Spring Selling Season “Has Not Yet Materialized”: CEO
Some housing bubble news from Wall Street and Washington. “Lennar Corp., the largest U.S. homebuilder by revenue, said earnings plummeted 73 percent during the fiscal first-quarter as the worst housing slump in more than a decade crushed demand. Lennar CEO Stuart Miller said the spring selling season, when homebuilders usually get the bulk of their orders, failed to materialize, just two months after telling investors this year would be as good or better than 2006.”
“‘Market conditions are very difficult across the Country,’ Miller said. ‘The industry is continuing to be challenged to adjust home prices and land values as well. It is unclear today where there is another shoe to drop.’”
“Gross profit margins on home sales fell to 15.6 percent in the quarter from 24.9 percent a year earlier because of higher sales incentives to lure potential customers.”
“‘The typically stronger spring selling season has not yet materialized,’ said Stuart Miller, Lennar’s president and chief executive. ‘These soft market conditions have been exacerbated by the well-publicized problems in the subprime lending market.’”
“New home orders were down 27 percent year-over-year, to 7,132. Lennar said its cancellation rate was 29 percent.”
“‘Our sense is that the tougher lending environment would have only started at the end of the quarter so that the impact will be more significant next quarter,’ analyst Daniel Oppenheim said.”
From MarketWatch. “The U.S. Commerce Department reported Monday that sales of new one-family houses in February were at the lowest level since June 2000. Inventories of unsold homes rose to a 16-year high.”
“William Wheaton, an economics professor at Massachusetts Institute of Technology, said the numbers ‘are actually where they should be,’ given that home sales over the past four to five years have been ‘unusually high.’”
“‘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.’”
“U.S. home prices continued to fall in January, with prices in 10 major cities now down 0.7% year-over-year, according to Standard & Poor’s and MacroMarkets LLC.”
“The 10-city index is down 0.7% in the past year, the first year-over-year negative reading since 1996. The 20-city index is down 0.2% year-over-year. A year ago, prices were rising 15%.”
From Reuters. “More than three in 10 U.S. homeowners have no idea what type of loan they own, according to a poll released by Bankrate.com, that suggested how confusion may be contributing to problems in the subprime mortgage sector.”
“Another troubling finding in the Bankrate.com survey was that 34 percent of homeowners who hold adjustable-rate mortgages (ARM) do not know what they will do when their loan resets to higher interest rates.”
“‘Clearly, many homeowners are uninformed about their mortgages,’ said Greg McBride, senior financial analyst at Bankrate.com. ‘Given that homeowners could be looking at an increase of several hundred dollars each month, this is a staggering statistic.’”
“The Federal Reserve is concerned that borrowers of subprime mortgage loans may face ‘more difficulty’ in the next one to two years, a Fed official said Tuesday.”
“In particular, those borrowers with recently originated adjustable-rate mortgages are likely to experience more delinquencies and foreclosures, said Sandra Braunstein, the director of the Fed’s division of consumer and community affairs.”
“‘To be sure, there needs to be a return to more realistic underwriting standards, and the guidance should have that positive effect,’ said Emory Rushton, senior deputy comptroller at the Office of the Comptroller of the Currency. ‘But we cannot ignore the likelihood that tighter underwriting will mean fewer–and smaller–loans,’ he said.”
From Bloomberg. “Federal Deposit Insurance Corp. Chairman Sheila Bair urged Congress to pass legislation setting a national mortgage loan standard to protect borrowers from predatory lenders.”
“A law should require loan underwriting based on the borrower’s ability to repay the true cost of the loan and not just the ‘artificially low’ introductory rate, Bair said in prepared testimony before a House Financial Services subcommittee in Washington today.”
“John Reich, the director of the Office of Thrift Supervision, disagreed with Bair, saying in his prepared remarks ‘we do not see a need for legislation at this time.’”
“He urged states to adopt federal mortgage guidelines for state-regulated mortgage brokers and lenders outside the reach of federal bank regulators.”
From CNN Money. “Sen. Christopher Dodd told CNNMoney.com that he did not believe new, restrictive regulation was necessary, but rather there was ‘enough on the books’ already.”
“Dodd admitted that he did not know what sort of bailouts were realistic for as many as 2.2 million subprime borrowers at risk of default, but said that ‘we need answers very quickly.’ To that end, he said he planned to meet soon with Wall Street banks that buy the loans from mortgage lenders and repackage them into securities, as well as others, in order to come up with some solutions.”
National Mortgage News. “On Thursday, members of the Senate Banking Committee lashed out at the Federal Reserve, and former chairman Alan Greenspan, for fueling the growth of alternative mortgage products and blaming the central bank for the rise in subprime-related delinquencies by not doing anything about deteriorating lending standards.”
“In 2003, Mr. Andrea Mitchell touted AMPs, in particular ARMs, to consumers but a few weeks later clarified his statements.”
“Of course, if senators on the committee knew anything about the mortgage industry they would realize that many of the biggest players in AMPs/subprime are non-depositories that are beyond the reach of the Fed and FDIC. The Senate panel might want to investigate Wall Street’s role in the crisis but that might cast many of their largest donors in a bad light.”
“This just in: HSBC Mortgage Services of Ft. Mill, N.C., is exiting the subprime correspondent channel.”
The Central Penn Business Journal. “Fulton Financial Corp. said it would take a $5.5 million pre-tax charge to first-quarter earnings because one of its subsidiaries is being forced to buy back subprime mortgage loans that went awry.”
“The loans did not require income verification and covered up to 100 percent of a home’s value for borrowers with a minimum credit score of 620.”
From Fitch Ratings. “Fitch Ratings has placed NovaStar Mortgage, Inc.’s residential primary servicer rating for subprime product on Rating Watch Negative. NovaStar is a subsidiary of NovaStar Financial Inc.”
“The rating watch reflects the challenging operating environment in the subprime mortgage market and uncertainties regarding NFI’s profitability. As a result of the company’s recent challenges, NFI’s ability to fund its ongoing servicing operation and maintain servicing quality could come under pressure.”
“Corporate recruiters fear home ownership may now prevent workers from accepting a new job, because selling a house may mean losing money. David Barlow said employers are now scrambling to upgrade their relocation policies to help workers sell their homes in a weak market. More of his clients are now offering to cover the costs of workers who lose money on a home sale.”
“‘It’s an absolute nonstarter for a company to expect an employee to eat a fairly significant amount of money on a home sale,’ Barlow said.”
“John Challenger, head of employment outplacement firm Challenger, Gray & Christmas, said that while America’s near-record 69 percent home ownership rate has been lauded by politicians, few considered the impact a less-flexible workforce could have on the economy.”
“‘When you’re renting you’re more fluid, but we’ve been moving more and more people into home ownership — it’s been a national goal. But there are problems with it,’ Challenger said. ‘The economy doesn’t operate as efficiently, and that’s what we’re now beginning to see.’”
“Challenger said laid-off workers face a double whammy. ‘People get stuck with homes now worth less than they were when they bought them, and they can’t get out of them,’ Challenger said.”
“‘Some can’t even make the payments if they’ve lost their job, and they certainly can’t take a $50,000 hit selling the house for less,’ he said.”
“‘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.’”
FB buying multiple flipped homes
FB buying multiple flipped homes….
Let me add to that… ” where anyone that could fog a mirror, no income documentation required, could get a million dollar loan for one of those homes”.
Looking forward for all that excess inventory back on the market in the form of REO’s.
Someone actually used the “when anyone could fog a mirror” line on CNBC this morning. I laughed. I wonder if he got it from here.
I wonder when someone is going to quote this website ? I wonder how many big wig economists read here ?
Mike Larson of Weiss / Smart Money advisory service not only reads, but also posts occasionally. Also some gov officials have made quotes that sound a lot like some of our regulars.
I hope these bigwigs see the folly of government sponsorship of housing, and change their policies.
The first change should be a elimination of homeowner tax breaks. If the government wants to lower taxes, lower them for everyone, not just some schmo who bought a house.
Technically, the landlord gets more generous tax treatment than homeowners (with some planning their activities can be essentailly tax free) and the break evens out the tax treatment of owning vs renting (assuming you believe that the rental market is competitive).
The home owners tax benefit is a scam.
To take tax advantage of your home loan’s interest, you must itemize and come up with a total that exceeds your standard amount. On 2006 tax returns, the standard deductions will be $5,150 for single taxpayers, $7,550 for head-of-household filers and $10,300 for married couples who file joint.
Most filers will not use it.
Where do YOU live? I heartily disagree. Property tax is deductable as well, so interest, tax, and charitable contributions are in excess of the std. deduction for almost anyone starting out, and for many years for coastal residents.
Unless one gets hit with the AMT
I expect much more AMF action, personally.
Interest deductions and tax deductions for most of the country (not California, Alaska or Hawaii) do not meet federal guidelines to justify itemizing. In the current economic doldrums, charity contributions are not increasing but they are available to non property owners.
For those who have ‘Option Arms’ there is no deduction and with Alt Min hitting another 15% get whacked.
I am looking for the resource and will post, but I recall in 2006 only 30% of all homes with mortgages qualified for Mortgage Interest deductions.
Hoz points out:
The home owners tax benefit is a scam. To take tax advantage of your home loan’s interest, you must itemize and come up with a total that exceeds your standard amount.
It’s not a scam. Like someone asked, where do you live? In places like Virginia or Maryland, it’s not that hard for a family to hit the $10k+ standard deduction when considering state income taxes (6-8%, even higher in DC) and property taxes combined. From that point on, mortgage interest IS deductible.
Obviously, this is not the case if your income is low, nor in places with no state income tax, and I’ve encouraged my friends in Texas and Florida (for example) to be wary about relying on the tax deduction as they decide to buy. One Texas friend many years ago was VERY incensed to find at tax time that his net benefit from interest on his $68,000 home mortgage was precisely — zero. I’d warned him, oh well.
Anyway, I posted this and more detail on a realtor blog in Tennessee some time back when the realtor was pushing hard on the tax deduction you get. I thought it was misleading and poor practice to promote that because TN is one of those “problematic” states with no state income tax, hence very few of her customers could get any benefit from the mortgage interest tax deduction. Seems like the topic didn’t stay on her board for very long, though. Hmmmpppph!
The mortgage interest tax deduction is a scam because home prices rose to cancel it out. Note that it is a deduction on the interest, not on the total mortgage payment. So in reality, while home prices rise to negate any benefit to the homeowner, the deduction subsidizes the lender profit (interest).
You can be sure that a LOT of movers and shakers (more accurately, their minions) read Ben’s blog — every day, every word. Anyone in any money business who doesn’t, is plain stupid.
“William Wheaton, an economics professor at Massachusetts Institute of Technology, said the numbers ‘are actually where they should be,’ given that home sales over the past four to five years have been ‘unusually high.’”
PINCH ME! Economics professor from MIT now tells me things are where they should be. Hey, Mr. Econ professor, where were you in March, 2006 when Ben’s Blog was ahead of the curve with rational arguments and research that predicted exactly what happened, and didn’t blow their own horn, which they should, after the alarm bells are ringing everywhere. Go back to your ivy covered office and stop letting me know how stupid you guys are.
(It is always good to first check the facts before typing)
“Hey, Mr. Econ professor, where were you in March, 2006…”
Professor William Wheaton Department of Economics Center for Real Estate MIT March 2005
Is There a “Bubble” in. US Housing Markets? Professor William Wheaton … Up and down economic shocks to the Housing market…
http://web.mit.edu/cre/news/pdf/HB-ARES.pdf
good catch GS…
he was screaming bubble in March 2005!
We get to ornery on here and accusative on this board sometimes, huh?
guess the Ivy is still sitting green and pretty!
“generalize the behavior of kneejerk liberals like”
Give it a rest you guys/gals…you know it’s a slow HB news day when the discussion devolves into Republican vs. Democrat posturing and baiting. News flash - both parties SUCK, and, at this time in history, they both share similar reasons for their suckage (immigration for one, unbridled spending for another). [mini-rant off]
Right on, brother.
Both Republicans and Democrats are to blame for this mess, as well as all the other crap going on.
It’s time for people with a partisan bent to get over it.
As a Republican I’ve had it with my party’s “leadership” and I’m fed up with Dodd and Nancy and Ted.
Please, let’s apply our talents to fixing the problem and getting rid of the lamebrains who cause the problems, regardless of their political party.
http://tinyurl.com/24j9ao
Here is the Senate’s bipartisan bailout team. Did anyone catch Shelby’s snarky remark about the credibility of the rating agencies with respect to subprime MBS? I’ll be he got a tongue-lashing later behind closed doors for that one.
I especially like slide no. 7: “Mid West Home Price Appreciation: surprisingly strong . . . but little risk.” Bwahahahahahaha! Clueless tool.
What were you presenting at MIT back in spring 2005? I suppose you saw the full picture…
Spare me. I’m proud to be a successful practicing professional and not some academic isolated in an ivory tower, and yes, the housing bubble was all too obvious back in 2005. Also, who couldn’t see then that Detroit was falling off a cliff and Midwest housing would suffer as a result?
With all do respect to the MIT professor, if the first time he noticed a bubble was 2005 then the only thing he stated is what was obvious to most people on this board at the time as well.
I noticed bubble in the only “slighty frothy” market of Chicago in the fall of ‘03 and I’m not an MIT grad.
Same here; I was looking to buy in ‘03 in Los Angeles, when I noticed the prices had suddenly jumped about 20% yoy. Also in late ‘03, the LA Times quoted the UCLA Business school guys (when Thornburg was still there) as saying the LA housing market was about 40% overvalued. I backed off from buying at that point.
Of course he nailed it. He’s WIll Wheaton, who played Wesley Crusher on ST:TNG. He lives 400 years into the future. Of course he knows all about our housing bubbles and our silly obsession with that “money” stuff. He took classes in it at Starfleet Academy.
I was about to post the same thing. Wheaton says in that PDF that there should have been a correction in 2002-2004. He’s been calling this bubble for a long time.
In 2004 subprime ARMs became popular as the fed started tightening. Most of us were appalled by this kind of irrational behavior and its endorsement. As a result, we are not surprised by its cataclysmic conclusion.
Interesting set of slides. Items from his slides in 2005:
1. He thought prices were already exceeding fundamentals in 2001.
2. Noted that permits were still rising, and price-to-rent was crazy in 2005.
3. Attributed the problem some of the problem to increased ownership, and noted that sub-prime originations was making things nutty.
Yep. Looks like he pretty much nailed it back in 05.
Looking at chart 13 — Can we fully explain the divergence?
a. Subprime loan products.
b. 40 yr low interest rates.
c. Average buyer expectations.
d. Rampant Speculation.
e. Fraud.
f. Shifting behavior from renting to ‘owning.’
Wow. He freakin’ nailed it.
Numbers are where they should be: LOL
Home prices plunge in January: S&P/Case Shiller
- U.S. single-family home prices plummeted in January, showing the first year-over-year drop in home values in more than a decade, according to an index of major metropolitan areas published on Tuesday.
The composite month-over-month Standard & Poor’s/Case-Shiller Home Price Index of 10 metropolitan areas declined 0.6 percent to 220.90, or a 0.7 percent year-over-year loss, S&P said on its Web site.
“The annual declines in the composites are a good indicator of the dire state of the U.S. residential real estate market,” Robert J. Shiller, chief economist at MacroMarkets LLC, said in a release.
“The 10-City and 20-City Composites are both showing negative annual returns, a striking difference from the 15.1 percent and 14.7 percent returns they reported this time last year,” he said. “The dismal growth in the 10-City composite is now at rates not seen since January 1994.”
http://tinyurl.com/2f7xko
The striking thing about the S&P/CSW index changes is the breadth of the contemporaneous price declines across U.S. cities — especially taking into consideration that there is no national housing market!
HEY ……
There was a RAP HIP-HOP MUSIC BUBBLE A FEW YEARS BACK TOO, now sales are back to normal down 20-25% so the RIAA blames and sues everyone for downloading.
what MORONS!
This curious form of muzak that has bothered me and others so, for a few decades now… can’t go away quick enough.
Dvorak, anybody?
I liked his tv show
“Lennar Corp., the largest U.S. homebuilder by revenue, said earnings plummeted 73 percent during the fiscal first-quarter as the worst housing slump in more than a decade crushed demand.”
This is a mammoth drop in earnings. 73 percent! Wow. The future is NOT looking bright for housing. And this is before the effects of the new, stricter lending standards have been felt. Boy this could get fugly real fast.
Going back to 1967 new housing production rarely got up to 800,000 units, mostly it trended between 400-600,000. But since 1997 it has exceed 800,000 and peaked at 1.2 million last year.
If the historic production average is 40-50% less than 1.2 million units, builders still face a lot of pain ahead (assuming there is a reversion to the mean). Anyone want to bet that “its different this time”?
Well, population is rising, households are getting smaller, and old housing does get demolished. Barring market cycles, I would probably expect every year to be a record year for starts and sales, scaling approximately with household growth minus demolition.
Note that I don’t think population growth will necessarily cause price growth. But I do think that, on average, housing starts should be higher now than they were in 1967. Am I missing something?
There is one thing missing - the size of new houses. The average new house is now over 2,400 sq. ft, a new record. Smaller houses sell for less, so if a return to normal means a return to normal sized houses too, the average/median price will drop that much more.
The enormous inflation in home prices between 2002 and 2005, is to blame for the housing crash. It was the price, stupid!
The fuel for the astronomical home price inflation was the easy credit. As prices got higher, Toxic loans were invented, to compensate for the higher prices, while credit was still easy, and drove prices even higher.
In the end, easy credit and exotic loans could not justify the inflated home prices, no matter what the interest rate or loan type. In the end, it was the price, stupid.
Why does the MSM avoid like the plague, talking about the inflated prices of homes, which is the root cause of the housing crash?
How about an extended discussion on the blogs about the actual high home prices, which triggered this crash? If the blog discussions focus on price, the MSM will eventually pick it up.
You’re 100% right, and I agree with you that it’s so blatantly obvious, but continually ignored. Even David Lereah has said in some of his less publicized comments that prices are simply to high, but everyone just keeps pretending that it’s everything but that…
Thanks, Patch Tuesday.
Got a new post up…follow up to an FB situation from 14 months ago.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Great story. People need to know they can successfully negotiate out of these upside down situations.
Seems very odd how this data (which I believe is more accurate with what I see) compares to NAR data last week. Me thinks the NAR with their fingers and toes crossed have difficulty counting correctly.
“‘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.’”
It took loads of scamming past off as analysis from Wall Street ‘experts.’ Nuff said.
“passed” (caffeine deficiency…)
Or surplus…
Wall Street doesn’t have analysts. They have cheerleaders. Its about time we stopped calling them analysts.
Wall Street makes money when you sell the stocks you own and buy new stocks. That means you need a constant flow of new stocks and you need advertisement for them. They call the people that do that cheerleaders.
O.K., sounds good to me…
Wall Street cheerleader analcysts
A little late for chief strategists of some kind, perhaps?
Throughout 2001, CNBC might have said:
“Today Chief US Investment Strategist Cheerleader Abby Joseph Cohen said to ’stay fully in tech stocks…’”
[And OT - hwy50 - gotta hand it to your UCLA Bruins... they've played very well since losing to Cal.]
Thanks for remembering sf jack,
between march madness & Ben’s blog… the 2-buck-chuck and Neil’s popcorn have been diminishing to dangerous levels in the pantry.
UCLA! UCLA!
I’ll second that. I’m a Bruin alum myself. Time for a little payback against Florida on Saturday. Need to do a few 8-claps during the game.
To clarify
Wall street has both Analysts and cheerleaders.
Being part of the great unwashed means you see and hear the cheerleaders.
I guarantee you that there are analysts…you will never see or hear them. They tell the cheerleaders what to tell you so their clients can maximize their profits.
Good news for the board…My home sold, but that is not the good news, the good news is the sale involved no realtors. No commissions will be paid to any greedy realthores
:)
What are the details?
No realtor on the front end and no realtor on the back end = no commssions for greedy realthores
:)
F. Watcher..I am surprised. I just got back from an Orlando area trip ,and was dumbfounded by the number of Houses for sale,and what’s more…the number of developments that have broken ground and in the first stages of development! On 42E I saw 2 Ryland developments that must be several 100 each, A huge development started on 44 towards the beach that must be 300-500 homes ‘Via Venezia?’ …One townhome development near Deland had fixed 4.5% finacing with 50k off sale. Otherwise, sale sign on every corner ,and most, FSBO’s. I guess there’s still a race to the stop sign.
Oh I agree with you completely eastofwest, but if people would simply follow the instructions that intelligent posters have laid out for them on Ben’s blog they can still sell their homes at these overpriced levels.
As an example the people on the blog try to instruct would be sellers to price their home well below the competition. That worked in my case, kept the home in great condition and priced well below the competing neighbors.
I would just like to say that I was able to do this because I eliminated the realtors from the equation which gave me an additional 6% of negotiating power.
So in summary price below the competition, eliminate realtors all together, throw open houses, yes they do work and deal directly with buyers who don’t have a realtor
One final note, make sure you protect yourself in the transaction by involving a title company which is owned by a reputable lawyer. By choosing that type of title company, the lawyer fills out the FARBAR contract for both buyer and seller and it protects both sides by using a competent lawyer. The kicker is that they don’t charge any money for the assistance with the contract, I have competively priced title companies and see no difference in price from the ones owned by lawyers.
I would like to thank Ben and all the posters that put such good information for all of us on here to absorb you have all been a real help in my situation
Well done. You took the 6 percent realtor fee and gave it to the buyer as a discount. As a result, you were able to price below the comps. All in all, it cost you less to sell on your own and you got out sooner rather than later, preserving equity before prices fall further. Smart move.
To Florida Watcher,
How did you manage to sell your home in a falling market?
I mean, did you tell the buyer that prices were going back up?
I feel sorry for the guy who bought your home. He probably did not understand the market, and I’m sure he would have not bought in a falling market if he had been told the facts.
I’m having a real problem accepting the idea of it’s “buyer beware” when the consequences are so profound.
I just want to know if FloridaWatcher managed to refrain from the “I’m sooooo glad I sold this place” happy dance in front of the buyer at settlement.
But seriously - glad it worked out for you, hope it works out ok for your buyer. Just curious - what kind of downpayment/financing did they use?
“I feel sorry for the guy who bought your home. He probably did not understand the market, and I’m sure he would have not bought in a falling market if he had been told the facts.”
Yep - can’t have personal responsibility where people actually do some research prior to making the largest financial decision of their lives.
Nope - someone is supposed to TELL the dumbf*cks what to do.
zeropointzero I did do that dance you described
To answer your other question sizeable down payment and fixed loan.
Again, thanks to all contribute to Ben’s blog and to Ben, some of you really are making a difference in people’s lives that you don’t even know and this is all being done over the internet.
To crisrose,
I’m concerned that the buyer may have been mislead.
That’s why I asked Florida Watcher if he told the buyer the market was going up.
It’s hard for me to imagine the buyer paying an overinflated price in a falling market without someone giving him some bad info.
clearview,
I congratulate FL watcher because he/she did the right thing. I’m watching tons of clueless buyers recently “snapping up” homes in our area — some for tippy-top prices on homes which were on the market for many months.
I absolutely abhor predatory lenders who pull the “bait & switch” on low-intelligence, naive borrowers; but to expect a seller to warn buyers away by stating that the market is going down is just unrealistic.
Congratulations, FL watcher!!
Moody’s and S&P are still rating junk subprime bonds as AAA
Just like the good old days when they gave AAA ratings to Enron and WorldCom into bankruptcy.
An excellent point and one that should result in major changes to rating firms in the next dozen years. A 70% subprime MBS CDO being rated AAA is surely a scam.
It’s different this time. Enron hid debt from the rating agencies and did nothing to correct the agencies’ misperceptions regarding their overall overall debt levels. Subprime borrowers, on the other hand, have been completely honest and thorough in all respects on their loan applications, etc. It is perfectly reasonable for the agencies to take subprime borrowers’ at their word for these things!
“The Federal Reserve is concerned that borrowers of subprime mortgage loans may face ‘more difficulty’ in the next one to two years, a Fed official said Tuesday.”
Not to worry, as politicians on both sides of the aisle are rushing to put together an FHA (read “taxpayer funded”) bailout…
http://www.investors.com/editorial/IBDArticles.asp?artsec=16&issue=20070319
First time I’ve seen the MSM note that stuck homeowners will not be able to accept new jobs in other areas, making the nation’s job market much less fluid, something that’s been predicted here for the last year or two.
One more reason renters come out ahead.
It was on Squawk Box last week. They said 3 out of 10 were turning down relocation requests due to housing issues. Old news! I want to hear when it’s 9 out of 10.
“They said 3 out of 10 were turning down relocation requests due to housing issues.”
I was wondering why Citigroup was considering a move to Buffalo—-having trouble hiring. Does that mean more corporate real estate (and jobs) will be moving to flyover land?
I have often wondered why it has taken so long. I guess the “creative” types like to live in 1.5 million apt to condo conversions in San Fran.
“But at the same time, Clinton wants to raise the $363,000 limit on FHA-backed mortgages to help buyers in more expensive markets.”
Does she even have a clue? The SFR median list price in San Diego County is $599,000 (ziprealty.com). Good luck at finding a home that is not either a condo, a fixer-upper or in a gang-infested neighborhood for under $400,000. Unfortunately, I don’t believe the situation is much different in the rest of California (especially anywhere within 1/2 day’s drive of the coast).
I don’t like Hillary, but I have to approve of her decision (?) not to prop up San Diego County prices. Her $363K won’t do NY any good either.
I misinterpreted her statement on first reading. She wants to raise the $363K FHA ceiling, though I am doubting she will get it all the way up to where it could have much effect on California coastal prices…
I confess I don’t get your point. If she raises the limit to, say, $700K, then lots of people in CA could suddenly buy with FHA mortgages.
Isn’t all of CA 1/2 day ( 6-7 hours ) from the coast?
For the last time– there will be no meaningful bailout of underwater homeowners.
The words “too little, too late” ring a bell? Any legislation that is passed will be so incredibly toothless, it will be essentially for show, bills that get passed and signed to make people feel better, to give them the sense that their elected officials really do care about their issues.
The reality is that were we to get a real bailout of people’s property values, the US would become insolvent. Now, maybe we are already insolvent, depending on how snug your tinfoil is, but everyone– everyone– realizes that the magnitude of this problem is beyond help.
The market will correct itself. Throwing taxpayer-funded money at the problem is like taking a squirt gun to the Great Chicago Fire. Nobody needs to get riled up beyond their normal levels.
My fear is that any such attempted bailout will indeed be meaningful - not in that it will actually help anybody, but that it will set a bad precedent - i.e. send us further down the slope of government responsibility for our financial well-being. Not that there aren’t already tons of bad precedents - but this would be yet another, and a huge one at that.
You are correct if Nancy Pelosi is held to her promise that this Congress will only pass bills that are within their “pay as you go” budget. It’s hard to imagine how they could manuever a bailout under those conditions.
Hypothetical question: Would Hillary’s proposed bailout through FHA expansion extend to those (like Casey Serin) who bought multiple homes?
Hopefully no bailout Stucco, I know that would frustrate responsible people.
From Reuters. “More than three in 10 U.S. homeowners have no idea what type of loan they own, according to a poll released by Bankrate.com. . .”
I’m surprised the numbers aren’t higher.
I recently heard that 50% of HDTV buyers don’t have the proper hookups, so they’re not really watching HDTV. And to top that off, according to the poll, 50% don’t even know it. We can’t be saved from ourselves.
“… have no idea what type of loan they own …”
They’re about to find out that in reality the loan owns them.
I recently heard that 50% of HDTV buyers don’t have the proper hookups, so they’re not really watching HDTV.
And yet, they’ll tell you (and convince themselves) how much better their picture looks now that they have an HDTV. Ahhh, the power of suggestion.
Amen brother!
How we struggle through every day of drudgery with our 15 year old, 24 inch tv… I cannot begin to tell you.
Somebody just shoot me.
“But with HDTV on the 60″ screen, you can actually see the droplets of sweat on _________.”
You just don’t know what you’re missing.
aladinsane, I’m cheaper than you. I have a 26 inch color TV I bought in 1987 or 1988. So either 19 or 20 years old. Works great! Picture is fine enough for me. A 0.50% higher clarity image for $1000 does not impress me.
I upgraded my ~10 year old color Sony TV this past year to a widescreen HD TV (and yes, I do have an HD signal and the proper hook-ups). It took me about 3 years to finally pull the trigger…this past Christmas, the prices were about half December 2005–which pushed me over the edge.
My wife poo-poo’ed the move at first as a meaningless change. She now admits she was wrong. If you don’t watch a lot of TV, it may not matter to you. But damn, I must say, the picture is a lot better.
>droplets of sweat
eww… pron was not meant for HD
Cheaper still…20″ bought in 1989. A bit fuzzy and blacks out every now and then, but won’t give in until the thing falls over and dies.
Beat you all! No tv, watch DVD’s on computer.
And guess what–I don’t miss cable a bit.
Come now all one needs to do is hook up their DVD player, even via RCA connectors and blow the doors off any analog TV any day of the week. Statement Validity
How many HDTV owners bought an “HDTV-ready” set that doesn’t have an HDTV tuner and they don’t even know it? I’d wager there are a ton of them out there suffering from a serious case of cognitive dissonance.
LOL, can’t deny that, but really now you didn’t expect them to put a 27″ daewoo in an 1800 sq ft living room did you?
They may not have put it into an 1800 sq ft room, but you can bet thet put it on a credit card…
And wine tastes better out of Riedel glasses, until you do a blind taste test. Then it doesn’t matter.
Actually I’ve an HDTV and I don’t have HDTV cable - intentionally.
There is nothing on TV worth watching in regular def never mind high def.
Just waiting to see who’s going to win the high def DVD battles before I pick up a high def player.
LG and I think another now have a player that plays both HDDVD and BlueRay. Can’t loose with that…
Or can you… I read recently on a tech website that there’s an even newer and better HD technology coming out this summer!!! So much for the HD/Blueray war.
30 year fixed at 6.125%.
I have a HDTV but refuse to pay Comcast more for HDTV service, they’re reaming me already.
comcast is the evil empire
Cox and Bellsouth are worse, if you can imagine. And I thought Verizon was bad. My… god…
I went to my uncle’s new house two hours East of SF Bay Area (long commute for him) for Thanksgiving. He bought a 65″ LCD ($10K) along with all new furniture after selling his townhouse in the Bay Area (instead of placing a bigger down payment down like he should have). He had no HD content and I experienced mental pain watching it. I hope he wasn’t sold into an ARM. Every new housing development I’ve seen advertises 95% ARM type products — they try to lure people with “Monthly payments of only $1432!” (for a $520K purchase).
I saw Circuit City is now advertising “no interest until 2010 on any TV $999 and up.” I wouldn’t be surprised if that 65″ LCD was also on debt.
Found the article, 85249 nailed it . . . this is humorous and exactly why we have a problem in the U.S. HELOC to buy crap to keep up w/Jones.
Thursday, March 1, 2007 - 10:12 (GMT+99)
US consumers confused over HDTV technology
AZcentral: Anyone who thinks consumers understand high-definition television should consider a recent survey by Leichtman Research Group.
It concluded that close to one-half of the 24 million households with HDTVs don’t actually watch high-definition programs because they haven’t obtained the necessary hardware from their cable, phone or satellite operators.
And about one half of those viewers - about six million - don’t even realize they’re not watching HDTV. Bruce Leichtman, the market research firm’s president, figures the confusion is partly because the consumers spend so much money on the set they can’t believe they’re not getting what they paid for. “This is cognitive dissonance,” he says.
…can’t believe they’re not getting what they paid for…
check out
http://www.tvtechnology.com
Click on Masked Engineer
then article
Getting to Home Base With A Cast of Multi
The article is very technical, but the bottom line is that
most HDTV signals are highly compressed. Some are
compressed to the extent that quality is lost. So even
if someone owns a digital tuner and/or set-top box and
a HD capable display there is no guarantee of picture quality.
A more predictable HDTV signal source is via a Blu-ray
or HD DVD disk.
For me, I sticking with a 15 year old TV and rabbit ears.
I can receive analog SDTV (standard def TV) over the
air with good enough for me and its free quality.
But this the the housingbubbleblog and I don’t
want to get off track.
For a bunch of people stating that others know nothing about HDTV well’s here’s a primer. All our analog [non-digital] sets starting in 2009 will be good for plant stands and vcr’s only. Uncle feddy is going to shove HDTV down our throats.
Apologize in advance about using Non-bubble bandwidth
The current cut off date for analog TV Over the Air
broadcasting is 17-feb-2009.
For the frugal amongst us, DTV to analog converter
boxes (and new antennas) are becoming available.
They will front end older analog TV’s. You can then
set your old analog set to channel 3 or 4 and tune
the DTV channels via the converter box. For those
who obtain signals via cable or satellite it’s a non-issue.
Most current DTV is standard def only.
True High def signals are still the minority. In other
words, HDTV signals are a subset of all DTV signals.
When I think of all the things I can use $1000 to actually improve my quality of life, the idea of spending that much to get a bigger TV is repugnant. To me the only thing worth watching is the occasional big sporting event, and I have enough friends who already have big-ass TVs that I can watch it with.
Ok - 7 years ago I splurged $999 on an RCA (how unfashionable!) 46″ rear projection TV. Was the biggest expense in my life up to that point but I paid cash with a nice bonus I had just gotten. The skinny sets were just coming out then and the salespeople tried desperately to seperate me from 5K for one of them but I just couldn’t swallow that. It’s still working 7 years and 2 moves later. Had a delivery guy come in the other day and marvel at how nice the picture was for an antique - when I told him how much I paid he winced and let me know how much it s*cked to pay 5K for a big flat panel HDTV. He just kept looking at my clunky old RCA wistfully. I am sure he used a CC to buy his and it was killing him.
And another 3 in 10 are too embarrassed to say that they don’t know what kind of loan they own.
A friend the other day said “I’m OK with my ARM, it has a maximum interest rate, and it can only go up so much at a time.” I asked her what the max was and how fast it could go up. She didn’t know. Which camp does she fall into?
All of the people that come out of the woodwork, after the fact…
Have showed up.
Welcome.
“Another troubling finding in the Bankrate.com survey was that 34 percent of homeowners who hold adjustable-rate mortgages (ARM) do not know what they will do when their loan resets to higher interest rates.”
That’s just plain nuts.
You’re right. Many of them were told by loan originators, “No problem, you can always re-finance.” That was the big lie.
az_lender, how do you compete against these “no money down, no payments forever” loans? What I mean is, how do you get any people coming to you then there is so much seducing them to take a toxic loan from the big boys? Do you have a special niche?
He lends on mobile homes, the big boys dont do them.
Actually, az_lender is a “she”.
‘You’re right. Many of them were told by loan originators, “No problem, you can always re-finance.” ‘
Of course that’s what was what followed the RealtWhores saying, “…but this condo is just a stepping stone, you’ll be able to move up in a year or two.”
another auction of New Century loans
http://www.thestreet.com/_tscana/newsanalysis/wallstreet/10346903.html
I have a potential stupid question:
Suppose I’m a holder of those New Century bonds (assume I’m Daddy Warbucks), and some of the home “owners” who’s loans were packaged in that debt default and go to foreclosure… would I as a bondholder end up as the legal owners of that home?
No, the securitization trust is the owner of the homes. You financed the trust with the purchase of bonds, you are the liability side of the trust. As a bondholder you have claims to the cashflow from the assets (the loans purchased with your money) of the trust, but not to the assets themselves.
You’d have to take a careful read of the perspectus. Most of those bonds are debt owed by the corporation that issued it (perhaps backed by the assets outlined therin) but in default your claim would be against the company’s assets–which might include REO but probably not a specific group of homes.
If you were really Daddy Warbucks, you could buy the all the bonds in default for a few pennies on the dollar and then essentially take over the assets (including homes and the right to foreclose on notes in default) and get the homes that way. Typically this results in a pretty good deal for the buyer, but not always. That’s essentially how Lampert bought K-Mart.
Folks we got us a bagholder! In…France!
“France’s fourth-largest bank, Natixis, plans on unloading $800 million in mortgage loans tied to beleaguered subprime lender New Century (NEWC - Cramer’s Take - Stockpickr).”
Good - any bags we can get the French to hold, I say let ‘em have it.
Hee hee hee, we’ve outsourced our toxic loans to the french. Who thinks foreign ownership of our debt is bad now?
Mr. D…is that you?
Even odds that US gov buys the bonds to keep the French from dumping their US dollars.
he said he planned to meet soon with Wall Street banks
Hoo Boy . . . that’s gonna go over big with certain elements of the political spectrum.
in 10 major cities now down 0.7% year-over-year
On average, but in many cases YOY prices are down as much as 20-30% in the D.C. suburbs of VA.
I meant the VA suburbs of D.C.
Yes yes, tell us how people in Arlington really feel.
That much? DC proper is down an official 3.92% My own neighborhood is down 10-15% from peak. We have a long way to go yet - things are still at outrageous multiples to both rents and incomes. Credit is tightening…..
I’m off 10-15% from peak 22151 N VA
““Corporate recruiters fear home ownership may now prevent workers from accepting a new job”
This is where we realize that housing is a non-performing, non-productive asset. It’s a white elephant for businesses.
Housing was not, is not and will never be an asset. Housing is a desirable liability. Part of the problem is that MSM refers to housing as an asset and rarely took about the cost of home ownership.
I agree about SFH, but rental appartments with positive cash flow look like an asset to me, especially in inflationary times.
Rental properties are assets, assets generate cash; unfortunately the last few years have resulted in negative cash flow on many rental units and necessary maintainance has not been performed.
Owning rentals is a *job*. I’ve already got a job and don’t need another one.
Respectfully disagree with you here. Sure there are costs to maintain this asset and it may lose value, but it is an asset nevertheless. The mortgage(s) is/are the liability.
Just as vehicles, furniture, fixtures, business inventory, machinery, equipment, etc. are assets. There are costs to own and maintain them including financing, insurance, personal property taxes, maintenance, repairs, etc. Plus, most of these can and do lose value. If it has a positive value and can be sold, it is an asset.
“Any item of economic value owned by an individual or corporation, especially that which could be converted to cash.”
and from the International Accounting Boards Standard
“An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise.”
What are the future economic benefits expected to flow? NONE
There’s always been one–rent savings.
Smithers,
Point taken. I should have been more specific. Investing in overpriced housing is a non-asset/white elephant.
At the right price, just about anything is an asset.
“At the right price, just about anything is an asset”
Yeah, like my 13″ color Sylvania t.v. I bought for $129.00 in 1987…still works great…coupled to a dvd & video player from Fry’s for $49.00…the small kids also use it for old super nietendo games…which I get for 25 cents at yard sales…hours of fun, snacking on Mac & Cheese & Neil’s famous buttered popcorn…although I might have a life time of costs going for eye glasses, Ha!
Now, If I can get that $60.00 Gov’t analog to digital converter rebate…Hell, the kids will be lamenting at my funeral about how I deprived them of intellectual growth by not upgrading to a PS3…they will look back in utter disgust and despair.
Housing is an “asset”, just not an “investment.” In accounting terms, technically anything you own is an “asset.”
Not if you listen to Robert Kiyosaki! We saw one of his presentations on a PBS fundraiser (shame on you, PBS!) and my wife the accountant was howling in laughter and disbelief at how he characterised assets and liabilities. No wonder people like Casey who pay for courses like that get so confused.
Au contraire, it is an investment, because it yields income. The income is a marketable service called shelter, the value of which is the market rent. Any capital asset that yields income is an investment. I thought that was pretty obvious.
Owner-occupied housing is just as much an investment as a house you rent out. In the former case you are consuming the income directly.
Things like gold, commodities, collectibles are not investments because they don’t yield income.
Thanks, Professor Yogurt!
“Things like gold, commodities, collectibles are not investments because they don’t yield income”
If I lease my Van Gogh painting to the Getty for a show…that’s not income?
When I practiced family law in Austin in the 80s and 90s, we referred to the home as a negative cash flow asset (particularly if noise was being made about what a wonderful thing it would be for your client to be awarded the home to offset the other spouse getting all the Motorola stock options).
Now, I envision spouses (and their lawyers) playing a vicious game hot potato to avoid being awarded the home/sucky mortgage. We’re really talking “negative cash flow” these days
I like that “a negative cash flow asset”! Did people really believe that line?
That is like the car dealer saying, “Would you like to roll your negative equity into your new car?”.
I’m replying so late that this won’t be read! But I have to note: there’s a silver lining for business. Stanley Johnson (the one on TV, not the poster here) can’t bear any period of unemployment, and certainly can’t afford to relocate, or the borrowed veneer of affluence and “respectability” will come crashing down. His employer OWNS him.
Nice comment!
Meanwhile, Quicken Loans is pimpin’ $500k mortgages for $1700/mo … I was watching TBS and Quicken had a 30 second commercial hammering home $150k loans for $450/mo and so on …
I haven’t heard anything about Quicken in the midst of all these subprime lenders stories … They might be doing loans to good FICOs but this is obviously a toxic loan.
Speakin’ of Quicken…
anybody here drive the 101 in Scottsdale and behold the huge ass glass and steel commerial (mortgage companies) buildings lining the freeway? Quicken is just one. There’s a slew, usually tandem with a realty company.
So, any bets on who the next occupiers will be?
So, any bets on who the next occupiers will be?
Either Fashion furniture or dollar tree
Vietnamese Nail Salons
Cash Only!
Telemarketers. That’s who always ends up occupying those spaces during market downturns.
How about some collection agencies?
Isnt it odd there are so many refi commercials on Squawk Box CNBC early in the morning? That audience isnt exactly Joe6Pack. Could it be the supposedly financial savvy folks have toxic loans, too?
The audience may not be J6, but it might include the dopes who over-bought spec condos and stuff like that.
I used Quicken. They were easy to deal with, gave me what I asked for, had good rates (1/4% below others on a 30-year fixed jumbo), and no pre-payment penalty.
“Dodd admitted that he did not know what sort of bailouts were realistic for as many as 2.2 million subprime borrowers at risk of default”
If we use Ohio’s standard of $100,000 needed per bailout, that would come out to $220,000,000,000 to bail out everyone (assuming that the 2.2 million FBs is accurate).
“$220,000,000,000 to bail out everyone”
That should be no problem for a net-creditor nation like the U.S.
I think you mean $2,200,000,000,000 (2.2 Trillion).
Actually, never mind. Bad math.
Good catch. All the more reason for politicians of a net-creditor nation like the U.S. to jump on to the bailout bandwagon.
BTW,
2.2 million = 2.2 X 10^6
$100,000 = 1 X 10^5
Ergo 2.2 million X $100,000 = $2.2 X 10^11 = $220,000,000.
Luckily I still have my special early 90’s Russian hyperinflation approved Citizen ten key that goes out to 16 digits! I get $220 billion.
Also thanks to my ten key I can also inform you that when the other 275 million Americans show up to get their $100,000 check the bailout will balloon to $27.5 Trillion!
Got gold?
Hey, my fair share is $400K!
The famous Chicago motto “Where’s mine.”
Actually, $2.2 X 10^11 = $220,000,000,000
“U.S. home prices continued to fall in January, with prices in 10 major cities now down 0.7% year-over-year, according to Standard & Poor’s and MacroMarkets LLC.”
One little side hobby I have (and encourage others to take up) is e-mailing local “journalists” who continue to cheerlead for the RE community (no doubt homeowner’s themselves). One local “journalist” just wrote an article titled “Housing Downturn Slowing” and quoted a realt-whore as saying “we expect prices will just level off.” When I confronted him, here was part of his reply, illustrating that even these so-called “unbiased” reporters are often in denial:
“I don’t know what you expect to happen…at work here is the law of supply and demand. As long as we have population and jobs… you are not going to see a drop in housing prices. Unless there’s a depression, worst case scenario is a 10% drop.”
Keep in mund this in So-Cal, where 10%+ is already in the bag. When I informed him of this, along with many other stats, he had no reply.
Think about it; is a “reporter’s” job really to do any, active, thinking?
They have to interview “experts”. They have to print what “experts” say (to some extent) in order for their reporting to appear “credible”. I’m not disparaging them; its hard to listen (much less record) what someone says, come up with relevent, hard hitting questions (sometimes UNCOMFORTABLE questions for the interviewee) and then have to compose something around several statements and some facts.
Unless there is a real desire to get to root of an issue (and how many reporters care about the “root” of the issues they are assigned to write about) how often will the follow-up question ever be asked that will be, truly, revealing? Even then, if a reporter prints an embarrasing answer will the subject (perhaps an “important” figure) ever talk to them again? So is it in the long term interests of a reporter to ask (much less print) discomfitting questions of “important” (future news sources) figures?
Your guy has heard “10% decline, tops” from “experts”. “Experts” know more than he so he just stops thinking. Most reporters probably don’t have the time or the inclination to do some basic research. That’s why they blow tiresome people like you (and me) off. Since we don’t have a “name” we have no value in their eyes. They certainly can’t WRITE; “But according to Fencesitter, massive foreclosures and the elimination of subprime loans will lead to much further declines”….can they?
Not unless you’re a “man in the street” and that, you clearly aren’t. Because the “man in the street” is someone who basically throws an opinion off the top of his head and you, unfortunately, have thought too deeply about this…..you don’t qualify there either.
Don’t take it personally. This is the nature of most media. They have to broadcast with an eye open to future news acquisition. This is why they’ll rarely toast a “big” figure until everyone else is pounding them (and the future of said figure is doubtful). When they can be of no further use….ah, that’s when you’ll get “revealing” news stories.
That’s the game. At least for now.
I don’t take it personal, but my expectations are that journalists need to report what is actually happening, not what RE shills say is happening. That’s like asking a defendant if he’s guilty and when the requisite “I’m Innocent!” comes out, the reporter writes a story with a headline “Joe Smith is Innocent!” You get the picture. I’ll keep poking at these guys until I see some truthful reporting, and not wishful thinking, in the newspapers I pay for.
Good for you fencesitter! We all need to stay on top of these people in order to get the truth out there.
If you think journalists are bad…try writing to politicians. Talk about getting blown off.
we all know about subprime home loans…but do not disregard its cousin “subprime auto loans”…
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7etPDiLQq4s
LOL! No really, I Laughed Out Loud.
“There could be some fallout from subprime in auto loans,” Risi said in an interview. “We don’t have much data yet. We’re still in collection mode. It’s probably going to be hard to say for a while.”
Where did this genius go to school? I want to cross it off the list for my children.
When will all this “unexpected” news suddenly become expected?
whoa!.. what’s this? “Hey look everybody, I just had a baby!”
Holy crap! I just spit water all over myself. Cut that out!!!
“Usually you can tell if you’re pregnant, but with me, I couldn’t tell,” the 39-year-old Garden Grove resident said Thursday, pointing to her belly and explaining that, at about 420 pounds, she was so large that no one – including herself – could tell she had carried a baby to term.
Branum says she never had morning sickness and did not feel the baby kick, at least not until after doctors told her what was inside her womb. “If he kicked, I didn’t feel him kicking,” she said.
The layers of fat padding her belly likely insulated the baby’s movements, said her physician, Dr. Afshan Hameed.
This is so gross. Also, the father is like 150 lbs soaking wet . . . things that make you go “bleeeeaaaaahhhhh”
I think everyone on this blog knew the hopes for a Spring rebound were in fantasy land. And that was before the subprime meltdown, which has been a very recent occurence.
There will be fewer & fewer qualified buyers at a time when inventory is swelling (usual Spring sellers + flippers + foreclosures).
And if we bail folks out for buying houses they can’t afford, what’s next? Get a bailout for driving a car that’s too expensive, buying a TV that is more than you can afford or taking that trip to Disneyland?
The only way this madness ends is if people have to face the consequences of their decisions.
Agree 100%. People have to face the music for poor decisions, but we also need to put some regulation in to avoid a repeat.
More regulation is unnecessary. Just let people learn the hard way this time, and these mistakes won’t be repeated in your lifetime.
Um, “Toast,” were you awake in the late ’90’s? Did you hear the one about the $300 stock, in a company with no products, or sales? It went to $600, then vaporized.
No one will learn anything about this episode.
Most of the people I know who were burned by the dotcon crash are not the same ones who will be crushed by this crash. After this bubble pops, the idea of “something for nothing” will be relegated to fairy-tale status where it belongs.
Joe Momma,
But I don’t think it has to be govt. regulation and if they “regulate” a return to safer lending standards, they have to know they will tank the housing market in 20 minutes flat. Without voodoo loan products, no one can afford these prices using traditional metrics. But banks might be forced to return to more traditional standards of qualifying buyers if they can’t dump those loans to an MBS bagholder. A return to downpayments, steady income, no credit card debt, 6 months cash reserve…we’d be back to 2000 prices at least. And that would be a market driven reaction to this mess.
No one is “entitled” to home ownership, as it usually does involve a 30-year financial commitment to a lender. You should have to earn it by showing you know how to manage your money and behave in a responsible way.
No one is “entitled” to home ownership, as it usually does involve a 30-year financial commitment to a lender. You should have to earn it by showing you know how to manage your money and behave in a responsible way.
That should be between the lender and the lendee, assuming the lender is playing with his own money (ridiculous assumption, I know).
Government got us into this mess. More government won’t get us out.
Oh my god..
If we went to those standards, we might be back to 1900 prices.
No credit card debt? The disqualifies… Well, just about everyone I know.
6 month cash reserve, 20% down.. Bwhahaha..
You could just take the current price; divide by 5, and then you would have the new selling price. And we would continue the slide from there, as there are only about 300 people on earth (of which 250 post here) who have a chance in he** at meeting those standards..
If that law was passed tommorow, I would be on the phone with State Farm that DAY to increase the limits on my renters insurance as high as it could possibly go. Why? Because within 1 month, the entire development I live in would be on fire as the flippers come to burn down the alligators.
It may be as simple as requiring the traditional 20% down again. When people have money at risk, up front, I think they’ll be a lot more thoughtful about the conditions of the loan they have to repay (in order to recoup their actual investment).
Not to mention; the mere fact that someone can come up with a significant downpayment indicates a reasonably responsible person from the begining.
If you’ve got no money at risk (or think you don’t) lets face it, that’s a “game” that is a attractive to most people.
20% down was the standard returned to in Austin TX by 1989 or so after 3+ years of decreasing home prices. 10% down for bank owned foreclosures (that had been sitting for months or years) where you jumped through hoops to prove you were a good risk. It took 5 years to get through most of the foreclosures and empty inventory. Prices fell 10%-20% below positive cash flow rent equivalent.
A 20% down requirement will take prices back to the mid-1990s in many places. There will be many foreclosures for years (far more than 2.2 million in total). Basically, anyone with less than 40 +/-% equity in many markets will need to bring money to the table or walk when they have to sell.
BTW, those years were strong economic times in Austin (1986-92), even the 1990s recession wasn’t too bad there.
I always liked the Bentley Continental GT - the only car I know that does a four wheel launch! Maybe my Senator will bail me out if I buy one.
I heard that rooms at Disney’s Grand Californian start at $340 a night. And that the hotel is always full.
Ever price a week long vacation to Disney World, staying at one of their deluxe resorts? Its almost $6000, and that doesn’t include meals nor air transportation!
This bailout *IS* a bailout for new cars, TV’s, and trips to Disneyland- unless we exclude cash-out refinances from the equation. That’s what infuriates me most. If there’s any sort of bail-out planned, I would at least like to see it resticted to for-purchase 1st mortgages.
for no greater than 80% of the median value in any given state, or 80% of the original purchase price, whichever is lower.
We may have to think about what compromises we are willing to accept. The tobacco companies did this with the Master Settlement Agreement and look like geniuses today.
The problem is that when leverage is applied the consequences are not limited to you the stupid one being the only injured party. That’s why bank regulation exists in the first place (to limit the external effects).
Exactly, bluto!
As long as idiots have the power to unilaterally affect the economy, we need regulation.
Doom and Gloom?
http://www.bakersfieldbubble.blogspot.com/
exerpt from Blog:
Local appraiser Michael Launer of Launer & Associates Inc. said the new housing market is strong. He said median sales prices do not accurately reflect the market as a whole and can be skewed if fewer high-priced homes are sold during a certain period.
“I don’t think it’s time to panic,” Karpe said. “Two or three years ago we were one of the hottest markets in the country. Our market couldn’t sustain that growth. It is in a correction phase. It’s not bad. It’s not going to crash.”
“Paging Mr. Bacon…Paging Mr. Kevin Bacon…”
“I don’t think it’s time to panic”
Sounds like it’s time to panic.
“…bringing Bakersfield to its knees”
I’m re-updating my Bakersfried motto:
Bakersfield,
Oil, carrots, pesticide dust and foreclosed houses…& free blanket & free one way bus ticket to WeedPatch
“U.S. home prices continued to fall in January, with prices in 10 major cities now down 0.7% year-over-year, according to Standard & Poor’s and MacroMarkets LLC.”
One of my side hobbies (which I encourage others to do) is e-mailing local “journalists” who continue to write artcles that cheerlead for the RE community. One local “journalist” wrote an article titled “Housing Downturn Slowing” and quoted a realt-whore as saying “we fully expect prices will just level off.” Here is a paraphrased excerpt of his reply to my e-mail:
“I don’t know what you expect to happen…what’s at work is the law of supply and demand. As long as we have population and jobs…you are not going to see a drop in housing prices. Unless there’s a depression…worst case scenario is a 10% drop.”
Keep in mind this is SoCal. When I informed him 10% was in the bag and gave him reasons why I expect another 20%, he had no reply.
Oops…this posted twice. I didn’t think it took the first time.
> while America’s near-record 69 percent home ownership rate has been lauded by politicians, few considered the impact a less-flexible workforce could have on the economy - The economy doesn’t operate as efficiently, and that’s what we’re now beginning to see.
Why is this so obvious but drowned out during the bubble years? The political class seem to have been on drugs, especially the president, calling for increased homeownership in an “ownership society”. Many people renting is good for the economy! I would prefer an ownership society where people save and invest enough to build wealth, regardless if they have rented their home or have rented the money to lay claim on its title. That would make them owners (of assets).
Your mistake was in thinking that the masses were going to be the owners in the pwnership society.
Surprise! You just got PWNED!!!
welcome to the bonership society
You are right that renting is good for economy. It means people have more mobility and are more willing to move to other cities for higher paying jobs. It means more tax revenue from higher incomes. In these days of outsourcing, people went the wrong way and enslaved themselves to a stupid house.
“In these days of outsourcing, people went the wrong way and enslaved themselves to a stupid house.”
Good. Survival of the fittest - less competition for what little high paying jobs are left.
“John Challenger, head of employment outplacement firm Challenger, Gray & Christmas, said that while America’s near-record 69 percent home ownership rate has been lauded by politicians, few considered the impact a less-flexible workforce could have on the economy.”
The Renter’s Manifesto
Why home ownership causes unemployment.
By Tim Harford
Posted Saturday, March 17, 2007, at 12:09 AM ET
http://www.slate.com/id/2161834/
A little foreclosure update…
California’s headed for disaster.
http://www.putfile.com/pic.php?img=5081563
I added the red data point yesterday. Thanks to Jim in San Marcos.
There are a couple other goodies in my folder to enjoy.
That is log-linear graphing paper, right?
Tentative conclusion: Foreclosures in CA are rising exponentially with a doubling period of about 2 months, 19 days.
Why are there no data points between mid-December 2006 and the end of March 2007? This means you are estimating the slope based almost entirely on the March 2007 data point.
Jim made that graph back in December and estimated the slope. I merely added the latest data point. Perhaps somebody has data to fill in the gaps. Looks pretty ugly regardless.
Some intermediate data:
Mid-Dec - 6,939
Mid-Jan - 8,149
Mid-Feb - 10,546
Mid-Mar - 15,906
Thanks!!
Updated:
http://www.putfile.com/pic.php?img=5083920
“How to Cover your Real Estate Losses by Raising Alpacas and Chinchillas for Quick Cash”
That was hilarious!!
Bots, I cant believe Learah didnt write a book on investing
in the subprime mortgage companies….
Hey thanks! I could probably crank out another. I’m open to suggestions.
From some genius over on the MSN board:
There has been talk about passing legislation to assist people who are struggling with their sub-prime mortgages to stay in their houses. This could be by requiring mortgage companies to roll back rate-increases in some cases, or by providing actual financial aid to homeowners in other cases. I think this would be very wise, because by reducing foreclosures in this way, we would help to preserve housing prices, which represent a substantial portion of the wealth of our citizens.
Probably posted by someone who works for a Wall Street investment bank.
” by providing actual financial aid to homeowners in other cases. I think this would be very wise…”
OK, why doesn’t this A$$hole find a couple of defaulting subprime borrowers in his neighborhood, write a check to bring them current, and start making their payments for them? I bet the whole concept wouldn’t seem quite so “wise” to him then.
iTulip Select Interview
Dr. Michael Hudson - Part III
March 26, 2007
1. Credit derivatives are the most likely cause of a future financial system crash.
2. No one can hedge the risks posed by asset deflation except by selling inflated assets.
3. October 1987 is the model for the next financial crash.
4. The larger the debt, the bigger the debt deflation. Expect a long, slow economic crash.
5. The U.S. will not repay its foreign debt.
6. Hyperinflation of the dollar, if it happens, will be a political and not an economic or monetary event.
7. Since the time of the South Sea bubble, financial bubbles have been created by governments in order for governments to dispose of public debt.
8. The U.S. government wants to exchange social security claims for stocks so that stocks can be inflated and then allowed to crash, to wipe out the entitlement liability.
9. Most corporate balance sheet growth over the past few years is fictitious capital, what used to be called ‘watered costs’.
10. The U.S. corp. sector is “fragile” due to excessive use of debt and leverage for the past several years.
11. There will be a huge asset grab and re-imbursement.
12. Hardly any money is spent on assets, rather, 99.9% of monetary payments are spent in assets, so the health of the FIRE economy is more relevant from a monetary standpoint.
13. Initially there will be mass defaults on mortgages and losses of houses to people with ready cash.
14. Later banks will allow home owners to stay in their houses, payments owned will be added on to the mortgages, and debt will go up without any money changing hands.
15. US housing debt will mimic the 1970s Brazilian compound interest curve.
i’d like to see the math behind this. the foreclosure rate is still lower than the early 1990’s and we lived through that
Got me some gold coins. Being a woman, I had to get the “pretty” ones, lol.
tx:
You seem to be of high karat…
In my book.
I’m just going to curl up in the fetal position, suck on my thumb and hope it all goes away.
Which ones? I like the Maples and of course the 4-ducat Austrian coins are beautiful. But the Eagles aren’t bad either.
#1 - Yes
#2 - not sure; not all assets deflate, just as all stocks did not go down during the depression.
#3 - I think it will be slower, but more painful
#4 - yes
#5 - It will, but maybe not for decades
#6 - True, only the gov expands money.
#7 - This appears to be true
#8 - Doubt it
#9 - Absolutely true
#10 - 72% of S&P1000 corporate bonds are rated “Junk” - True
#11 - Foreign countries are trying to get out of dollars into hard assets. True
#12 - Corporate buybacks of stocks are non productive - True
#13 - Happening
#14 - Already proposed.
#15 - Lets see household debt from 1995 2 trillion to today 12 trillion - maybe
What math is needed?
“8. The U.S. government wants to exchange social security claims for stocks so that stocks can be inflated and then allowed to crash, to wipe out the entitlement liability.”
“3. October 1987 is the model for the next financial crash.”
You ever watch a persons body language on Jeopardy… frantically pushing on their clicker button after they’ve been beat to the punch?
When all the little boyz PC’s ( Wiley E. Coyote) go to push on the button that says: NOW!…
only to find their sell trades have hit… just after… the big boyz (Roadrunner) PC’s cause the bottleneck called: The triggers have been activated!
Could you believe I failed my jeopardy tryout?
Truth be told, it was an embarasing place to be. folks that had fully memorized people and dates and little more. No grasp.
We took our test and it was supposed to take 20 minutes to grade them and they put up a video of an old episode and I cringed as people shouted answers to the screen.
I only hung around, like a few minutes.
Who knows how I did?
fait’ jeopardy~
Hey Texas Chk.
How is the Kingwood area? Humble Texas?
Might consider going to Texas after I’m done in Tokyo, difficult to return to LA. (I never bought a house (especially in this insanity), so I’m not an home equity Locust)
Maybe an ex-expat low Japanese income tax equity locust.
Job market looks decent for my profession and the salaries are decent compared to home prices.
seems like the Houston area hasn’t seen the huge run ups like other areas like LA, Dallas, Chicago,etc.. somewhat akin to the Pittsburgh area.
Thanks!
Chris
Re: Legislation to bail out FBs.
Sorry to rain on the parade of the Geniuses (like the one on MSN) who think this will happen and is a good idea.
- When was the last time Congress did anything to improve things for
you or me ? I can’t think of a single case.
- In this case (as in most everything else), they want to give the
impression they care and are doing something. In reality, some token
legislation will pass that will result mainly at making sure banks (and
other political donors) get to cover their collective asses.
- The thought that Congress is going to pass legislation to bail out FBs
and indirectly bail out holders of crappy mortgage-backed paper, most
of whom happen to be Foreign Investors and Hedge Funds, at the risk
of sharp tax increases, is ludicrous and will never happen. Even with
the Dems controlling the House.
You’re right–remember USAir?
The current congress sucks. And Pelosi is part of the problem. The good politicians have died or retired and these crazy boomers (sorry, boomers) have taken their place.
Good to know the barn-door will be closed tight and locked, perfect timing:
http://www.reuters.com/article/newsOne/idUSN2724197920070327
“The time has come for national anti-predatory lending standards applicable to all mortgage lenders,” Federal Deposit Insurance Corp. Chairman Sheila Bair told a House of Representatives subcommittee in a hearing on Tuesday.
Might be a plan to ask her where she has been for the last 6 years while this tsunami was gathering momentum AND, unlike most tsunami’s, it was well known that it was on it’s way. I suppose the two questions to ask are: “What was the reason you didn’t speak up before and have you had any donations from any orgnization in the real estate industry?
D. Seiders on CNBC as we speak. ..Now sees an 8% decline in Newhome sales, 2 weeks ago he said 4% decline ,and Feb he said 2% down. He explains it as a quicker than expected slowdown. Surprising , the source.
at least we can calculate the slope !
who’d want that job
Just on Cnbc a builder named Anfuso was complaning about how it’s hard for people to get loans now. He said that the requirements for getting a mortgage jumped from being able to fog a mirror to having to be in the Forbes 400. What a windbag, requirements aren’t even where they should be to make sound loans. But I am beginning to think maybe you do need to be in the Forbes 400 to AFFORD a house anymore.
Fun to watch all the experts that really should have said something long ago, all getting up on the dance floor, to do their version of the CYA Neutron Housing Crash Dance…
Love their lack of style…
it’s all about “spin and cover”
Oh, “Cut & Run”?
http://www.google.com/search?hl=en&rls=GGGL,GGGL:2006-21,GGGL:en&defl=en&q=define:Cut+and+run&sa=X&oi=glossary_definition&ct=title
Not a bad thing.
“On the other hand, the liquidity that exists in today’s financial market is a real wild card and could be a critical mitigating factor alleviating negative market forces and restoring balance” — Lennar Corp
This is what bothers me. There is so much excess money around and so many smart, greedy, hard-working financial engineers on Wall Street. They will come up with new strategies to flip distressed American properties to oil-rich Azerbaijanis who will then flip to their neighbors in Kazakhstan and then on to Tajikistan and so on down the line until we end up with the Mongolians.
Financial Innovation to the Rescue!
Has everyone heard about the innovative new loan product that is going to save the housing market? With the new Appraisal Stated/Stated FICO(tm/patent pending) (”ASSF”) loans, everyone can be a prime borrower and qualify for 100% LTV, perfect for the NINJA first-time buyer! There’s never been a better time to get ASSF’d!
Lou Minatti: watch out for doz Galveston condos! Yeeehaw!!!!
http://wwwa.accuweather.com/promo-ad.asp?dir=aw&page=hurr07
Might I suggest speculating in oil and nat gas futures?
ROTFLMAO - Tx, I detect that wry since of humor that I enjoy so much. I like South Padre and I had a ranch outside of CC years ago. Never got hit once. Lucky
I haven’t heard anyone comment on any “bridge loans” .
Friends of mine are closing on a house next month and
haven’t sold their current house and investment condo yet.
Are they toast or what????
Bridge loans can be pretty toxic. If you need a “hard money loan” expect to pay 13-15%. But then again, you’ll only need it for a month or two until you sell your old house, right?
Another question I have is , what does seasonally adjusted mean??
Is that just a fancy term??? Can I seasonally adjust my weight????
Yea , now I’m 115 lbs. Seasonally adjusted for summer.
Now I’m going to seasonlly adjust my bank account too.
Yes, the data is adjusted for whichever produce is in season at the moment. Right now it’s cucumbers, so everything gets adjusted by $1.26/pound. Last month it was pineapple.
Comment by txchick57
2007-03-27 11:41:40
Got me some gold coins. Being a woman, I had to get the “pretty” ones, lol.
Reply to this comment
Comment by aladinsane
2007-03-27 11:46:54
tx:
You seem to be of high karat…
In my book.
txchick/aladinsane: could you offer any recommendations on where/how to purchase gold? I’m considering purchasing some but don’t know which way is the best to buy - thx.
There are many people that buy and sell Gold bullion…
Google will tell you if they’re naughty or nice.
You’ll have to do your own homework.
http://www.golddealer.com
i’ve used them several times!
04:26 ET Feds are investigating homebuilder Beazer - BusinessWeek.com (BZH) 31.41 -0.91: -Update- BusinessWeek.com reports that federal investigators have opened a broad criminal probe into lending practices, some financial transactions, and other dealings at Beazer Homes USA. The North Carolina field offices of the FBI, the IRS and the Justice Dept. have recently opened a joint investigation into the co over such matters. The Inspector General of Housing and Urban Development is also part of the group since a large percentage of Beazer’s loans were made to low-income borrowers and insured by the federal govt through the Govt National Mortgage Assn., according to people familiar with the investigation. Investigators, however, are not limiting their probe to possible mortgage fraud. “There’s all sorts of potential fraud issues here,” FBI spokesman Ken Lucas told BusinessWeek. “We’re looking at all types of [potential] fraud associated with Beazer—corporate, mortgage, investments.” The joint investigation stems from a series of articles that ran in The Charlotte Observer in mid-March, detailing allegations of abusive lending practices and unusually high foreclosure rates in a handful of Beazer housing developments in North Carolina. The paper’s investigation alleges that foreclosure rates in several Beazer developments ran at around 20%, compared with the national average of 3%. (See 16:21 comment)
04:21 ET Beazer Homes: CNBC announces that Businessweek is reporting the FBI is investigating BZH on possible lending fraud (BZH
The sleeze is uncovered as the tide goes out.
Lennar CEO Stuart Miller said the spring selling season, when homebuilders usually get the bulk of their orders, failed to materialize, just two months after telling investors this year would be as good or better than 2006.”
——————————————————————————–
Amazing! Does this mean that Stuart should give back some of his stock option profits? How do you go from 0 to -73% in two months wihout knowing somethings up?
Kitco on the internet is a real good source to buy gold/silver bullion and/or coins?
http://www.kitco.com/
Might I suggest a few gold coins (Kruggerands or American Eagles) and quite a few rolls of silver coins to use as cash/barter…
But it is all pointless; if things get that bad you will need some body armor, light arms, and a good knowledge of improvised explosives to set up your perimeter with homemade mines!