian, I can only say: Go Californicate yourself!
I am glad i hit the central nerveous system on all points with one shot!
As Dick Cheny said, ‘Lets go shoting together.. You lead the way!’
You’d be a lot more convincing if your poor grammar didn’t conjure up the image of spittle at the corner of your mouth as you typed. Probably in a poorly lit bedroom somewhere…..
So if Californians are to blame for leaving and pushing up prices elsewhere; then who is to blame for Californians themselves being pushed out by high prices? Uber-Californians perhaps?
Josh (Native Californian)
Exactly Josh!
~Misstrial (a 3rd generation Californian, 6th generation Westerner)
The News Tribune reports from Washington. “Downtown Tacoma’s condominiums have helped to transform a once-troubled downtown where few previously wanted to live. Today, a patchwork of exposed steel, scaffolding and cranes showcases a decade of marketing, recruiting developers and trying to convince buyers of the area’s merits.”
There’s a section of Chicago that was originally very industrial and then essentially abandoned. However, over the last decade or two, it has seen a revival and its appeal as a residential neighborhood has steadily increased. The housing boom of the last few years really accelerated the trend and now there is one last parcel of land to develop. This afternoon I attended a public meeting for the proposal for that land. It’s going to be 150 floors and 2000 feet tall, with 1300 condos. It’s a beautiful building and one I hope gets built, which puts me in a weird spot. Knowing that now is perhaps the worst time to build a tower - the market is crashing all around.
Anyway, there have been some benefits to the housing boom - a lot of buildings have been built in areas which otherwise would have never seen development. Yes, many of them will have huge issues with foreclosures, but they will eventually be full again (10 years?).
I doubt if this 150 story tower will ever get financing, but it makes for a good tale. There is not enough money in Chicago to do a ‘Dubai’.
Hoz makes an excellent point. They can bring all the proposals they want, but nothing gets done without financing, and from what I’ve seen and heard, condo projects are now viewed quite skeptically. A day late and a dollar short, but I agree that this will ever be built as proposed.
Yeah, that’s what many people think. The original developer got approval to go 120 floors and 1600 feet last year, and then a little-known Irish guy swooped in and bought the project out for $50-100 million. This developer and Anglo Irish Bank are saying they have the money (estimated at between $1-2 billion). Who knows.
We know that the guy has made billions in Europe, has an architect that is highly-regarded in Europe, and will do most of the marketing in Europe.
If sales go as planned, this is a bargain to rich folks in Europe, and is getting cheaper by the day. If helicopter Ben lowers interest rates, this could end up being the bargain of the century.
“If sales go as planned, this is a bargain to rich folks in Europe, and is getting cheaper by the day. If helicopter Ben lowers interest rates, this could end up being the bargain of the century.”
Here we go again. More talk about people from a totally different area, in this case country, flocking in with loads of cash to save the day. That’s just BS, plain and simple. Long term demand is by and large local, not global.
Hey, I’m just saying that it’s being targeted to Europe.
My concern is the money for a building, and I know that if it’s built I’ll never be able to do anything but look at it. But oh do I want to look at it. My brain is telling me that it will never be built because the money. My heart is hoping it gets built and the nice folks from Europe pay for it.
My recollections concerning countries that hope somebody will come from overseas and bail them out, has not been especially good.
Faith Based Building Code rules
Chicago is broke.
Brian, if it gets built (not likely), you’ll have your unit in the building because condo prices in Chicago will fall by half in the next several years.
For people on the upper floors, that will be one hell of a walk if the elevators ever aren’t working. I spent some time as a kid living in a high rise in a third world city with periodic electricity disruptions, and let me tell you, the hike upstairs was a death march even when I wasn’t carrying groceries or a bookbag.
We crunched the rent vs. own numbers & found:
Myth #3: Rent Is Wasted Money
http://www.viewfromsiliconvalley.com/id316.html
I guess it depends on what the definition of rent is. If the definition includes the rent you pay as interest to the bank on a McMansion-sized home loan, then I agree: rent is money down the drain.
vfsv,
As I remarked yesterday, your demonstration that rent is NOT wasted money is a good one, but I do wish you would eliminate the first 6 or 8 paragraphs of introductory “see how cool I am” gibberish.
Why not do this calculation on a 200k house? I know the answer and that is that it is better to buy the house. Where I live that gets you a 10,000 sq ft lot and a 2200 sq ft new house and yes some do have granite. Another question what do all of you renters do when my mortgage is paid off? You keep renting.
“Why not do this calculation on a 200k house?”
There are no $200K houses in San Diego. So yes, I will keep renting, until I either leave this place, or home prices realign with the income distribution.
WAman - if you live where you can get that much house for that little, you should buy, as long as you can afford it.
Try again. After you paid off your mortgage, we buy the house next door with cash from all the money we’ve saved by renting throughout the years. Do the math.
I guess you forgot about the standard deduction for a married couple being what $10,500? So take off 20% of 200k and that’s 160k right? PITI on 160k? $1000 roughly at 6%? Minus the 1% maintenance cost? I’ll let you do the rest of the math…
Million dollar condo’s in downtown Everett, WA??? This is insane. I grew up in Everett and have visited a few times over the last few years for business. It is an economicaly depressed looking area, and the dark gray skys made me remember why I never wanted to go back when I left in the late 70’s. Beautiful scenary, but everything else looks dreary. One symbol of the desparity is the Indian Casinos on the outskirts of town with all the trailer folk gambling away their social security checks. The downtown is the opposite of thriviing. It is a 29 mile drive to Seattle, but the traffic is horrendous. Million $$$ condo’s…you have got to be our of your freakin mind.
I’d rarther be in lubbock,madison,asheville in a million dollar condo
or maybe soon scranton,poughkipsee,yuma
I don’t know Everett, but I really enjoyed reading that a salon owner is going to be developing these million dollar condos (apartments) in what sounds like a decent sized, but economically marginal town. The stories just get more humorous with each passing day! Not to worry though, Donna the stylist/developer knows it will work out because:
“…Everett is the best kept secret in Washington…”
Riiiiiight.
I forgot to add that these people are planning to build when the town already has a 14 month inventory of condos. Fourteen months! That is well over a historically “stable” market, and this is just for condos. Add in single family units and it sounds like Everett is looking at quite a hangover. Good luck with that project, I think you’re going to need it.
I used to live up there, close to Everett. If Everett is the -ahem- best kept secret in Washington, it’s a secret that she will probably take with her to her grave.
I guess you folks don’t know what they build in Everett - betcha AIRBUS does!
They mean Everett is “Best kept secret”, not it’s THE best kept secret.
I can’t imagine who is buying $1M condos up there - that’s still in the extreme upper percentiles for downtown Seattle.
$1M in Everett is a 6000 sq ft estate sitting on an acre of waterfront. There’s nothing in downtown Everett to justify this kind of price - unless the buyer is unfamilliar with the area and doesn’t know that ahead of time. Finding a restaurant open after 10 PM on a weeknight is a challenge there.
Prices in the entire Puget Sound area have become so far detached from incomes, it’s remarkable. A lot of longtime residents are leaving now, or have plans to. The quality of life is rapidly deteriorating due to the enormously high cost of living. Property taxes have become crushing financial burdens. Washington cities and towns have a long history of going bust. The area is at its peak right now, and is ripe for a major meltdown. I anticipate a hangover lasting decades up there.
What stuck me was the population, at approx. 100k. How many millionaires are there to soak up these units?
The answer Ben, is not enough. The ONLY thing they have going for them is a view of the water. Everett is a military town with very low wages and higher than average crime. I cannot imagine anyone with that kind of money would want to spend it there. Sure, there are always a few willing participants, but there is just no way that the demand is strong enough. They’re making the same mistakes in Bremerton, WA. It’s another military town with little to offer other than some decent views of the water (if you like shipyards and decommissioned aircraft carriers). Most early sales of luxury condos have gone to speculators. I believe the long term demand is paltry at best.
No one, or a fool Ben. The thing is for a million bucks, or less, you can buy a HOUSE in Queen Anne - just north of the city. Who in their right mind would spend that for a place in Everett. Loco…
“I believe the long term demand is paltry at best.”
Didn’t you hear? There’s a high demand for these projects. First, all the boomers from all over the country are downsizing and they will want to live in these, because they have lots of money. Then there’s all the rich South Americans who want to leave Miami. Finally, rumor has it that China wants to “outsource” its population to the US and everyone from China is rich from all the dollars they made from trade with the Americans! All the Chinese are incredible savers and have lots of money saved up to buy US real estate. Oops, I forgot, Bill Gates is gifting all his H1B Visa employees with condos in Washington. So don’t sweat it, there’ll be plenty of demand. Everyone’s rich!
I don’t know why, but your use of “opposite of thriving” struck me as wonderfully dry and understated. Well played, OOSD.
I ate with some Microsofties last nite in West Seattle. There are currently over 900 ‘directors’ (a high-mid-level mgmt position) in their Redmond (Seattle ‘burb) HQ. Lowest annual income for these guys is about 320K, not counting stock options if they’ve had good performance. They and their 15 levels of mgmt above them are a big driver for the crazy prices in Seattle and the eastside communities (Bellevue, Redmond, Kirkland, Issaquah).
Everett has Boeing, but remember all their top brass moved with their HQ to Chicago about 3 years ago. Rank and file senior assemblers at Boeing do well, but nothing like the compu-geeks. Anyone who works in Everett with some money will find a nice house in the mountain foothills, not in downtown Everett. The commute between Everett and the Seattle job market is so bad these days that they might as well be across the state from one another.
What’s the payment on a $1M condo? What about $6,000? In Everett, for $3,000/month you could rent a beautiful house with a water view and still have money left for lawn service, cable and utilities. Even if you were to buy then why the heck would anybody buy something like that in Everett? There are so many more options available in that price range in much better locations…this project makes absolutely no sense!
btw marksparky, this may be off topic but most Microsofties that I know are full of themselves. Makes me hope that Linux and Apple really catch on. Microsoft’s ego can truly use a haircut.
“They infect the rest of the region with their…questionable driving and make housing prices soar.”
Not using turn signals or driving 80 in the slow lane on a rainy day makes me a bad driver huh?
I’ve watched people sit through entire green lights and drive 40 in the fast lane here for years. I’ll put our home-grown retards up against Californians, or anyone else, any day.
Helicopter Commander - I’m wiping wine off the keyboard! But thank you.
If you don’t like the way I drive… stay off the sidewalk!…………….IDIOT!
So its the poor driving habits that has run up housing costs!!!!
(i knew it!)
Finally some honest answers!
I don’t know, I lived in Boston almost 20 yrs before living in LA for 15 yrs. I’ll take California drivers over Boston drivers any day. Probably it has to do with the fact that in LA the lanes are actually marked, instead of the streets’ being left blank for however many taxicabs abreast can squeeze in.
Boston, eh. We need a constitutional amendment banning traffic circles IMHO. A Boston traffic circle makes a demolition derby look sedate.
I thought people were getting tired of California and were moving out of state.
I think you are correct…
Greener pastures outside of county?
Region sees more leave than move here; housing costs blamed
By Lori Weisberg
UNION-TRIBUNE STAFF WRITER
March 22, 2007
http://www.signonsandiego.com/news/metro/20070322-9999-1n22census.html
In EVERY way, actually…
“Because in many ways it’s like an apartment.”
That was referring to this quote.
Especially conversions.
When you can hear your neighbors breathing, its time to re-think your purchase of your space.
Not quite in every way. When the lease is up, you can leave the apartment behind and never give it another thought.
“When you can hear your neighbors breathing, its time to re-think your purchase of your space.”
One thing I’ll say for renting is that it’s certainly taught me never to buy a condo.
“One thing I’ll say for renting is that it’s certainly taught me never to buy a condo.”
I’ll testify to that! Amen!
LOL…..exactly.
yes, i think most ppl would agree…
OT, but I am totally aghast, I have this friend here on the westside who keeps bugging me to fix up my house, hers always looks fabulous, she always has workers over there painting or remodelling…I just looked up (on this private internet search system that my brother is a member of) how many times she’s refinanced, jeez, she owes a LOT of money, 1.4M to be exact, and seems to make an annual habit of refinancing. Wow. Her house is probably worth close to 2M by now, but that doesn’t do her much good when it comes to making the monthly payments, now, does it?
Sounds like she has a bad case of Remodelritis , it usually starts off with a mild form, Redecorateritis
but if untreated it quickly gets worse. If she starts showing signs of Rebuildritis then you need to call 911 immediately since this could be fatal to her economic health.
I bet its already been fatal to her economic health. LAinvestorgirl, can you see what types of loans she has? If its an OptionARM… there is probably a 50/50 chance her last refi is the loan she’s stuck with.
This “liberation” of California equity is part of the reason the “California premium” is going to take a hit. My theory is that part of the premium is self-fed by the upgrade market. If people cannot upgrade… the premium will not be fed. Note: I think nice coastal areas will and should always have a premium. But at some point, its time to pay the piper.
Got popcorn?
Neil
Good question, I’ll have to check on that tomorrow.
It’s 7%, ARM.
Her house looks like she’s aiming for the cover of Architectural Digest
LAinvestorgirl, if she wants to be on the cover of Architectural Digest and can afford it, then fine. But she should stop bothering you about your house - that’s insulting and rude.
Tell me about it. I don’t even notice half the stuff she points out, until she points it out. I enjoy living debt-free much more than having $100 per gallon snooty paint colors on my walls, thank you very much.
Yea, I have a few clients like that. One has dropped 450k of his own money. with the grand plan of pulling it back out when he finishes because market decline doesn’t happen in his area.
BTW lainvestorgirl have you been keeping tabs on the apartment market. I’m seeing a lot of seller motivated stuff and the inventory is increasing rapidly. I think some are getting out because of the coming rental decrease especially those have been through it before.
I am seeing more listings approaching 10 times gross, 9.5 in really crappy areas, which is hardly a bargain for those of us who remember 6X-7X. But, I’ll take that over 2004 when everything was 13-16X and flying off the market. If you go on Loopnet and do a California search with the key words “motivated” or “reduced”, you actually get several pages of results (which was not the case in 2005), many that have been sitting on the market for months…but the prices (compared to gross income) are still sky high compared with just a few years ago, and would give you negative cash flow unless you come in with an extraordinary down payment. In short, I’m not jumping in any time soon…
I know one guy who listed his units on Loopnet and his agent described him as “motivated”, his story was he jumped in and bought in 2005 and now realizes there is no upside in rent, he can barely keep up with the problems with the tenants and the bureaucratic demands and fees of the City of LA, and he ain’t netting all that much at the end of the month. I wonder how many of the “motivated” sellers are accounted for for these reasons.
I think all the upside in rents has already been exhausted even for a few years going forward, but I don’t see any sign of rents going down in LA. Rents aren’t as subject to speculative bubbles because, fortunately, you can’t finance your monthly rental payment…although I’m sure there are many who would if they could. On the other hand, I don’t know who is feeling more pressure now, the tenants paying 40%+ of income, or the landlords who can’t lower the rent because they overpaid. Around Venice and SM, I do see some units sitting vacant for long periods of time, but the landlords are pretty stubborn about the rents they’re charging.
I’ve heard and continue to hear there is some decreases especially in my area of ownership. Unless it’s section 8 most tenants who want to live in the area can’t keep up with 1200 or 1300 a month for a 2 bedroom talking to one guy it appears 950 to a 1000 is the sweet spot and that’s causing some problems with the newish owners. Even section 8 is starting to sqawk a little louder about it.
A lot of these guys underestimated the powers of rent control and jumped in with 1 to 3 yr fixed products. You’re seeing some of that coming back onto the market. I know a guy like the one you described not only did he underestimate rent control he underestimated the locals. His property has been on the market for a year. He’s about 100k off where he should be. I’ll hit him with an 8x gross offer later this week and see if he bites.
Equal pressure on both sides of the fence. I’m seeing buildings turn over and from personal experience my attorney has never been busier.
If you can get a seller to even counter offer anywhere near 8X, with no section 8 tenants, please post it, not necessarily the actual listing but at least the general vicinity…That would be a major victory. I tried lowballing at 8X in West Ventura, and I’ve got some sellers or listing agents calling me back, sometimes 3 and 4 times, but not much price flex so far. Seems they’d rather leave the thing on the market for 12 months than come down and make a deal.
http://listing.loopnet.com/14996013
I’d like to see this one around 9. I want to break into this area. But 13x would make me ill. I’m thinking about shooting him one at 8.5x or 9x just to see what he says.
A non section 8 building where I buy is almost non-existent.
That’s a great area, mine are mostly in Koreatown or K-town adjacent. I can go ghetto, I can deal with illegal aliens and even angry blacks, but not with Section 8.
Anyway, good luck with your offer, but I’m really skeptical you’re going to get anywhere.
By the way, my husband just told me two people at his job just bought houses: BH post office, and Silverlake.
Oh I know I’m getting nowhere with the link I just posted. Hitting him at 8.5 or 9x would just be for entertainment although I do remember those days. He probably wouldn’t even submit to the seller.
Bah… I think you said to much… I think I just figured out who you are. Especially if you have ever had a very very frustrating experience with the City of L.A. with a couple of your buildings. If you are who I think you are no worries I’m very big on privacy.
The sudden resurgence of Silverlake is mind-boggling and BHPO well nice area but not for the prices they are asking. Both are way way overpriced.
Perhaps she’s got SarahWinchester-itis.
Of course, Sarah had her own money.
http://en.wikipedia.org/wiki/Sarah_Winchester
http://www.winchestermysteryhouse.com/
BayQT~
Anyone want to take a stab at this quote?
“It is not interest costs that are too high, and there is plenty of money available from lenders. It is the lack of suppliers and bidders that is driving the cost of these projects higher,” Ron Shipka Sr., a principal at The Enterprise Cos., said last week.
Just saw this a few minutes ago in the paper, in reference to another condo in the city that will start shortly. Is this guy crazy?
Hi Brian -
I’m also in the Chicago area. What’s really interesting about the Chicago market is that Cook County is #3 in the nation in terms of population loss from 2001-2006 (after Detroit and New Orleans). More than 88,000 people have left Cook County during the past 5-1/3 years. That doesn’t quite equate to growing demand for real estate, does it? You’d never know it by the looks of things.
More residents (and businesses) will leave once Blago succeeds in soaking taxpayers for an extra $32 billion. What businesses will be willing to pay those taxes and the enormous salaries needed to get decent workers in this area? I’d wager that very few would. I guess the tax bill will be paid by those who tend bar, sling hash, sell real estate, drive taxis and cut hair.
I’ve had two doctors leave during the past two years (they didn’t like paying that $160K+/yr. mandatory malpractice insurance - they pay $34K-$45K for the same coverage in NW Indiana and SE Wisconsin). My auto mechanic has left too…his property taxes skyrocketed from $18K in 2005 to $38K in 2006.
This smells like so much sulfer, courtesy of Daley, Balgo and Obama. They’re succeeding in their drive to make the city and state punitive to business. What they somehow failed to take into account, however, is that the loss of businesses will mean the loss of jobs -and the loss of planned-for increases in property taxes from condo buildings that remain 30% unoccupied.
How many developers are part of the city council anyway? We know that Obama likes to play footsie with developers…who else does?
I wish Madigan would run for Governor or for the Senate. I’d vote for that tough, no nonsense broad in no time flat.
EVERYONE is corrupt in this state, so no one points any fingers.
And I still don’t understand Obama mania. I nave no idea what he stands for, what his issues are, what wrongs he wants to see righted… and he’s my senator! OK, he’s a black guy who isn’t old and shows no obvious signs of racism or corruption. Not being corrupt doesn’t count for anything in Illinois, but anyway, why should I vote for him? Because he’s not Hillary?
Well, the funny-money lending mess has finally hit home with me. My wifes cousin just called her and is in trouble with his mortgage. He is working night and day to make the payments, so he is not in trouble in that area yet.
He bought his house last year for 530k and of course, could only qualify using a toxic arm IO loan. My wife warned him at the time, but he said the agent told him he could just refinance the loan when he is ready. As of today, the comps look like the home is worth a little less than what he paid fo it.
Turns out his loan has some kind of prepay penalty although I am not sure if it is on the first or second. It’s an 80/20 type loan. So, we are talking about 100% financing here.
He just now realized after looking at his loan docs that he is only paying interest on the loan. He wants to refi into a 30 yr fixed, but after my wife ran the numbers, he will not qualify for it since he has to use stated income (he is a cook in a resturaunt and his wife is a waitress..LOL).
He thinks he can mange the payments for now, but what infuriates him is that he is killing himself to make the payments and has no equity to show for it. Hence, the fact that he is only paying interest.
This loan will reset after 5 years, so 4 more years to go before the bomb really explodes. This is a classic case of not being able to refi out of a lousy mortgage, and I presume that the value of his house will only drop over the next few years. I put his odds of eventual foreclosure at about 80%.
This kind of reminds me of watching the news everyday and hearing about cancer, but you pay little attention to it until someone you know has it.
Well, Mr. Vincent, you can give them each $12K to help them get an FHA loan, or you can advise them to Walk The Hell Away from that house … surely they could rent something nice for $2000/mo ? I suppose you told him at the time that they should not buy it, and should not take an IOARM, but alas, nobody listened to any of us last year, did they. I have several friends/relatives in these boats, and the big question is, to whom to give how much. Those living farthest beyond their means will receive the least from me. Those who can come close to digging themselves out of the hole, I will help.
Yes, she went over to meet today and I already told her earlier to have him contact his agent and take a look at what FHA has to offer.
I also told her not to offer any financial help.
I never asked anyone for a penny in my life and I expect the same.
I’m thinking the FHA won’t be able to help… if he “fudged” his income for his current loan…
I think eventually a lot of people will realize working night and day to preserve a declining asset… isn’t worth it. They’ll walk. Once that attitude becomes the norm… they’ll run. Hence why I think this will be the fastest correction ever.
But don’t worry, I’m watching indicators. So if I’m wrong… cest la vie. I’ll just lose another bet on it (there goes another $3 to buy diet Pepsi at work. These are bets with a minor value just to keep them interesting.)
Got popcorn?
Neil
“I’m thinking the FHA won’t be able to help… if he “fudged” his income for his current loan…”
Now that’s an interesting topic for a new thread. With all the talk of “liar loans” and “wink wink” on mortgage applications, I’m guessing there would be no bailout for subprime borrowers if their applications included falsifying their income picture.
I hope that’s a case of diet pepsi?
They’re both working in the restaurant business, which isn’t known for lofty rates of pay, yet they buy a $530k house? Sheez!
I think I’d get an unlisted number and NOT give it to the wife’s cousin. Reason: I think the begging calls are coming very soon.
Good loan for the lender/mortgage rep as he/she made bigger profits with this toxie loan. The profits were always greater with these types of loans than the “standard 15-30 yr fixed loans. Why do you think the reps. liked these toxie loans? The customer be dame.
A cook and a waitress with a half a million dollar loan. Wow…
Movie Title
“They’re both working in the restaurant business, which isn’t known for lofty rates of pay, yet they buy a $530k house? Sheez!”
Exactly. Every bubble has its reasons. When cooks and retired people living on SS are buying houses…well you know the rest.
I remember reading about some NYC millionaire who was riding down an elevator when he overheard the elevator-boy giving stock-purchasing advice to a friend. He considered it a bad sign that so many minimum-wage earners were gambling on the stock market. He sold all his stocks and moved the money into other assests. The year was 1929 and the move saved his fortune.
The modern day shoe-shine boys are New York City cabdrivers and hairdressers who “invest” in real estate on the side…
Yes, Dan, when previously unemployed acquaintances told me they were getting real estate licenses a couple of years ago, I knew the bubble was about to burst.
That was Joe Kennedy; father of Robert, Ted, and JFK.
Any chance of getting a 12 step program going?
Only for Intrastate Equity Refugees
Bad news if you’re a fiscally responsible taxpayer in Ohio:
COLUMBUS— For the first time, the Ohio Housing Finance Agency will help homeowners threatened with foreclosures refinance their mortgages.
The state agency’s decision to issue $100 million in taxable municipal bonds to provide 1,000 refinancing loans comes as a report issued Monday showed that foreclosure filings in Ohio jumped sharply last year, increasing by 15,000 or 23.6 percent over 2005.
So here’s the net: a guy who has never paid his bills on time and didn’t bother going to college buys a house using a stated income, 2/28 adjustable mortgage that he can’t afford to pay. But you can afford to pay it for him, and you will! Instead of the guy having to pay for his irresponsibility, move out of the house he can’t afford, and perhaps go back to renting, he’ll get to stay in the house he can’t afford, courtesy of Ohio taxpayers. Maybe he’ll even get to do a cash-out refi and get that cool four-wheel ATV he’s had his eye on.
Funny, isn’t it, how U.S. politicians are so quick to jump on the bandwagon of robbing households who exercised personal responsibility to help out profligates. IMO, it is a very bad sign when the only politically viable kneejerk policy response is to play favorites with those who make the worst possible household financial decisions.
Well said!
Maybe people should write those braindead politicians and even vote them out of office.
Well, I guess they outsmarted us after all.
Nope. Read what it says. They will only be able to bail 1000 homeowners. The article says that foreclosure filings are increasing by 15,000, or 23%. That means that foreclosure filings are already around 65,000, so add the 15,000, and you have 80,000 foreclosure filings coming up. Lets say that only one in ten foreclosure filing actually results in foreclosure (which sounds conservative what with flat or falling house prices). That gives us 8,000 foreclosures coming down the pike.
So if you only have enough money to bail out 1,000 homeowners, that means that only 1 in 8 gets a bailout. And that’s only assuming that foreclosures are not a higher percentage of foreclosure filings.
It looks like they are assuming $100,000 per bailout. If they want to cover 8000 foreclosures, instead of 1000, they would have to raise another $700,000,000.
And again, that’s only assuming 1 in 10 actually goes to foreclosure, and that notices of foreclosure don’t go up.
Realistically, homeowners may be “to big to bail”.
It’s telling that they are only aiming to “save” 1000 F’d Bs. That smells of political posturing, aka “look at us, we care and are doing something about it”.
It was a joke. In any case, the lenders are the ones who actually benefit; foreclosure is expensive.
Hopefully the people in charge can target the emergency funds to the neighborhhods their relatives own in. That will save a few areas rather than spreading the funds too thin trying to save everyone.
Unbelievable. And all the responsible taxpayers can do is write letters to their congressmen and senators; working too hard to find the time to rally or protest. Sucks.
see my earlier post - the HBB family should march on washington : “we’re mad as hell and we won’t take it anymore”
esp. to Dodd and his ilk
“The state agency’s decision to issue $100 million in taxable municipal bonds to provide 1,000 refinancing loans comes as a report issued Monday showed that foreclosure filings in Ohio jumped sharply last year, increasing by 15,000 or 23.6 percent over 2005.”
Unbunch your pantyhose, everyone. This is a diddly-squat deal that does not mean anything. The Ohio Housing Finance Agency has been lending enormous amounts of money to first-time homebuyers already. Last year they issued $1.1 BILLION in mortgages to almost 10,000 homeowners. Their loans are fixed rate, but otherwise can be quite toxic (100% LTV, subprime). This agency alone has >$2 billion in loans on the books. Their JOB is to help lower income buyers. It is likely that the $100 million will just go into keeping their own mortgageholders on the merry-go-round so that they don’t end up with a pile of foreclosed properties. Again, this ‘bailout’ can cover, at most, about 5% just of the OHFA loans.
Also, as far as a bailout, it isn’t going to work. The idea is to issue bonds (ahem, taxable) and use the money to refinance people into 6.25% or so fixed rate mortgages (buying out ARMs?). But I can only see this working with households with some equity. How can they refinance houses with negative equity without turning their bonds to turds?
Of more interest is the fact they don’t have the cash to bail out even a thousand FB’s.
Pretty soon a lot of bailout proponents are going to realize the FB is not the only one who is broke.
My comment isn’t so much about the specifics of the Ohio deal per se — it’s the bigger picture issue of the federal and state governments rushing to bail out FBs. And with respect to Ohio, I wouldn’t assume that the bailout is going to stop at $100m. It will probably grow to several times that.
>>How can they refinance houses with negative equity without turning their bonds to turds?
I doubt that the Ohio bonds would be backed by the collateral of the properties themselves. They’ll be backed by the full faith and credit of the State of Ohio.
I never really thought of Ohio as a big bubble area? Who is going to bail out California? - Much bigger loans, and 6.25% wont help most. I suppose the Federal Govt could refi everyone at 1% or the likes, which might help, and keep in mind they can and DO create money from nothing, albeit inflationary. I somehow do not see this happening. No one stepped up to bail out the dot coms, no one stepped up to bail out the last wave of foreclosures or the one before that and so on … It is my humble belief that this problem will top the big T in terms of losses as in Trillion dollars when all is said and done. But really what is a Trillion or two among friends?
Wars are God’s way of teaching us geography. Asset bubbles are God’s way of teaching us economics.
Pathetic but true.
God sounds like a strict teacher, but the students don’t seem to learn much from him. Maybe he should embrace a more liberal pedagogy.
Or, on the other hand, maybe they just need a good caning more often.
When the (last) Massachusetts bubble burst back between 1990 and 1993, typical mortgages were in the range of 100 to 150k
It was hard enough then to keep payments going when things tightened up
Now imagine things going wrong with 300 to 400k average mortgages or higher - such as on the West Coast
I always wondered how people were going to pay back those huge notes
Apparently NEVER
This is going to be a huge disaster
Scary.
“‘We simply don’t need 1.2 million new homes sold a year,’ he said. ‘The real puzzle is how did we build so many homes for all those years without having the market tumble.’”
Ouch. I can’t think of anything else except ‘tumble’ that can solve the professor’s puzzle.