“Foreclosures Are A Growth Business”
KDKA 2 reports from Pennsylvania. “A wave of house foreclosures that has swept the nation from coast to coast is also hitting the Pittsburgh area hard. But you might be surprised to learn that it’s hitting hard in our affluent suburbs. After putting an addition on her home, Renee Schopper in McCandless refinanced the debt several times to pay off other debts and then refinanced again with a so-called adjustable rate mortgage which has adjusted to rates she can’t afford.”
“She blames herself for not reading the fine print but says she was pressured by her lender.”
“‘I was sitting in the office and I was sobbing and the gentleman was saying ‘you’re doing the right thing, don’t worry about it.’ and I said okay I trust you. So I signed,’ said Schopper.”
The Philadelphia Inquirer from Pennsylvania. “Domeeka Lawrence never imagined spending the rest of her life in the Southwest Philadelphia house she bought in June 2003 for $66,900. Next month, she is probably going to move, but not to make room for renters. The house is scheduled for a sheriff’s sale May 1.”
“Lawrence, like many low-income borrowers, got something she wasn’t expecting in her adjustable-rate mortgage: The monthly payment jumped in July 2005 from $387 to $514.”
“‘I asked at the settlement table, ‘Is this going to be my payment?’ Lawrence said. ‘I rushed into that without really thinking. I should have done a lot more research,’ said Lawrence.”
Bloomberg reports from Michigan. “Todd Alford put his house in Dearborn, Michigan, on the market in February, when he left his job as a Ford Motor marketing executive. He has not received a single offer.”
“Before Alford left his job, he and his wife, Paula, spent $25,000 on renovations to their brick house, sure they would recoup the investment whenever they sold it. They purchased the property for $200,000 in December 2002 and have a $1,428-per-month mortgage on it. Now the Alfords are hoping just to break even on the property.”
“‘The real estate market has plummeted because of auto industry layoffs and the foreclosures that go with it,’ said Alford, who put a $215,000 price tag on his family’s three-bedroom brick bungalow.”
The Journal Sentinel from Wisconsin. “Wisconsin’s mortgage-paying troubles deepened in March, and experts see no end in sight.”
“‘Foreclosures, I’m sorry to say, are a growth business,’ said Roy Scholtka, president of HomeSale Realty Inc. in West Allis. ‘Typically, they were something you saw in the lesser prices and the tougher areas. Now, we’re seeing them in the suburbs and across the board.’”
“‘April’s going to be a real big kicker. That’s when the subprimes of spring 2004 go up’ as these high-priced loans’ teaser interest rates expire, said Gary Zimmermann, national director of Federal Housing Administration lending for CFIC Home Mortgage.”
“‘Every day I get calls from people who signed for loans that weren’t fully explained to them,’ said Catey Doyle, chief staff attorney for the Legal Aid Society of Milwaukee. ‘Some people knew full well what the terms were but were hoping on a wing and a prayer that they’d get that raise at work, or their ship would come in somehow before the payments went up.’”
“For thousands, no ship came in. Wisconsin courts recorded 16,473 foreclosure filings last year and 4,834 in the first three months of this year, figures show.”
“‘On average, there were 77 foreclosures filed every business day in the first quarter,’ said Robert Jansen, president of (a) Milwaukee-based data tracking firm.”
The St Cloud Times from Minnesota. “Last year at this time, area real estate agents, builders and bankers knew a housing slowdown was on its way. Builders began to roll out more incentives, home staging became more important and agents expected a reversal of the real estate appreciation trend.”
“A year later, the St. Cloud area is weathering its part of a national housing slowdown caused by an inflated market and overdue adjustment. The area finished the quarter with almost 13 months of home inventory in March, compared with about eight months a year ago.”
“Mark Herron, a real estate agent in Waite Park, hung a sign that reads ‘Priced reduced’ on a home for sale in St. Cloud to motivate buyers. ‘It generates more interest from drive-by traffic,’ Herron said.”
“‘We’re pricing them now at where we were selling them last year at this time,’ said Scott Reinert, president of the St. Cloud association.”
“‘It takes awhile for the seller in the market to recognize that their asking price is too high,” Reinert said. ‘Now, they understand that overpricing a home is just costing them money.’”
The Star Tribune from Minnesota. “Soon, you might be able to buy a big-screen TV where Jaguars once roamed. A Seattle company has pulled the plug on plans to build a 290-unit condo building planned for the Downtown Jaguar site at Hennepin and Washington Avenues in Minneapolis.”
“Instead, the company is proposing an all-retail complex. This is the second luxury high-rise downtown condo project to alter plans in response to a sluggish market, and one of several that’s being redrawn for commercial or retail purposes.”
“Many applaud the changes at what was once called the Two Twenty Two project, because it will take some pressure off an already soft condominium market. ‘This would just be dynamite,’ said sales agent Fritz Kroll. ‘It says that there’s enough housing already on the market.’”
“Mary Bujold, a Minneapolis multifamily consultant, said that many developers are in a holding pattern. Right now there are 1,311 units in downtown Minneapolis that are being marketed, but are not under construction (not including the aborted Two Twenty Two project or the revised Nicollet Tower). And there are 1,336 units under construction, 60 percent of which are already sold or reserved, she said.”
“Last year the market absorbed 900 units, about 75 a month, not including condo resales. That’s down from the peak of 2004, when the market absorbed 1,300 units, about 108 units a month. Since the beginning of the year that number has dropped further, to about 30 units per month.”
“Seattle-based developer Don Milliken will present final plans to the neighborhood group later this month, and he still needs city approval. Milliken said that he scrapped the condo plans, which he announced after acquiring the site in November 2005, for several reasons.”
“‘It is just not economical to build high-quality condos right now, and the simple reason is that the costs are accelerating and continue to accelerate at a pace that doesn’t work,’ he said. ‘At the same time, the prices that can be acquired in selling condos is at best stagnant and at worst declining a bit.’”
Renee Shopper (great name!) - “I trust you” - translated, “I’m too lazy to take responsibility for my own decisions so I’ll tee you up to blame later.”
And spare me the sobbing woman routine. Damn, I hate that. I wouldn’t sob during a business transaction if you chunked me across the head with a 2 x 4.
By the way Tx, noticed Lend closed just under $10 and I still expect a close their to expire all of those options worthless at that level
they just did a thing on Griffin and his hedge fund(forgot which one help me out) and his fund, according to wikipedia, held stock in homebuilders, LEND(which was a new position since the stock tanked) and some other RE related biz. this is the smart money?
these are the people who have created exotic trading instruments that could threaten the financial system?
“I trust you”.
I try to feel compassion for these people, but an idiot like this woman Shopper makes it impossible.
For any young person reading this blog. This Shopper nitwit is an example of why you don’t trust anyone in a business transaction, not even a good friend or relative. You MUST read all of a contract or have a lawyer read it. Never sign anything you do not fully understand. Never agree to anything verbally.
And never, ever trust in the good will of a person who’s livelihood depends on extracting as much money from you as possible.
For any young person reading this blog. This Shopper nitwit is an example of why you don’t trust anyone in a business transaction
This advice would have saved me many many $$ if I had had it earlier. Especially if you are young and starting out, listen to clearview above so that you can avoid the same scars that I have.
And even if you’re not so young, it’s worth reminding yourself that there are many scumbags in the world posing as decent people.
JP and Clearview: How true. My gullible in-laws were talked into bad investments by fellow church-members and friends. Trust no one.
Nice society where we can’t even trust people at our church. But I have to agree that if someone wants your money, for any reason, don’t trust them.
“Trust evervone… but always cut the cards.”- W.C. Fields
An old joke from the Chicago pits: How do you say “F**k you” in Yiddish? “Trust Me”
For everyone who is scared about a pending “bailout” of FB’s– this is what the bailout will wind up being. Legislation to simplify mortgage documents and provide for some sort of “one-sheet” of terms much like the mandated MPG stickers on a car, or the EnergyStar requirements on appliances.
The government will not throw anything more than a small token amount of cash at these people, but the process for buying a house will change. Burying the loan reset terms deep within the contract will wind up being illegal, no question about it. The rhetoric of “I was tricked” or “I was confused” is really ramping up, and as much as we like to say “read the whole thing with a lawyer” the reality is that people just don’t do that, especially when there are pretty numbers up front, and five-point-font subtype on page 30 of your mortgage.
The binding portion of the mortgage will be required to be on one or two pages, where the payment terms– even for an ARM– will be required to be disclosed in full, and any dollar amount not on that page will be unenforceable and will also wind up with some sort of government-issued investigation into the lender. That’s what will happen.
The “Good faith estimeate” is the document and it allready exist. They simply need to require lenders to make 5 of these for worst cast interest rates from the start of the loan and every 2 years after that. These should be the first documnets signed by the buyers with all cost highlighted in RED and a larger font than all others on page.
Putting these at the front of any discussion with a lender and matching them with an identical set at closing (first pages signed, with verification of sameness with initial ones). The Title Co. should verify that the first set of good faiths (notorized for date verification) matches what the lenders are really selling them. If the first set was signed less than a 2 weeks before the closing set the title Co. should be required to suspend closing to allow buyers 2 weeks to consider the new good faiths.
These documents should be handled seperatly from the other 400 pages of crap. They should be in their own envelope (larger than all others with LOAN TERMS VERY IMPORTANT all over it in bold colors).
I am fully aware that they still may be glossed over in person, but how fricking far can you really go.
It is now commonplace for buyers to show up at escrow closing to have a much different (worse) loan than the one they were promised. NP, sign new good faith (or lose the home) and away we go. Take this very shitty slight of hand out of the process and it would make a big differance.
yeah…. and the US tax code will be re-written to fit in a 10-page booklet that can be understood by an eight grader.
For everyone who is scared about a pending “bailout” of FB’s– this is what the bailout will wind up being. Legislation to simplify mortgage documents and provide for some sort of “one-sheet” of terms much like the mandated MPG stickers on a car, or the EnergyStar requirements on appliances.
The government will not throw anything more than a small token amount of cash at these people, but the process for buying a house will change. Burying the loan reset terms deep within the contract will wind up being illegal, no question about it. The rhetoric of “I was tricked” or “I was confused” is really ramping up, and as much as we like to say “read the whole thing with a lawyer” the reality is that people just don’t do that, especially when there are pretty numbers up front, and five-point-font subtype on page 30 of your mortgage.
The binding portion of the mortgage will be required to be on one or two pages, where the payment terms– even for an ARM– will be required to be disclosed in full, and any dollar amount not on that page will be unenforceable and will also wind up with some sort of government-issued investigation into the lender. That’s what will happen..
This bailout is like dabbing a kleenex on a sucking chest wound.
“Legislation to simplify mortgage documents and provide for some sort of “one-sheet” of terms”
Preferably in 24 point type and written on a third grade level.
Damn. I even read the stupid user agreements that appear whenever you install a new piece of software
No WAY would I not read the whole contract if several years of wages were on the line…
I thought I was the only ‘idiot’ to read the users agreement. It has kept me from putting a lot of software on the computer. LOL
…not even a good friend or relative…
This is even more truthful if it is a “fundamentalist Christian,” and ESPECIALLY truthful if it is a “fundamentalist Christian” friend or relative.
I have learned the general rule of thumb when dealing with FCs is do not expect to get paid, period. Consider most of ‘em as having a charater rating below 620 on a scale of 850. (Sub-prime character.)
Got 10% down?
SPOT-FRICKEN-ON!!!
….wow that really hit home with me. I got burned, man did I get B-U-R-N-E-D…..
Looking at her house on the video link, perhaps she was sobbing because she realized how much per month she would be paying on the dump she lives in.
“‘I was sitting in the office and I was sobbing and the gentleman was saying ‘you’re doing the right thing, don’t worry about it.’ and I said okay I trust you. So I signed,’ said Schopper.”
Gentleman? I think the word she was looking for was rapist.
I work as a government lawyer in a public agency that helps client’s with family law issues. The sobbing woman routine is very prevalent, I get it almost every other day. It’s funy, the women in my office say “that never happens to me.” I guess it’s a woman trying to manipulate a man type-of-thing.
Secondly, I have to review people’s finances every day in this job. I can tell you that here in So-Cal there is an uptick in BK filings, foreclosure notices, and overall desperation. Most of the people I see are living slightly BEYOND the edge.
I like that! Not living slightly beyond their means, but slightly beyond the EDGE.
I picture Wylie Coyote hanging there, beyond the edge, looking around.
Hmm, I graduate college in a few weeks- maybe I should check out the foreclosure industry for a new career? I think anything involved with foreclosures, credit counseling, bankruptcy, etc. is going to be booming.
Here’s the downside. I worked in that business through the entire 1980s-1990s bust on workouts, bankruptcies and FDIC/RTC asset disposal matters. If you do it, you’ll be afraid to ever buy anything. The level of carnage is that bad.
Growing up in OC duing the Carter era recession did this to me. That and my mother’s early years were spent in pre-war Germany during their depression. She has some amazing stories. The woman saved everything.
Bless your Mom,
Mine was also full German and grew up poor as hell in North Dakota. When she passed away we had to pile everything of hers up and my sis and I checked everything. She had over $11,000 in cash all over! The largest single ammount we found was $600, most others were about $200. She had jewlery stashed inside frozen meat to keep it safe.
I remember she was a crafts master, if she liked something in a store she would promptly go home and make it!
The hording of food and toiletries in the house was amazing. I swear we didn’t buy toilet paper or canned foods for three years after we lost her.
My father and her lived a comfortable life for over 30 years, but she was still deeply aware of the poverty of her youth.
This should be really scarry for all of us that grew up in much better times, it is very possible for this countries standard of living to drop to levels none of us have lived through.
Now I’m sad recalling Mom, but her fear of poverty would have served all these FB well!!!!
HMMM…Sounds like we all might have the same grandmother! LOL.
No way. That industry will spike for a few years, but it will also be flooded by ex-brokers and ex-RE agents already primed with hit lists. Heh, could you imagine that phone conversation?
“Hey bob, it’s dave”
“Dave! I hate you, you sold me this POS, and now I can’t make payments.”
“About that, I’m here to collect.”
Imagine that. Scalp em on closing, earn a commission. Go back and suck out every last drop of money, earn a commission. God Bless America.
that’s what I was thinking- the RE and mortgage crowd will flip sides and go to wherever the money is. Reminds me of a RE guy in Boise who runs a RE show on the radio. Pre-bubble, he was all about helping the little guy to find good deals on HUD homes and foreclosures. During the bubble, he turned into a total market cheerleader: “homes are an investment, buy 5 or 6 and watch the cash roll in!” Now he is hawking RE retirement plans. By next year, he’ll be back to foreclosures and HUD homes. Here’s his site: http://www.realtycenterboise.com/
Be VERY careful of the credit counseling business. A lot of it was organized as non-profit organizations and the IRS is taking them down. They were determined to be organized for the benfit of the creditors (selling credit plans) not for the benefit of poor people (education on what credit really means and help with how to get out from under). Ethics varied from highly questionable to totally nonexistant. Not sure if they are structured to survive if they have to pay taxes.
This is highly simplified, but the gist is there.
Consider your overall career goals, rather than just what’s going to be ‘hot’ over the next few years.
Smart RE lawyers always do bankruptcy/workout stuff on the downside, though most of type of practice is in commercial RE where the big money is. It’s just riding the waves, really.
Dont be afraid to learn a real trade, if you dont already have one… sometimes those BS degrees dont go far enough, and you have to get dirty to pay the bills.
As I mentioned before, was able to sell my house by going below all of the other houses in my neighborhood and accomplished that by eliminating realtors all together from the transaction. The blog helped me to understand the need to use that pricing strategy and it worked.
With builders lowering prices and offering incentives I just don’t see how my neighbors expect to possibly sell their homes when people can buy new for less than their resale price. By the way the neighbors were very relieved my home sold and is no longer competition for them
Yes, but how do they feel about the new low comp?
I don’t think they think about things like that JP. As an example, one of my neighbors used to get a kick out of asking me “have you gotten any bites?” After reading advice on the blog and lowering the price below everyone to sell the property I saw fear in their eyes instead of getting the usual “get any bites” question. I wondered why until I saw their home go up for sale, for the record they are at wishing prices from yester year and have bought into the hype of using a realtor.
I remember thinking to myself after their broker open and them getting no showings, welcome to the world of selling overpriced Florida real estate
I don’t think they think about things like that JP.
Great, you get to have your cake and eat it too!
Meaning: it sounds like you get to keep the relationships and your wallet.
Yay Florida Watcher. Have prices now fallen below your sales price? If yes, you get to feel like a genius every time you drive past your neighbors’ for sale signs.
Interesting REhobbyist, I went to look at asking prices and voila the asking prices are now where we sold ours for similar square footage homes in our neighborhood. Remember those are for asking prices, not final sales and they also include realtor commissions (ouch) we as mentioned previously had no realtor fees whatsoever. Not able to feel like a genius yet, but the trend is moving toward me feeling better for getting out now rather than later
:)
In a market like this the only thing you want a seller to understand is “You must price you home to be the next one to sell”. If they won’t price it to be the next one to sell don’t take the listing.
The buyers don’t give a F#$k what they paid for it. All they know is that they have a list of 300 homes and only need 1. The buyers will allways start at the bottom (lowest price) of the list and work up. It is no joke that many sellers look at less than 10 houses before making a purchase (allways stuns me). If your home is priced above the lowest 10 for the area your a F$*ked seller. Better to be in the lowest five and have a nicer home than the others. If no different than the others if your not the lowest price your screwed!
Great advice, Rich.
So what happens? Do they get tired after looking at 10? Is it that houses are so generic these days that you can live in 10% of the houses regardless of what else might be available?
To quote my uncle in FL with a neighbor like you…
“Now all anybody’s gonna see is the g*d-d*mned price.”
Maybe your uncle was my neighbor
How is it in the comps if it was a FSBO?
“spent $25,000 on renovations to their brick house, sure they would recoup the investment whenever they sold it.”
————————————————–
old conventional wisdom: renovations increase value
new conventional wisdom: renovations are a money pit
What’s old is new again …
Exactly, renovations shortly before trying sell are a waste of money, and just serve to increase your cost basis. It’s better to clean the place up, make any necessary repairs, so it dosen’t like maintanence was neglected, and price below the competition. It’s all about price now. When buyers are scarce, price gets the attention of the few out there. Smart sellers are grabbing their best offer and running like they stole the money.
Everything you just stated was true for me Vmaxer. Spouse wanted to do a couple of things to make the place look better, she felt it would help it sell faster. We kept the money and went with the blog’s advice and just lowered the price instead.
Besides, not everyone even LIKES stainless steel appliances.
I hate ‘em.
Of course, I’m not buying anytime soon.
“Besides, not everyone even LIKES stainless steel appliances.”
The last features I would want in a house would be granite countertops, and stainless steel appliances. I think those two items will forever be associated with this bubble. The nicest homes are those with innovative, original ideas.
Good for you polly, mine were white appliances from Sears.
A few months ago, my wife and I were shopping around to see if we wanted to buy a place when the current lease expires. I did walk-throughs on about 10-15 different places.
I saw plenty of horrendously ugly granite countertops. I mean, I can’t even image what kind of landscape was needed to produce granite with these colorings. Must have been a prehistoric toxic waste dump or something. I remember making a realtor quite angry when I told her that one countertop made the condo value drop by twice whatever the owner had paid for it. She must have convinced the owner to install it or something.
As for appliances, I always searched the place to find the washer and dryer. Nobody that takes care of the things they own will willingly install the cheapest possible washing machine. If I found the standard basic model that all builders throw in, you knew the place was owned by a flipper or someone that couldn’t take care of the place. Just like when buying a used car, you look at the brand of the tires, not just the tread. If they skimped on the easily visible stuff, guess how likely they were to skimp on the hidden stuff!
I saw an idea I liked on a remodelling show - coutertops made from a recycled high school chemistry lab bench - the stuff is made to withstand any kind of heat and 15 year olds spilling acid on it. Very durable. And I remember they didn’t look that bad in my high school and I bet those were 20 years old if they were a day. And nobody was doing any special maintenance or “resealing” on the lab benches.
The problem with Granite is same with appliances: there is no one universal color or finish that everybody likes. So instead of imposing on your buyer “moron, this is the color of granite that you want” wouldn’t it be better to just lower the price and then the buyer can pick from hundreds of granite colors/textures/finishes? That is to say, if he/she even wants granite. Corian can be a good substitute also.
Got 10% down?
I love a nice white kitchen. Harder to keep clean, but then you know it is clean. The appeal of granite has always escaped me - it has to be a fad. Stainless steel makes me think of the restaurant I worked in when I was young - not homey at all.
In 5 years the granite is going to look as dated as avacado bathroom fixtures.
I think I saw research done on the return on renovations (dollars of increased sale price vs cost of renovations). In all cases the return was less than the expenditure, except for basic cheap cosmetic changes (painting) or amelioration of defects that would have to be disclosed (i.e. radon mitigation, damage to the house).
“Renee Schopper in McCandless refinanced the debt several times to pay off other debts and then refinanced again with a so-called adjustable rate mortgage which has adjusted to rates she can’t afford.”
Why do people think refinancing magically makes the debt go away? Is ‘refinance’ synonymous with Abra Kadabra?
I know. You listen to the radio and hear all this nauseating ads…”are you tired of bill collectors calling you?” and “wouldn’t it be GREAT to get out of debt?”
Like, do debt people even THINK about how they’re just changing one aimed-at-the-head pistol for another????
Catherine: your term “debt people” makes me laugh. I picture zombies walking around buying stuff and not paying for it.
Remember George Romero’s ‘Dawn of the Dead’ where all the zombies were drawn to the mall. Just like when they were alive
Best movie of all time IMO!!
I have that on DVD and watch is several times a year.
LMAO at the debt zombies!!!!
I’ll have to watch that again.
“debt people”
I’m gonna start using that one.
Got 10% down?
Ditech was running a TV spot a few months ago that featured an overjoyed woman on the telephone who had just gotten one of their ripoff equity loans saying “it feels so GREAT to be out of debt.” It ran for a couple of weeks and then disappeared–wonder if they were forced to pull it as being blatantly false and misleading.
Ditech was also telling people they could borrow 125% of their home’s value. That didn’t last very long either.
Still running the ad in Wisconsin.
I’ve been monitoring some of these adverts and the impressions they give the viewer/reader are: (1) It’s easy or simple to refi — hassle free, (2) The lender has done all the research so the borrower does not have to do anything but ask, (3) Act now or lose something, (4) All your bills will be immediately paid off.
This is one I hear on the radio all the time (from outofbk dot com I believe)
“Life doesn’t have to be painful:
UNLOCK YOUR EQUITY, and RELIEVE THE PAIN!”
Hahahahaha!
Yes, it’s always “unlock your equity” or “liberate your equity,” or some such nonsense. For some reason it’s never “borrow a large sum of money and collateralize the loan with your house.”
I am sooo sick of hearing this MORON!! I could about barf! When is it going to end and relieve my pain!
Reading this blog is giving me the idea that a lot of my fellow Americans are pretty stupid.
“‘I was sitting in the office and I was sobbing and the gentleman was saying ‘you’re doing the right thing, don’t worry about it.’ and I said okay I trust you. So I signed,’ said Schopper.”
Nothing more pathetically stupid than that.
We have a winning quaote of the week.
“my fellow Americans are pretty stupid” only the FB ones not us.
quote
We’re all hoping you mean that the stoires that are told here are making you feel that way, rather than our comments to them……
GS, the comments on this board have:
1. Saved me from doing anything stupid with my own money.
2. Made me more aware of how stupid a lot of other people are with their money.
So, kudos to Ben for creating this blog!
Yeah, I was just pulling your leg - don’t know how to make those little smiley faces….
Just type a colon ‘:’ then a minus ‘-’ followed by a right parenthesis ‘)’ voila!
You know how to create the O.J. Simpson emoticon?
Backslash, frontslash, escape.
Very true. Combine this with the fact that American Idol and Deal or No Deal are two of the most popular TV shows and we live in a country where the collective IQ must be about 45.
What’s wrong with Deal or No Deal? How often does one get to see risk tolerance, utility of money and option pricing unfold right before your eyes? My only complaint is that I wish the banker were a little closer to a competitive offer earlier in the game.
As far as I can tell, his deal is always sub par. But once a contestant gets into 6 figures, they start asking themselves if they dare risk losing 100K to win maybe 300K?
If only they were that thoughful when buying a house.
Exactly, that’s what makes it interesting. When they mull over and accept the deal, you’re seeing the marginal utility of a dollar (the EV of the suitcase is much higher than the offer, but there is usually a very wide standard devation/risk). His offer is always well below the straight EV of the suitcase, but since it represents a large adjustment to most participants’ incomes the risk factor makes the offer a pretty good one at times.
I watched that show once and I started analyzing it like you Bluto. That’s scary.
I wish the banker were a little closer to a competitive offer earlier in the game
The last thing the producers want is for contestants to take an early offer - there’s no drama in that. They need the amounts to run up higher and the contestant to get more anxious to keep the audience watching.
Even if the contestants win 6 figures, it’s still a cheap show to produce. And most of the contestants invariably get hooked on greed and adrenaline, go too far, and end up giving back the biggest gains, settling for much less later. (There you see amateur speculative psychology at work.)
Would be waaaaay more interesting if contestants had skin in the game. IIRC, the worst case scenario is +$.01. A variant along the lines of the Milgram experiment for poor choices perhaps.
http://en.wikipedia.org/wiki/Milgram_experiment
Sorry but I like the hotties!
“Reading this blog is giving me the idea that a lot of my fellow Americans are pretty stupid.”
Yes, they are. And that’s not a slam, it’s a matter of fact. Half the people are below average intelligence. And that’s why those of us here, who by and large are brighter than average, have to have some understanding of the challenges faced by a huge percentage of our fellow citizens. We assume that since we’re bright enough to read the fine print and understand the terms and conditions that *everyone* should be capable of the same. The reality is that a substantial segment of our population is simply unable to deal with those details.
I have a sister who’s worked in corporate H.R. for years, and she and I often discuss this dilemma: what does our society do with the growing numbers of people who simply can’t keep up with the intellectual and educational demands of contemporary America? These types used to be able to support themselves with assembly-line jobs or unionized service jobs. Now the manufacturing jobs are mostly gone, the unions have been rendered toothless, and employers don’t want to hire Americans who’ll stand up for their rights. Instead, they prefer to hire the hordes of illegals who can be bullied and threatened with deportation should they try to stand up for themselves.
Contemporary life has more intellectual challenges. Back before credit became prevalent, working-class types weren’t offered opportunities to sign contracts for mortgages or other major debts, since they weren’t considered good credit risks. Now it’s a buyer/borrower-beware mentality, and all these folks who never will comprehend complicated
writings or mathematical details are routinely signing their names to agreements they aren’t capable of grasping. Not necessarily because they’re lazy or badly educated, but because they simply aren’t bright enough.
My sister has to deal with endless employee turnover and related issues due to this very problem - you need to hire bright people, and roughly half the population will never be bright enough. That’s a lot of chaff to sift through nowdays. And what do we do with this chaff as their options for self-supporting employment dry up?
Has the lending industry conditioned some Americans to respond against their own interest with the word refinance? I’m reading about people refinancing into higher rates. What does it mean when people refinance into higher rates?
Well, since the word “stupid” is being tossed around this thread quite a bit, I’d say that’s what it means.
the higher rates are probably fixed rates
Good point. However, in this instance “Schopper … then refinanced again with a so-called adjustable rate mortgage which has adjusted [upward] to rates she can’t afford.”
1) people refinancing into higher FIXED rates
or
2) people refinancing into ARMS with introductory rates that are lower, but with setpoints that are higher. This “buys time” for the FB, and many of them take the gamble.
or
3) people who need to “cash out” their equity to pay living expenses, SUV expenses, plastic surgery, etc. The rates are higher than when they last refinanced, but they need the cash now.
that’s my 3 guesses.
I think the lending industry won the battle using key words like refinance. They redefined the word through long term advertising campaigns. Now, people hear or read refinance and the Pavlovian response is: I need to get me some of that refinance and pay off all my bills.
“Now, people hear or read refinance and the Pavlovian response is: I need to get me some of that refinance and pay off all my bills.”
People respond like an animal, they deserve to get treated like one.
I need to get me some of that refinance and pay off all my bills.
“more refinance, sir”
LENDER: “And finally, monsieur, a wafer-thin refinance.”
MR. CREOSOTE: “Nah.”
LENDER: “Oh, sir, it’s only a tiny, little, thin one.”
I did see that movie. Many quotable quotes!
(Numbers are hypothetical, just a friday afternoon WAG):
Joe Sixpack has an ARM and some “equity” in his house, but his cash flow each month due to whatever is negative. Instead of spending less, which results in a long term gain, J-SP goes out, refi’s into a new cash-out 30 year fixed, and even if the payment is slightly higher, he now is sitting on $25,000 or whatever, which is socks in the bank and uses to cover the negative cash flow. A short term solution to a long term problem that is made worse by the short term solution.
They refinance into higher rates, but the longer terms mean lower payments.
I had a conversation with an old friend yesterday. She is ruined financially and doesn’t know it or will not accept it yet. BK is the only way out of the situation. However, for some reason or the other, she believes refinancing is the solution.
First, she wants to refinance the car. Then, the credit cards. Also, the house. However and at the end of the day, her income is simply below her expenses. What’s more, since she has missed a couple payments here and there, the future costs of refinancing will certainly be higher than her going costs.
To her, I’m afraid, refinance means something completely different. It’s sounds crazy but after the conversation I was under the impression that some people think refinance means debt forgiveness.
“A Seattle company has pulled the plug on plans to build a 290-unit condo building planned for the Downtown Jaguar site at Hennepin and Washington Avenues in Minneapolis.”
As a local I have to comment on this. It is WAY too funny. The geography of this “deal” is hilarious.
So on Hennepin Ave (the main street of downtown minneapolis)where this was going to happen you have:
1) the river. Beautiful.
2) On the river is the Federal Reserve Board of Minneapolis. (occupies the whole block)
3) next block is some big business building.
4) Then the next block is this proposed condo tower.
5) Then the next block is a notoriously trashy bar called the “Gay 90’s”. At one point, it was the most happening place in the city. Then in the 90’s it became very dangerous. Now it is a shadow of it’s former self, and almost nobody goes there except the truly pathetic (super drunks, heroin addicts, etc). In fact, the gays have boycotted the Gay 90’s. It’s falling apart with a huge neon sign that says “the Gay 90’s” (it looks sortof like the Arby’s sign)
Everything else around that building is warehouses and clubs. So it is EXTREMELY busy and loud all night long on Wed thru Sun night.
It’s just hilarious to see that “luxury condos” were planned RIGHT NEXT TO the Federal Reserve Bank of Minneapolis, and a seedy dangerous ex-gay bar called “the Gay 90’s”
Here is a picture of your luxury view from the proposed condo tower:
http://www.bobmeyers.com/images/Mpls/90s%202.jpg
The condo tower would be near this big building:
http://images.google.com/imgres?imgurl=http://www.cgstock.com/thumbs/228.jpg&imgrefurl=http://www.cgstock.com/hennepin_ave3.html&h=100&w=100&sz=4&hl=en&start=62&tbnid=CLLwWAIeWbGgRM:&tbnh=82&tbnw=82&prev=/images%3Fq%3Dhennepin%2Bave%2B5th%26start%3D60%26gbv%3D2%26ndsp%3D20%26svnum%3D10%26hl%3Den%26sa%3DN
Hey, Being able to walk around the corner to the Loon Cafe and get some Pecos River Red chili and a cold Sam Adams has to count for something!
Funny and symptomatic of the bubble era where if you just threw up “now selling pre-construction prices” real estate would fly. I guess they realized those days were long gone and the project wouldn’t sell anything at this point.
“‘We’re pricing them now at where we were selling them last year at this time,’ said Scott Reinert, president of the St. Cloud association.”
So, what’s your point? Big Deal!
I noticed that also mrktMaven and thought the same thing, big deal
They are using the MSM to establish a fictitious higher selling price.
Got 10% down?
PLEASE PLEASE DEAR GAWD…
i need work yesterday please come to NYC and make me have 50+ hours of work weekly….i can live again pay off my bills…. maybe get my teeth fixed…let alone buy some new pants and shoes….
Whats keeping the Foreclosure Gawd from coming here to the big Apple?
Please deliver us, amen! Let somebody put their fingers in da wind. But one report of a good RE month and suddenly the fear’s in the air of getting priced out “forever.” Puke
DC area could use the same thing, especially lower Mongomery county, Maryland.
dj: I don’t think that Foreclosure Gawd will help anyone find a job, although he should lower your rent. That might help some.
Speaking of which, the free paper that the Washington Post gives away downtown and near metro stations had a huge selection under the rentals section this morning. More than I have ever seen before. And a lot of the ads were offering two free months rent to new tenants. I’ve never seen two months free before.
Unsold new condo’s being offered for rent by the developers?
Dear tiny 6 lb, 2 oz baby jesus……
And that movie made the entire family laugh!
Renee Schopper in McCandless refinanced the debt several times to pay off other debts and then refinanced again with a so-called adjustable rate mortgage which has adjusted to rates she can’t afford.”
“She blames herself for not reading the fine print but says she was pressured by her lender.”
Well, another “victim”. I noticed that the article didn’t specify the nature of the “other debts” she paid down with the cash-out refis. I wonder if it was:
- Lifesaving surgery for her little nephew Timmy
or…
- Credit card debts rung up on consumer junk like expensive shoes and clothes, big screen TV, iPod, new car, furniture, home knick-knacks, and appliances for the addition to her house, etc…
Which do you think it was?
Looking at the hellhole she’s living in, the shoddy furnishings, her unattractive horse face - I’d have to guess the life-saving surgery.
The expensive consumer junk astounds me. When I hear them talk about the I-phone coming out at $500 I just don’t get it. I am not poor and much better off than most of my peers, but I would NEVER pay $500 for that shit. I see my less well off peers getting new cell phones every 3-6 months!!!!
The newest friend with new phone told me “my new phone has 2 gigs!” WTF does that even mean!!!! He was all proud that it only cost him $40!!!! For what? I still use my original phone (many years with same service). I got a new one from them (no cost) when renewing commitment, but I hated it. Stupid camera flip phone that I couldn’t hear shit on! I just went back to my old phone.
Oh and the $40 phone guy told me he is now paying $10/mo extra so he can watch HBO shit on his phone!!! Who the fuck wants to watch the Sophranos on a one inch phone screen!!
It will be very interesting to see how many buy the $500 I-phones now that they can’t pay for it with free refinance money? I wonder how much apple will suffer when all this consumer crap ($200 mp3 players!!!!) falls flat in the face of busted consumers.
I dont even own a cellphone. If somebody wants to reach me, either they can email or call me on the land line. Damn, I am so old fashioned.
I’m as old fashioned as you are John. I’ve never had a cell phone. Reason: I find it difficult to hear the person on the other end.
I have a cell phone so my wife can call me and tell me what to do. Roughly the same idea as those ankle bracelets people on bail wear.
I bought my second cellphone about six years ago. The old one was analog and too large to hang on a belt. I got a lot of ribbing about it, too. Now people say my second phone is too big. They also make fun of my cheap car. They would probably not make fun of my net worth.
There is a big difference between spending a few thousand dollars on toys, and overspending by 100-200 thousand dollars for a house. If someone wants a $500 phone, so what? If they use it every day for 2 years, it’s 70 cnts a day. It’s like all that crap advice about saving money by not buying latte coffees. That $1000 a year savings doesn’t matter at all.
“‘I was sitting in the office and I was sobbing and the gentleman was saying ‘you’re doing the right thing, don’t worry about it.’
Lady just can it, nobody wants to hear it. I remember years ago when my wife bought a peice of property. After she came home from the closing she told me she had annoyed everyone at the table by spending 1/2 an hour+ reading the docs. One guy on the other side of the table asked her what’s taking so long? She said I need to know what I signing, but if it’s bothering you I can take the paper work home and come back and close at a later date. Needless to say she had a silent room in which to finish reading the paper work.
I have never understood why closings don’t have signed copies already exchanging hands before sitting at a table.
You’re expected to deal with all verbiage issues in real time? I’ve never seen any other legitimate business transaction proceed like that.
We did the same thing when we bought our last house. We made them explain every paragraph in detail. The whole process took almost 2 hours and they were really annoyed.
“We did the same thing when we bought our last house. We made them explain every paragraph in detail. The whole process took almost 2 hours and they were really annoyed.”
I’ve always wondered about that. What’s the good of asking them to explain? They could lie, or just make sh!t up. How would you know?
WOW! It looks like I’ll be able to pick up some good deals when I pull into the ‘Burgh this July. Do any Pittsburgh locals have a lead on what land prices are going for in North Allegheny/South West Butler these days? I look online and the prices seem to be all over the place!
I am sure the parasites have artificially inflated land values there as well. Like a disease, they spread across this entire country.
“Lawrence, like many low-income borrowers, got something she wasn’t expecting in her adjustable-rate mortgage: The monthly payment jumped in July 2005 from $387 to $514.”
This is really low income, when you can’t afford a $514 mortgage payment for a house. Yet some lender gave her a mortgage, I guess however the lender did get the commission and fees up front and that was all that mattered.
If you can’t afford a $514 mortgage, you should find another job!
Exactly
My first thought was that these numbers sound much closer to a car payment than a mortgage payment.
All I can say is: wow! 14,050 total homes in some stage of foreclosure as of April 5!
http://www.voiceofsandiego.org/articles/2007/04/06/survival/795correction.txt
“I’ve got a correction to make on the data I’ve been reporting from RealtyTrac, a firm that tracks real estate data, especially foreclosures, nationwide.
In a couple of recent stories (on risky loans and short sales) I reported recent data from RealtyTrac as if those numbers were the total number of homes in foreclosure in the county.
Actually, those numbers reflected a new filing or a new change in status (such as a house moving from the notice-of-default stage to the point when the owner has notified the bank will be selling it), according to Rick Sharga of RealtyTrac.
The stories have been updated with the corrections.
And now, here’s something to put those numbers in context. On the phone this afternoon, Sharga ran a check of the database to tell me how many total homes are in some stage of foreclosure in San Diego County. Here’s what he found:
7,083 notices of default (missed mortgage payments)
1,135 notices of trustees sale (auction sale)
5,652 Real Estate Owned (REO - bank repossessions)
14,050 total homes in some stage of foreclosure as of April 5″
The headline on my Las Vegas local webpage is “Report Shows More LV Homes for Sale”. Listing of SFH’s now over 21K and condo’s over6K, this does not include FISBO’s, builders models, specs etc. Lets see there are 5 homes for sale in my cul de sac of 12 homes for the last 2 months and I have never seen even 1 of the houses being show. Now the article says home prices are still at a 305K median. Hey if you do the math, how much longer can the crash be? Looks to me like a perfect storm. At least in Vegas.
Reporting observations from the Pittsburgh metro market. The run-up wasn’t as high here as other areas, but rose it did relatively high to incomes in SW PA. I’m 40 miles east of Pittsburgh proper and I personally see whole sections of small towns (old homes) emptying out. All of these must be from equity refis or speculators pulling out of the cash on rental units. It’s damned ugly.
Meanwhile, evidence is piling up that Wisconsinites, historically wary of risk, threw caution to the wind.
Hey!…We were just KITING houses…another order of beer, brats and refi’s over here Please.
Cue Auger: “Waitress…..”
“Todd Alford put his house in Dearborn, Michigan, on the market in February, when he left his job as a Ford Motor marketing executive. He has not received a single offer.”
This house is right down the street from me. He won’t get $215K for it.
Sine when does an “executive” sweat a $1400 a month payment? Sounds more like a schmuck who makes $75K.
Exactly. Kindas reminds me of the retail stock brokers (salesmen), before they became extinct. “Account Executive.”
Or IBM typewriter repairmen, back in their day. “Customer Engineers.” So you get to be an “Engineer” without ever having spent a day learning analytical calculus.
Got 10% down?
It is hard for any seller who bought within the last 5 years in Metro Detroit to recoup their costs. The lucky ones have relocation benefits. We recommend that most price their homes at about what they paid. The improvements make the home more sellable.
And, I agree, most Ford executives I have met live in homes that are worth a lot more than $200K.
The Ameriacn ERA of Foreclosures, Bankruptcies and U-Haulmania has Begun …Big Time.
U-Haulamania…that’s funny.
Does it imply that UHaul stock will increase as well?
Pods - that may be a growth business for people who can’t let go of the stuff but have to let go of the house.
minstroge places I suspect will dor very well for a while (maybe a short whiel tho)….
“‘I was sitting in the office and I was sobbing and the gentleman was saying ‘you’re doing the right thing, don’t worry about it.’ and I said okay I trust you. So I signed,’ said Schopper.”
Oh, she’s soooo trusting.
Good thing he didn’t tell her to bend over and spread her buttcheeks, or this story mighta gone in a whole different direction.
roflol
The interesting thing here is, as always, looking toward the future. Right now we have nice trusting sheeple being fleeced. They cry and complain, but are generally still compliant, law-abiding citizens. They move out (mostly) when they’re supposed to, and lenders are still providing “cash-for-keys” inventives to help them get out. They signed where they were supposed to sign, and they’re moving out when they’re supposed to move out. There aren’t any standoffs, there is no violent resistance, and there is a sort of stunned acceptance that this simply will happen.
Six months from now, when they’re drinking away their last day-labor wages in a dismal bar with other people in the same boat, and the mainstream news is filled with reports of fraud and bankruptcy, massive layoffs and big unemployment, and the lenders are taking a hard-core, no-prisoners approach to liquidating their collateral to stay solvent, I think it may be a really different story. Unless the executive branch gets busy with enforcement and puts a lot of people in jail so people can see that justice is being meted out, things might get ugly.
you make a good point.
By the time all that happens, President Shrub will be at the ranch, clearing weeds, collecting benefits.
It’s the next admin that needs to clean up his disasters.
That’s why, if Hillary was a *really* good strategist, she would wait until 2012. Of course, no politician nor their party can afford to pass up any chance at the public trough. Their big-money contributors demand their rewards from the taxpayers pockets. That’s why the government should never have been allowed to expand, why the anti-federalists were right.
gmme a break. You make it out like Bush planned the whole affair in the CREDIT BUBBLE. One problem, he cant fathom a credit bubble, daddy gave him the cash. Dont ever think that Greenspan hasnt battened down the hatches with plenty of foreign currency exposure in his portfolio. The only thing in Bush’s portfolio is his pictures from his days dodging work, drinking Jack straight out of the bottle, and jamming his nostrils full of South American Soda.
“Unless the executive branch gets busy with enforcement and puts a lot of people in jail so people can see that justice is being meted out, things might get ugly.”
And now you know why we have the ‘Homeland Security Police State’ waiting in the wings. It ain’t for the ‘terrorists.’
“‘It is just not economical to build high-quality condos right now, and the simple reason is that the costs are accelerating and continue to accelerate at a pace that doesn’t work,’ he said. ‘At the same time, the prices that can be acquired in selling condos is at best stagnant and at worst declining a bit.’”
It’s almost comical, how short people’s memories are. In every housing cycle — every cycle, condos fall first, fall hardest, and recover last. When I moved to Seattle in the mid-90’s, “condo” was still a dirty word from the last housing bust, and the condos that people were living in at the time were embarassing by apartment standards — poor construction, fading paint, rotting siding, paper thin walls, and cheap contractor grade carpets and cabinets.
Yet in every housing mania, here and forever more, an army of fresh idiots will appear with wheelbarrows full of easy money ready to spend on the very type of residence that renters seek to escape from. And every cycle, banks will drop money from helicopters on builders, speculators, and FBs to perpetuate the spawn of these godforsaken eyesores.
…and the condos that people were living in at the time were embarassing by apartment standards — poor construction, fading paint, rotting siding, paper thin walls, and cheap contractor grade carpets and cabinets…
What makes you think it is any different now?
Got 10% down?
American Home Mortgage cuts profit forecast
Warning suggests subprime woes are spreading to other home loans
http://tinyurl.com/2zbhx4
Subprime meltdown not contained and starting to see problems in Alt-A… Who woulda thunk it…
high-quality condos
Isn’t that an oxy-moron?
The part of this that surprises me is the Pittsburgh market problems. Pittsburgh was generally regarded as “underpriced” 18 months ago, in fact was lsited as the most undervalued of about 350 markets. I have a friend who’s company moved from suburban Boston to the Pittsburgh area. He was commuting 55 miles one way in Boston and lived in a condo. In Pittsburgh, his commute is ten miles and he was able to purchase a 1500 sf house for less than he sold his condo in the Boston area.
I think a lot of those foeclosures are in low end property even though they’re in the burbs. A $550 mortgage doesn’t buy much.
Pittsburgh was losing population throughout the bubble while home prices continued to increase.
Pittsburgh has been losing population since the 1970s. I think that half of Allegheny County’s population has left since then.
Really? I thought that they retooled after they lost their manufacturing base and recovered as a business center. My dad was from that area; his dad mined coal. My dad fled to Detroit to work in the auto industry in the 50s because there were no Pennsylvania jobs. My Pittsburgh acquaintances seem to be doing well, although I haven’t visited the city since a girl.
“‘I was sitting in the office and I was sobbing and the gentleman was saying ‘you’re doing the right thing, don’t worry about it.’ and I said okay I trust you. So I signed,’ said Schopper.”
I wonder if there is any way to get information on the percentage of subprime borrowers were serial refinancers?
“‘It is just not economical to build high-quality condos right now, and the simple reason is that the costs are accelerating and continue to accelerate at a pace that doesn’t work,’ he said. ‘At the same time, the prices that can be acquired in selling condos is at best stagnant and at worst declining a bit.’”
There are a number of reasons that Fed-created inflation will not work very well to rescue the housing market (even though it looks as though it will not stop them from trying):
1) Higher inflation means higher costs for builders, who will have even less incentive to build into a stagflationary glut.
2) Higher inflation means higher long-term interest rates (including mortgage rates), which tends to price prospective buyers out of the market.
3) Higher inflation means higher consumer prices for necessities like food and fuel, which tends to dampen consumer spending.
4) Higher inflation with weak demand pressures employers to “cut costs” by laying off workers (especially in the housing sector).
5) High inflation in the spring can result in a spike in T-bond yields, as fixed income investors would rather not hold bonds during inflationary times. But spring bond market corrections have been known to lead to October stock market corrections.
http://www.marketwatch.com/tools/marketsummary/
Question: When a person buys a home utilizing the creative financing tool called and ARM, doesn’t the paperwork come with an amortization schedule?
When I bought my money pit in 1999 ($67,500) with a 7%/30 Year mortgage, the paperwork presented to me was bigger than “War and Peace”. There was an amortization schedule and I remember looking at that a long time before signing the final “You Own This Property” paperwork. Seems to me, one would have to have at least a hint as to what they can expect their payments to be in 1 Year, 3 Years, 5 Years and so on. Is this last statement a true statement?