“Both Lender And Borrower Underestimated The Risks”
The Capital reports from Maryland. “Even though Maryland is insulated from the worst fallout from the proliferation of subprime loans in the past few years, it will still feel some consequences. These foreclosures also hurt lenders. To counteract any financial hit, lenders will try to clean up this ’subprime slime’ with tighter credit standards and higher interest rates, said Anirban Basu, chairman of the Sage Policy Group.”
“Overaggressive lenders can increase the likelihood of foreclosure, said Tom Shaner, executive director of the Maryland Association of Mortgage Brokers, but one of the biggest problems with these loans is a lack of housing knowledge from buyers.”
“‘I’ve had people after buying a house, call me and ask where they pay the rent,’ Mr. Shaner said. ‘Lenders have been aware of the issues and trying to use caution and we’re telling them, but they still want the house.’”
“People were so enamored with low interest rates that they leveraged themselves to the hilt, and they weren’t just buying houses. They were buying flat-screen televisions to go in them, Mr. Basu said. ‘Contrary to the American dream, for the first time we are hearing people say, ‘You aren’t ready to buy a house,’ Mr. Shaner said.”
“There is a whole generation of lenders who came into the industry with the housing boom beginning in the mid-1990s and who have never seen a downturn, said Christian Weller, senior economist at the Center for American Progress.”
“During this boom, there was a lot of money chasing too few good opportunities, which gave the lender a free rein, he said. ‘You have a whole industry being professional optimists,’ Mr. Weller said. ‘Both the lender and the borrower have clearly underestimated the risks.’”
“‘The last hurrah in the housing market was on the back of the subprime,’ said Christian Weller, senior economist at the Center for American Progress.”
The Examiner from Maryland. “Homeowners across the state with subprime mortgages may be setting themselves up for financial disaster. According to the Mortgage Bankers Association, there was a 12.39 percent increase in subprime loans by Marylanders in the fourth quarter of 2006.”
“Residents of Baltimore City…have taken out an alarming 14.2 percent of their loans from subprime lenders. According to statistics acquired by The Examiner from Data Place, this number is only compounded by 33.7 percent of mortgage refinancing loans being brokered by subprime lenders.”
“‘Even with higher incomes, you may have got suckered in with a low teaser rate,’ Urban Institute Senior Research Associate Peter Tatian said. ‘People will be able to get out of it, it’s just going to cost them some money to do it.’”
The Washington Post. “Tysons Corner mortgage broker Jose Luis Semidey, who has a popular Spanish-language real estate talk show on Radio Universal, is being deluged with calls from desperate homeowners who are falling behind on their mortgages.”
“Semidey said that the most calls are coming from Manassas, Woodbridge and Dale City in Virginia and Gaithersburg, Germantown, Capitol Heights and Langley Park in Maryland.”
“An illiterate carpenter bought a $750,000 house in Ashburn Village, Semidey said. Francisco Santos makes $60,000 a year by working seven days a week. He became convinced that real estate was a can’t-lose proposition after the value of the townhouse he had bought in Woodbridge in 2002 for $95,000 climbed to $230,000.”
“He and his wife traded up to another house and banked part of their profits. The Spanish-speaking real estate agents with whom he negotiated the purchase persuaded him to borrow against his equity to move up again.”
“‘They called me every day; they said we can do more business, that it’s a good time to do it,’ he said. ‘They talked very sweet into my ear. I believed. I believed these people, and I did this business.’”
The Philly Burbs from Pennsylvania. “Last week, we reported that home sales and home prices in the 43 municipalities of Central and Upper Bucks County and Eastern Montgomery County were both up 26 percent, a pretty significant increase.”
“The data on which we based that conclusion, as it turns out, was wrong. The corrected data shows, instead, that prices dropped 1.8 percent in February when compared to February 2006. The median sales price in February was $280,000, well below the $356,500 we reported a week ago. In February 2006, the median price was $285,000.”
“Sales also fell 1.7 percent to 282 in February from 287 in February 2006. We initially reported that sales jumped to 357 last month from 283 a year ago.”
“The overall trend we’ve been reporting for much of the last year, a housing market where prices and sales are falling while inventories rise.”
“In January, for instance, home prices in the area fell 4.8 percent, the revised numbers show, to $295,000. Last month, citing incorrect data, we reported that home prices fell 6.6 percent. The number of home sales in January fell 12.9 percent, according to the corrected data, a bigger drop than the 2.2 percent decline we initially reported.”
The Pittsburg Post Gazette. “David W. Bishoff is so pleased with condominium sales at the Carlyle, the soon-to-be-converted Union National Bank building at Fourth Avenue and Wood Street, Downtown, that he’s ready to try it again — right next door.”
“While it might seem like too much to some, Mr. Bishoff has no doubt the market can support it. ‘The question isn’t whether this city can absorb 200 or 400 or 600 or even a thousand. This Downtown should easily absorb and keep filled several thousand units,’ he said.”
“Mayor Luke Ravenstahl used the ribbon cutting to pitch his proposed tax abatement program for residential housing that is now before City Council.”
“One Carlyle buyer, Brian Ritz, likened his investment to ‘owning a piece of the Golden Triangle.’”
‘ The Standard & Poor’s/Case Shiller Home Price Indices report, released monthly by Standard & Poor’s, says.. Washington-area prices are down 3.9 percent from January 2005. Boston and Detroit were among other cities posting big declines.’
‘VIRGINIA BEACH — Late payments on subprime mortgage loans made by Resource Bank will hit the bottom line on its Pennsylvania-based parent. Fulton, with $14.9 billion of assets, has banks in Pennsylvania, Maryland, Delaware, New Jersey and Virginia.’
nothing’s going to hit “the bottom line” untill assets get sold and new low ,low prices……..
BS on the 3.9%. I’ve been watching houses all over NoVA, from Loudoun to Fairfax, from townhouses to 4-5 Bdrm SFH, and selling prices are off 10-15% from Summer 2005, and are already down to 2004 levels.
I guess technically 3.9% off of January 2005 would technically be 2004 prices, but the way that they are stating it paints a rosey picture. After all, 15% off from August 2005 sounds more dramatic. I’m looking for at least a further 10-15% decline by March 2008.
It depends a lot on the specific zip code and product type. Go look at the MRIS data where you can isolate these variables and you’ll see the losses can be all over the place from essentially flat in some places/types (like northwest dc detached homes) to -20%+ in others (like suburban condos and exurb townhouses). I suspect this is also timing… the detached home market downtown had very little subprime exposure but will fall indirectly over time as the people who would otherwise have traded up into them can’t in future years.
I’m seeing this in detached homes (4br +) in Vienna, Oakton, Fairfax, etc.
Well, lenders hire people who are payed to understand the risks.
excuses excuses all around just start taking the losses and forget about bail outs
the guy selling the paper to someone else just didn’t care
“‘I’ve had people after buying a house, call me and ask where they pay the rent,’ Mr. Shaner said. ‘Lenders have been aware of the issues and trying to use caution and we’re telling them, but they still want the house.’”
Unbelievably sad…
His statement sounds like a red herring. Like one time, somebody with an IQ of 65 asked him that. And it was probably someone using the word “rent” as a substitute for “payment”, as in “where do I send the money”…
Agree. I’m already so tired of the BS coming from these people that facilitated this mess. As if they didn’t fully understand the risks and expect the fallout (while pocketing the commission). Please, media, stop quoting these shysters as though they are innocent bystanders.
If anything I’d think it would be the opposite. Like, “I still have to send you money every month? Just like when I was renting? But I thought I didn’t have to do that anymore because I OWN a house now! And what’s this bill from the city, do I have to pay that too?”
h_a_n aka passthebubbly
Charlie Don’t Serf
It’s not sad, it’s true. He’s got an IO loan, simply semantics my friends…
“People were so enamored with low interest rates that they leveraged themselves to the hilt, and they weren’t just buying houses. They were buying flat-screen televisions to go in them, Mr. Basu said.”
This is what some of the top leaders at the Fed, and other economists as well, have referred to as the “wealth effect” from inflating asset prices. It seems very odd, in retrospect, to imagine how asset price inflation (due to ultra-low interest rates) could possibly make money grow on trees. Can anyone cite any theory in economics that would explain this alchemy?
Can anyone cite any theory in economics that would explain this alchemy?
Monetarism.
‘Monetarism.’
Milton Friedman was a monetarist, wasn’t he? The following famous quote suggests that he did not believe one could create wealth by printing money:
“It follows that inflation is always and everywhere a monetary phenomenon, as it cannot occur without a more rapid increase in the quantity of money than in output.”
http://www.britannica.com/nobel/macro/5004_32.html
It’s called “the wealth effect.” If you “feel” richer, you have more confidence, thus spending more money today. It’s a theory (seemingly proven out) that current spending is more a function of emotion than of analytical thought.
That’s fine, unless the wealth you “thought” you have was really no more than a loan that has to be repaid. This goes at the household as well as the national level…
Yes, spending is emotional. It used to be thought that people would not be fooled by the “money illusion”; i.e., they would recognize that when prices rose 10%, their 10% raise would be neutralized…ummm, it looks like they didn’t realize that. More to the point, if your $250k house appreciated by 20% to $300k, would you feel better off? Well, suppose you really, really craved that $400k house which also appreciated 20% to $480k. You’ve gained $50K on paper, but the house you want is now $80k more expensive. Throw in transaction costs and it looks like you’re actually worse off. The only way in which rising prices can benefit homeowners is when they’re downsizing or liquidating. But that truth is much less appealing than the illusory “wealth effect”.
“Throw in transaction costs and it looks like you’re actually worse off.”
Throw in PITI, maintenance costs and negative appreciation on the $480K home and you are screwed.
“He became convinced that real estate was a can’t-lose proposition after the value of the townhouse he had bought in Woodbridge in 2002 for $95,000 climbed to $230,000.”
“They talked very sweet into my ear. I believed. I believed these people, and I did this business.’”
Not a victim. An business decision that didn’t pan out.
“An illiterate carpenter bought a $750,000 house in Ashburn Village, Semidey said.”
Any chance the FHA loan limit will get raised from $363,000 up to $750,000?
I may be wrong, but don’t you have to document income to qualify for FHA? All of these GF’s went stated.
Let’s hope not.
“Illiterate carpenter” is an oxymoron. You have to have math skills to be a carpenter. Either the guy is literate, or he’s not a carpenter.
You sure as heck better know how to read too.
I took it to mean “illiterate in English”
You’ld be surprised at how many illegals can’t read in Spanish either. My sister is a bilingual teacher and she has confirmed that few of her students parents can read in Spanish.
Correct……when my oldest daughter was in high school, half of her Spanish class were illegals that could speak the language, but could not read or write it. That is when I realized that this country is almost too screwed up to straighten out.
America……the “thats real effin’ Beautiful…..”
These days, anyone who can swing a hammer and hit the nail on the second or third try considers himself a carpenter. You should see some of the work these yokels do.
BILL OF SALE: 1 HOME
SALE PRICE: $750,000.00
SIGN HERE TO BUY HOME: X
HAHAAHAAAHAAAHAAH
Slightly off topic, but this post reminded me of something I once read:
Many jackpot winners at casinos are immediately annointed VIP treatment via free show tickets, free stay at the Exectutive Suite, an escort of a show girl, etc., all designed to keep him in the casino and to keep him playing.
Eventually he will lose all his winnings (and then some) and these comps will suddenly disappear.
Pavlov’s Dog?
He and She have been frequenting Vegas, for some time.
Reinforce me~
There is no free lunch.
Only two couples I know have done overlap-purchases (buying before selling) in the past six months. Both are from Phila area. I have yet to hear whether their old places are sold. Both were entirely confident that it would be easy to sell their previous houses. It’s different there … ??? nicer than Pittsburgh though.
I know of a couple in the same boat here in Tucson. Last August, their real estate agent told me that they’d have no problem selling their old house, as it was on a double lot. I walked by it yesterday evening. Still for sale.
My old colleague in Bozeman, MT has been sitting on his first house for a year now. He figured it would take at most a month to sell as “everyone wants to live here”.
A good friend of mine relocated to Dallas (and bought a fancy place there) from a fairly nondescript place in Continental Ranch (3/2 around 1600sqft I think). It finally sold after being on the market for something like 8 months. I don’t have the address so I don’t know what it finally sold for, but I suspect they took a haircut just to get it gone.
Sure, az_lender, it’s different in PHL if you cook the books:
Our data supplier says that while the numbers it supplied for individual municipalities were correct, it mistakenly included one additional municipality — Bensalem — in its totals. That skewed the numbers enough last month to make it appear there’d been an increase in sales and prices. In past months, however, the mistake does not appear to have significantly altered the market’s basic trend.
The real estate data we publish each month in the form of a long chart is provided by Prudential, Fox & Roach Realtors’ research division.
1st of all - numbers being skewed by sales in Bensalem? Anyone familiar with the area knows that’s a suspect statistic. Bensalem is hardly a retirement haven for Boomers. Some biker gangs, maybe.
2nd - Data supplied by Prudential, Fox & Roach…ha ha ha that explains it. I used to work for that chop shop. Everytime a new condo development came on board I would ask the sales people:
“Who’s going to buy these condos?” …and they’d present me with binders of bar graphs and pie charts and all kinds of graphics that demonstrated the entire moneyed universe wanted to live in Philly.
$crew them and the horse they rode in on.
And shame on you, Philly Burbs, for believing those crooks.
I was in the lobby of my kid’s music school in the Philly ‘burbs and overheard a conversation where the one person’s daughter was unable to sell her house and had already bought another one. Lots of listings in the ‘burbs, now; a lot of money, too, but the people with money are smart and waiting for the bottom.
“a popular Spanish-language real estate talk show on Radio Universal, is being deluged with calls from desperate homeowners who are falling behind on their mortgages.”
US has long been seen as “paved with gold” etc. by the South of the Border immigrants. In Latin America they don’t loan you money if it doesn’t look like you can pay it back. Unfortunately, as of late, the same hasn’t applied in the good ole USA…
Welcome to the You’ve Been Owned Society
Tu casa es mi casa
no mas casa
Ahhh, the famous roads of gold! These articles are getting pretty disgusting. Take the illiterate carpenter. These immigrants, legal or otherwise, are getting screwed by their own kind. I bet their broker’s parents were immigrants. Really sad. That being said, why didn’t the guy go use some kind of pro-bono legal service before doing all of this? Illiterate or not, I think the old saying is worldwide: if something seems too good to be true, it most probably is! Some of my friends and family are getting tired of my bearish/pessimistic economic outlook, but how can the near future be good when this RE bubble found its way into some many crevices of society? Our economy seems to have been flying with just one engine: RE. As someone here once posted: how far can you go on one engine? Answer: All the way to the crash site.
I wouldn’t be suprised if the broker is an “immigrant” also.
Tango Nachos?
Neil
Did you just ask your nachos to dance?
Tienen palomitas de maiz?
(con mantequilla, por supuesto)
LOL. Thanks, all.
–
Under estimated the risk that was Crystal Clear to even non-financially inclined?! Most people I know thought that what was going on in the mortgage business was “crazy.”
Jas
“‘The last hurrah in the housing market was on the back of the subprime,’ said Christian Weller, senior economist at the Center for American Progress.”
Over the last few years, the poorest and least credit worthy individuals became the “lucky owners” of incredibly substandard homes and loans. I was talking to my mortgage broker last week (an honest woman with more than 20 years in the biz), and she was staggered not only by the lack of standards, but the hideous overvaluations of manufactured homes (trailers). The poor people were lining up for these things, anxious for their shot at the American dream. Most of the loans will never be paid off. They cannot afford a $200k trailer on less than $30k per year.
Somebody was trying to sell a mobile home in Key West for a million dollars last year or the year before. Don’t know if it sold, but it probably did.
they still have mobiles listed at 500k if they have great view of the ocean
but there are ones now slipping into high 200s on canals
Soes that 200K include land? I know people who have purchased used trailers for 10K.
Yes, the land was included. But, with little value in the trailers themselves, they should not have been funded as real property. Instead, the deals should have been treated as land purchases, and required a minimum 20-50% down. The lenders chose to fund with little to no down, cooking the numbers with bogus appraisals to get the deals done.
“Homeowners across the state with subprime mortgages may be setting themselves up for financial disaster…..”
“…..you may have got suckered in with a low teaser rate,’ Urban Institute Senior Research Associate Peter Tatian said. ‘People will be able to get out of it, it’s just going to cost them some money to do it.”
I’m sure the subprime homeowner will have no problem bringing money to the table to get out of a house/loan…… just as soon as someone can show them where to borrow it.
“One Carlyle buyer, Brian Ritz, likened his investment to ‘owning a piece of the Golden Triangle.’”
Why do I sustpect the investment will soon resemble the Bermuda Triangle?
LOL!
I’ve seen the “Golden Triangle” and that ain’t the golden triangle I know…
IMO, Brian Ritz is going to feel like he’s getting a “golden shower” from his “investment.”
And just when you think you’ve heard the last of this mindset, along comes another GF: “Even though Maryland is insulated from the worst fallout from the proliferation of subprime loans in the past few years…”
Maryland! It’s different here!
http://www.mcre.com/story.cfm?Market=MCRE&StoryID=14799
“It gets under my skin how when things like this happen everyone starts talking about how lenders are bad, they’re so bad…It’s not true. I can’t say that mortgage brokers are to blame for this, or Wall Street or consumers. We have cycles like this in every credit industry. Several years ago, it was the credit-card industry that everyone was worried about. This is being painted as an ethics issue. That’s wrong. It’s a Capitalism issue.”
“It’s a Capitalism issue.”
I wouldn’t necessarily disagree. Inherent in the system is the possibly of excess. Hence, the continual boom and bust of economic cycles. Things continually shoot over and under in terms of values and prices.
Beats waiting in line for a hour for your shot at the last loaf of bread though….
Socialism then?
Education.
Agreed! For both consumers AND lenders.
The real fundamental thing you need to teach people is that money is money. There’s no such thing in the universe as ‘easy money’.
MSM has been chest-pounding the last 5 years “RE Money is easy! Working for it is hard. HELOC money is easy! Rent is throw away.” 5 years before that it was nasdaq. People hear ‘easy money’ and they just jump off a cliff!
Now that stock accounts and homes are drained of value, there’s only one place left where people have real money– Death. Don’t think there’ll be a life-insurance-backed securities market in 5 years? Just say ‘easy money’ and watch.
Was talking with the local pastor and we are 180 degrees apart…
(he believes in life after death and I believe in life before death)
But,
You can’t let a little thing like that get between you.
Go Meet the neighbors, they won’t bite.
Indeed, education for borrowers AND lenders. And the best education is to let them face the consequences of the risks they took. A bailout would be like inflating every grade of F to an A.
Yes, it does. But what remains most reprehensible is the cult of personality surrounding so many executives, The Fed, and the Trumps of this world - cunningly crafted by a self-serving MSM. They convinced so many that these mighty titans have finally caught the tiger by the tail - that capitalism’s wild gyrations have finally been tamed.
If anything I hope at least this latest crisis chases smug CEOs, entrepreneurs, and bureaucrats off the covers of financial magazines for a decade or two.
What’s the saying? “When you grab a tiger by the tail you’d better have a plan for dealing with his teeth”–or something to that effect. The tiger has spun `round and is getting ready to dig into the Masters Of The Universe.
Too bad . . . [schadenfreude moment]
Imploder,
it is fiat money (credit from thin air) that is responsible for these types of swings. Look up Austrian Business Cycle Theory. And check the stability of money from after reconstruction to just before the formation of the Federal Reserve (~1912).
You won’t see bubbles, just a gentle deflation due to productivity gains that makes it supremely easy to provide for ones golden years.
Paul
OK, so could you explain how the Tulip Mania and South Seas Bubble happened long before fiat money?
I don’t entirely disagree either. However, the individualism portion comes into play because many of us are offered the opportunity to abuse the tools of capitalism at the expense of others or the community in general. The individual has to decide whether to take advantage of that opportunity. Some believe that if you don’t take the opportunity you are a sorry-*ss sucker. Others think that what comes around goes around. We all make decisions.
“It’s a Capitalism issue”
No. It’s an issue in a pseudo-capitalist country where the economy is ruled by a few greedy men behind the curtain - namely the Federal Reserve and their cronies.
True capitalism would not have these problems, because in a truly capitalist society you don’t have interest rates controlled by a few greedy idiots, but rather by a wide array of competitive banks. Yes they may still be greedy, but if they’re all trying to out-greed each other you have balance in the system, and the consumer wins. When one single group of greedy men is allowed to rule, it introduces imbalances into the once-capitalist system, and these imbalances cause things like housing bubbles.
Thanks. For what is coming, the electorate must understand basic economics if we want to return to a democratic republic. It will be very easy for the MSM, politicians, and bankers to convince the uninformed that what they really want is a United Socialist States of America (USSA).
Perhaps you have forgotten about the frequent Panics in the 19th century?
Risk was not created by the Fed–in fact, at times, the Fed has provided some stability. The Fed was created out of admiration for the Bank of England system (when it was working). There were those who feared a central bank, so instead of a Bank of America we got a rather crippled “Federal” system which completely failed to do anything useful during the 1920’s-1930’s boom/bust. As a result, the FDIC was created, to save the savers. (Savers supposedly benefit from deflation, but not when the bank fails!) In later decades, the Fed came into its own.
True laissez faire capitalism is a messy system which leaves human wreckage everywhere … which gets us back to the purpose of government: the social contract to assure the common defense and the common good. User optimised systems destroy the common good; we need government to institute system optimization. It makes us all better off.
We currently have a system where the responsible taxpayers bail out the irresponsible borrowers and lenders. It is doomed to fail because it encourages too much risk.
Chris Dudd’s FB bailout will be a massive transfer of wealth from the workers to the corporations. Instead of having Wall St eat the losses from foreclosures, taxpayers will help the FB’s pay their high-interest notes on overpriced properties to big banks. Yes, money will be flowing out of our pockets directly to Goldman Sachs and Lehman Bros for another few rounds of billion-dollar bonuses. Thankyou Senator Dudd, you slimy corporate motherf%$^*(&
Dodd gets $millions from GS,WM,Lehman, and the rest of Wall Street(check his contriutor’s list). No different than Fastow, Lay (rip), Ebbers,Clinton,Reid and the other slime balls in government.
news.yahoo.com/s/ap/20070328/ap_on_re_us/townhouse_deaths_6
Immigrant townhouse owners with financial problems and a murder suicide ruination—could this be the first tragic stories of FB’s to come?
No, this was more than just financial, or at least so far evidence does not show that this can be blamed on interest-only ARMs resetting and the like.
Perhaps I am a sick puppy, but I actually looked up their sales records AND mortgage records. There is a single mortgage on the place. He borrowed 97% = $190k approx (ouch!) to buy it. It is not an adjustable rate; it is fixed, but I can’t find out what rate. There are no other liens recorded on the property that I could find.
In any case, even though this was not the “toxic” adjusting ARM that is slamming so many people, I cannot help but wonder that it must have been painful on their salaries to pay mortgage+tax+insurance which was probably in the range of $1800/month. (You can rent in that neighbourhood for $1200 or so.)
Maybe he was headed for layoff and the prospect of losing the house and heading back to El Salvador empty-handed? Gosh, methinks it better to make it back alive with the family, broke and empty-handed, than what’s transpired thus far. A very sad situation.
“An illiterate carpenter bought a $750,000 house…”
That pretty much sums it up, doesn’t it?
who can blame him? they talked sweet in his ear.
“hey you sexy carpenter, how’s about coming over to my place for some hot, steamy mortgage action.”
Now we know how much Jesus would pay for a house
The question is: What would Jesus do . . . when he finds out that there is no eight day available for working?
Don’t diss Jesus. He could read - the Bible describes him reading the scrolls at the synagogue. The ancient Jews were one of the most literate peoples of their time.
He also talked about building up riches in heaven, rather than riches on earth, which seems to be a pretty good warning against RE speculation.
The best confidence scams all involve showing the mark that he’s gonna make money… can’t lose… show them the money.
A couple of years ago, a scam artist showed up locally, made his pitch, and somebody hooked him up with an undercover cop. The cops were so sure they had him, they went down and signed for 10k at a local bank to run the deal.
The guy was so slick, he got away with the bank’s money off the cop.
I wonder who is going to lose all this money that was loaned out and won’t be paid back ? Is it really that spread out to not be noticed ?
Good question. Millions of homes foreclosed, an average loss of 200-300K in CA, less elsewhere. Talking hundreds of billions of dollars.
That’s not small enough not to be noticed.
Oh lord, now Chimpo Cramer is touting Merrill as a put candidate/subprime play. Gee, didn’t we come up with that little gem about a month ago? LOL
“If I were the President of this land, you know I declare total war on the pusher man.”
When all of this is over and we start over again, I hope I’m not a slave.
New rules:
No credit of any kind.
No credit cards.
No auto loans.
No mortgages. Cash only. All of the financial games that are played in this country will be illegal. You have the F&%#ing money or you don’t. Case closed.
Unfortunately, that plan hs a few problems.
Tyler Durden, is that you?
You mean like Saudi Arabia? Come to think of it, doesn’t Islam forbid the issuance of credit as usury? Credit has its place, there just need to be controls. You really need to think a little bit more before you say something that patently stupid.
http://tinyurl.com/2pnnwr
Yeah, it’s Poughkeepsie, but the comments about declining values and how low it could go is interesting.
Dan,
It’s different in Poughkeepsie!
(I crack myself up sometimes!)
My wife and I were roadtripping, out east…
She had a conference in Boston and slipped away, and off we went.
I’d never been to West Point and it’s so austere and beautiful, cadets running all over the place. Everything seems to be in it’s proper place and what a Fabulous cemetary…
Legends are a Dime a dozen~
But just down the road a piece in Newburgh, NY, we saw drug deals going down on the street and it looked, quite frankly, a little scary.
http://www.homesurfer.com/crimereports/view/crime_report.cfm?state=NY&area=Newburgh
Two worlds, both violent. Living next to one another
Is this the new Amerika?
Connect the dots with me.
I moved to Northern VA in November, and have been renting a room from a newlywed couple in their townhouse in Manassass. (I mention this because several people on this blog have mentioned before that statistics on the supply of housing units don’t take in to account people like this young couple who are renting out rooms in their own house, which is quite common in the DC/NoVA area, judging by the number of posts I saw on craigslist).
Anyways, their townhouse is located in a newly built community, and my guesstimate is that these POS townhouses sold for around $200K a couple years ago. There are several For Sale signs, including about 6 townhouses that I think have never been lived in.
Just down the road, Hovianian is trying to sell some similar townhomes that start in the high $300’s and it looks like there’s very little interest so far. There’s also some new condos coming online in nearby Fairfax that are located next to the new Whole Foods. Bottom line: more and more inventory, and not a buyer in sight.
Manassass is definately going to take a huge hit when this is over.
Prince William County’s inventory has been hovering at about 10 months’ for a few months, now. (And that’s a bit of an improvement). Yes, prices have already taken a very large hit. There’s also so much new development in the pipeline in that County.
I just can’t believe how much they’ve been building out there, and yet they continue to do it, even as the slump deepens. Miles and miles of gabled grey rooftops and white vinyl siding! Arrghhhh!
Hovnanian is one that was recently putting “make an offer” on some of their ads, though I see that’s been removed, at least from the recent one I’ve seen, as their asking prices dropped. If you have a real estate brochure from them from last year, compare the asking prices in their developments from that time versus their asking prices now. Not to mention, I bet you can get a lot of nice, tacky-trendy upgrades if you buy now!
As to why they cannot stop building, in some of those developments the developers still own a LOT more ready-to-go parcels, and if they are already in process of building the infrastructure (or have it built already), they really do have to keep it up. Better to lose $50k on each parcel than lose double that by not building it out. (OK, those are sheer guesswork numbers just for effect, but you get the point.)
All in all, it will be a tremendous oversupply, especially out in outlying regions where you would spend half your free time and a quarter of your income just commuting to work and back.
Yes. It takes a while to turn the big boat that is housing construction, for the reasons you stated. They’ve seen the iceberg for a while - it looked small at first so they gave the boat a nudge., figuring it looked like a small iceberg. My guess is that they’re just now realizing the iceberg is a lot bigger than they thought,, and are just now calling out “ALL BACK!!! FULL RUDDER TO STARBOARD” right now, but still the boat takes a while to turn.
The iceberg will be hit. We’ll see who makes it to the lifeboats in time.
Oh yeah, the outlying Va. suburbs are already bad and are going to be a bloodbath. I live much closer in to town in Arlington in a neighborhood from which you can walk to the Metrorail station, and houses seemed to be moving fairly well until about the beginning of this year. Slowly, however, I’ve noticed things come to a total halt. And this is a neighborhood where unmodified 1920’s-era houses were increasing in value by $100k per year for awhile.
Just on my block alone, there’s one house that a relative of the former owner (who relocated out of area) bought as a fixer-upper/flip but abandoned before even finishing his rebuild of the front porch (it’s now a total liability trap if some kid got up there), and another house for sale as a foreclosure after it had been used to house illegals for a year or so. And a quick walk around the ‘hood reveals the same houses on the market month after month. And this should be one of the final places to crash.
I live out in the Manassas area and I see alot of houses but not alot of selling and if the do sell. i bet that it was done with an I/O loan.
Do you know Prince William County used to be beautiful? There’s still some parkland and a few really old homes, but most of it is gone, and has been gone for a long time.
It is an ugly, ugly bedroom community. Even if you work locally (and so many do) the commutes are atrocious. The place is just soul-killing.
I wonder how that Cherry Hill community went. There were supposed to get their own VRE station and everything.
PS–I always rented rooms in TH’s when I lived there, LOL! Like an apt, but you have to pay for your own repairs.
LOL! Interesting time to be doubling down! Best of all, it sounds like he hasn’t even converted the first building. I wonder how many of his supposed buyers will actually close?
“David W. Bishoff is so pleased with condominium sales at the Carlyle, the soon-to-be-converted Union National Bank building at Fourth Avenue and Wood Street, Downtown, that he’s ready to try it again — right next door.”
If a lender has a contract and is explaining it to a unqualified poor person or paractically illiterate person who can’t understand the terms of the contract, but the lender is pushing the contract to earn the commission, etc….then I would say the lender is unethical and even devious. There should be consumer protection laws so that we the tax-payers don’t have to listen to bs about bailout because of the mess created by the so-called “professionals” in the lending industry. And the fact the AGreenspam is worshipped like an economic genious…that’s something else altogether.
Regardless…socialism or capitalism you will have excesses of either power or greed…
What we have is a free market that needs regulation because people are either ignorant,or they pass the buck, or they are unethical and greedy. Case in point…we need unions so that corporations will treat their factory workers like human beings. But now they just give outrageous salaries and perks to the worthy corporate execs for their “genious” performance….and keep the minimum wage ridiculously low for years.
We have a contract society that guarantees our freedom. Unfortunately we have to regulate decent behavior.
The lenders bear some of the blame. They are supposed to be pros…the bottom line –they knew these people could not afford these homes - and if they don’t understand real estate “cycles” or that housing can drop - maybe they are not qualified to be lending.
Something caused this - starting with AGreenspams theory and neglect. Then it was fueled by ignorance, unethical business practices, greed….and many at companies like New Century made loads of $$$ knowing that these borrowers would sink later.
If New Century were to be prosecuted now - for lying on it’s balance sheet or whatever, individuals still made loads of $$ - how do you go after those blood suckers? New Century can fold now and then later pop up under a different business. But what motivates all of that?
The new American dream is to make as much $$ as possible at any cost…regardless of who you harm.
The sad thing is –even with all of these exesses (compared to the rest of the world) how satisfied are we in the end.
I mentioned this phenomenon a few months ago. There is a very high percentage of foreclosures of properties owned by Hispanics. The pace of foreclosures is still increasing, however, across the board for all borrower. We’ve got twenty or thirty a week scheduled for April, and I’ve got to hire new staff.
About 20,000 illegal aliens got mortgages through the FHA in Denver alone. They have nothing to lose by leaving the keys in the mailbox while stripping the copper. When the payments reset - adios gringos
http://tinyurl.com/y5tnff
“An illiterate carpenter bought a $750,000 house in Ashburn Village
Story is the same, but, last week it was a tile setter instead of a carpenter. I guess you can substitute any profession making $60,000 and buying a $750,000 house. They will all have the same outcome.
60K x 3 = $180K. Sigh.
You are forgetting the middleman to blaim here. BROKERS. they are the ones that explain/lie to the borrower regarding the terms on the loan.
Sure the lender (underwriting managers) are to blaim for not catching the lies, but the brokers are the ones who push/threathen the lender to either approve the file, or we wont send you anymore business.
Does then lender just stop doing loans and put themselves out of business by not having any volume, or do they do the loans, and pray to god only 3% default? cath-22 here.
I know of a lender that had to make that decision. Bryco Funding in San Francisco was doing great volume, but their operations/underwriting was very tight. (clean) which eventually all brokers stopped using them. they now do less than $20M/mon in volume.
also, the Account Reps that work for these lenders are to blaim. they train/teach the brokers on how to get lies pass their underwriters. I knew a rep from Peoples Choice (whom is bankrupt now) which had fake income docs in has pocket, and gave it to any Broker who needed to go full doc.
these are the guys that ruined it for everyone. You have 86% of all subprime loans performing, which means they are a good thing too.
Has anyone else heard of the new chattel mortgages? The loan is tied to the person instead of the property. The lender will have a right to garnish your wages until the loan is paid off, so that you cannot default or mail in the keys. The loan can even be passed down generations. I don’t even know if that would be legal, but I have heard and read about it. It sounds like the new OWNED society.
Yes … in Thomas Hardy’s book “Tess of the D’Ubervilles”, Tess’s mother and siblings must leave their house when her father dies. This is because he had a three generation house lease.
The English word “husband” comes from “house-bond”.
In other words, this is a very old concept, from a time when a few people controlled most of the property. Our Founders shuddered to think of living under such a regime. May it never come to pass.
The “new” chattel mortgages? What are you talking about? Typical chattel mortgages are already in use — think of your car, for example.
Or consider any unsecured loan (or a secured recourse loan) — any of these are perhaps already like your nightmare to some extent. You can’t just toss the keys and be done with it because the banks *can* come after your wages, as perhaps they should since you ran up the debt. Student loans (I think) and IRS debts are even worse, with even bankruptcy not releasing them.
However, debts in the USA at least ARE NOT able to be passed from generation to generation! The debt can indeed be applied to a deceased’s estate after death, but if the estate cannot pay, that’s the end of that. I’d reckon anything else you’ve heard on the matter is paranoid speculation. Rest easy, that part of law is well settled and VERY unlikely to change.
I meant “new” as in the loan is tied to the person instead of the asset. They are trying to make it harder for the borrower to default on loans. Anyway, I was asking about the legality of it. I know that the government can garnish your wages for taxes and student loans. I don’t know if businesses can do the same unless they go thru the courts.
Jerry, the posters have been trying to tell you that the norm has always been for loans to be tied to the person. Loans tied to the asset only are the exception. These are called “non-recourse” loans and only apply to home purchases (not refinancings) in some states. For everything else the purchaser is personally on the hook for the whole loan.
Of course businesses have to go through the courts to obtain a judgement for debts. That’s what the courts are for.
However, debts in the USA at least ARE NOT able to be passed from generation to generation!
HA!
(wait, let me say it again for more emphasis)
HA!!!
Take a look at social security, medicare, war spending, welfare, etc.
Just because YOU can’t tie YOUR debtors to intra-generational bondage, doesn’t mean it won’t happen.
really, it is to laugh. i mock thee, i mock thee, i mock thee.
Paul
Future generations will be cursing us - if they don’t flee back to Europe or Asia first
Re: my area…
“Last week, we reported that home sales and home prices in the 43 municipalities of Central and Upper Bucks County and Eastern Montgomery County were both up 26 percent, a pretty significant increase.”
Yes, and my comment at that time was “…this is discouraging…”
“The data on which we based that conclusion, as it turns out, was wrong. The corrected data shows, instead, that prices dropped 1.8 percent in February when compared to February 2006. The median sales price in February was $280,000, well below the $356,500 we reported a week ago. In February 2006, the median price was $285,000.”
Wow - this is a HUGE error!! How could the previous data been so off?… (Of course I’m certainly happy to read this, but still.)
Our data supplier says that while the numbers it supplied for individual municipalities were correct, it mistakenly included one additional municipality — Bensalem — in its totals.
Bensalem is ghetto. How it skewed things so much, I don’t understand.