Symbols Of Affluence, In Foreclosure
The Baltimore Sun reports from Maryland. “An Edgewater house with a new siding-and-stone facade. A five-bedroom in Hanover, two-car garage attached. A West Friendship mansion on nearly an acre of gently sloping land. A million-dollar Colonial in a Columbia development so new, the sales office is still open. Symbols of affluence. And, as recently as the past few weeks, all in foreclosure.”
“Foreclosure filings rose four times faster last year in Baltimore’s suburbs than in Baltimore, up 15 percent versus less than 4 percent in the city, court records show. To the south in Montgomery, one of the nation’s wealthiest counties, filings were up more than 30 percent.”
“Consider, for instance, a western Howard County home whose lender filed for foreclosure last month: Built last year, it’s nearly three times the size of an average new house, with a double-door entrance, a circular driveway and a four-car garage. Balance due on the loan: about $1.5 million.”
“‘Either they’ve fallen behind in payments or it’s just gotten to the point that the debt is strangulating them,’ said Mark F. Scurti, a Baltimore bankruptcy lawyer who has seen the number of people looking for Chapter 13 protection because of mortgage problems increase ‘dramatically’ in the past few months.”
“‘People are getting these large mortgages with variable rates that are just outrageous,’ Scurti added. ‘What they got in at, they could afford. Now they’re paying almost double.’”
“Some homeowners are in trouble before their first reset. One foreclosure filing in affluent Howard County last month, for an almost $1 million home in Columbia, affects an owner whose interest rate isn’t scheduled to change until 2011. Not one dollar of the principal had been paid off at the time of the court filing.”
“Three days later, another lender filed for foreclosure on a $480,000 split-level in Ellicott City with an adjustable-rate, interest-only mortgage that also hasn’t reset. The home changed hands only last summer.”
“The problem isn’t limited to subprime loans. Baltimore-based First Mariner Bancorp, which doesn’t offer subprime products, said bad loans contributed to its nearly $4 million loss in the last three months of 2006.”
“‘They can’t sell their property and they can’t refinance their property and they can’t get a tenant, and you’re seeing them throw up their hands and say, ‘You know, I’m out,’ said Brett Carter, president of First Mariner Mortgage.”
The Lancaster News from Pennsylvania. “The calls, said Bob Thomas, don’t always come from poor people. ‘One prospective client makes $100,000 a year,” said Thomas, (who) provides financial counseling. But he, too, had gotten a mortgage with low, low ‘teaser’ rates that soon leapt to the stratosphere; and he, too, was worried he couldn’t make the higher payments, and might lose his home.”
“M&T Bank, with several branches in Lancaster County, announced last week it would not auction off $883 million worth of loans to investor groups, a typical move in the banking industry, because it would lose money on the sale, according to an article in The York Dispatch.”
“Though these particular loans weren’t subprime, ‘There’s a lot of skittishness. Investors have shown less interest in any product that’s not a traditional prime mortgage,’ bank spokesman Michael Zabel told The Dispatch.”
“Frank Christoffel of the Lancaster County Association of Realtors (said): ‘When you look at our market overall, it’s still doing rather well,” he said. ‘Prices are still going up, not as much as they were, but we’d been drinking out of a fire hydrant.’”
“‘We’ve long seen a steady volume of folks coming in with subprime loans,’ said Patrick Cicero, an attorney in Harrisburg who has worked with struggling Lancaster-area homeowners. ‘But anecdotally, over the last six months, the numbers have been higher. When the housing market was hot it allowed people to purchase homes who shouldn’t have been buying them. We were selling them the American dream, and giving them a nightmare.’”
The Sharon Herald from Pennsylvania. “A Sharon homeowner closing in on his 80th birthday thought he latched onto a deal of a lifetime. The elderly man needed his roof replaced and a leaky basement repaired. With only a monthly Social Security retirement check to support him, he didn’t know how he could pay for these home improvements.”
“Then along came an out-of-town contractor who said he could complete the work for $30,000. The contractor hooked the man up with a Pittsburgh mortgage broker who specialized in subprime loans.”
“When the homeowner was unable to pay the monthly loan bill, the subprime lender began foreclosure proceedings against him and his home was scheduled to be sold at sheriff’s sale.”
“Although Sharon attorney Tom Dill was able to halt the sheriff’s sale of the man’s home, he wonders why the lender agreed to the loan in the first place.”
“‘The guy’s house is worth maybe $12,000,’ Dill said. ‘I don’t know why they gave him a $30,000 mortgage on a house worth that much at his age. How is this guy going to pay off a $30,000 mortgage on just Social Security?’”
“Since the mid-1990s, sheriff’s sales in Mercer County have soared from 33 in 1995 to a record 357 in 2006, according to the county sheriff’s department. With 177 sheriff’s sales on the books so far this year, 2007 is on pace to set another record.”
The Pocono Record from Pennsylvania. “A big chunk of homes sold in Monroe County so far this year were houses in foreclosure. In 2006, foreclosed homes accounted for 9.6 percent of all home sales here. That rate more than doubled to 20.4 percent in the quarter ending March 31.”
“While homes in foreclosure were usually six to seven years old in the past, real estate broker Vicki Brockelman now sees many after only two to three years, coinciding with the typical teaser period of adjustable rate mortgages.”
“But Brockelman sees an upside. ‘One person’s loss is another person’s gain,’ she said. ‘As prices go down, more people will be able to buy.’”
The Patriot News from Pennsylvania. “The midstate real estate market is showing signs of slowing, with prices wavering and houses taking longer to sell. For buyers in the local market, the trends could mean they have more bargaining power than they would have had last year.”
“For example, Grayson Homes, a builder from Elliott City, Md., has twice cut the base asking price for its Copper Ridge town houses in Lemoyne since the units were listed for sale last September, said Lee Frey of Grayson Homes. The base price dropped from $369,000 to $329,990.”
“The model home, the most expensive of six units available, started at $616,000. It is now priced at $424,990.”
“Market conditions in the Harrisburg area are better than in southern York County, where Grayson has developed Logan’s Reserve, Frey said. The number of days homes sit on the market there have doubled because of its proximity to the Baltimore and Washington, D.C., metropolitan areas, where the housing downturn is having a greater impact than near Harrisburg.”
“Keystone Arms Associates hasn’t reduced the prices of its new town houses just outside Carlisle that range from $171,700 to $184,700, said (realtor) Pam Hopper. Hopper said about 30 of the more than 190 units available have sold.”
“Even with prices being ‘a little under market,’ Hopper said, the builder is using incentives such as lower closing costs and adding a yearlong warranty to spur sales.”
“Jerrod Paterson, president of the Greater Harrisburg Association of Realtors, said the average sale price and number of days on the market this year are ’skewed’ by sluggish activity for homes priced at $250,000 and more.”
“‘In the higher-end homes we are seeing offers being made and houses not selling for the asking price,’ he said.”
‘Prices are still going up, not as much as they were, but we’d been drinking out of a fire hydrant.’”
They’ll soon go from drinking out of the fire hydrant to falling headlong into the storm sewer.
I suppose if you’re not smart enough to use a simple metaphor correctly, then Realtor ™ is the job for you.
“The problem isn’t limited to subprime loans. Baltimore-based First Mariner Bancorp, which doesn’t offer subprime products, said bad loans contributed to its nearly $4 million loss in the last three months of 2006.”
From their 10K filing
“…The Board of Governors of the Federal Reserve System
and the Federal Deposit Insurance Corporation, along with other federal banking
regulators, issued final guidance on December 6, 2006 entitled, Concentrations
in Commercial Real Estate Lending, Sound Risk Management Practices, directed at
institutions that have particularly high concentrations of commercial real
estate loans within their lending portfolios. These types of loans also
typically are larger than residential real estate loans and other commercial
loans. Because the loan portfolio contains a number of commercial and
commercial real estate loans with relatively large balances, the deterioration
of one or a few of these loans may cause a significant increase in
nonperforming loans. An increase in nonperforming loans could result in a loss
of earnings from these loans, an increase in the provision for loan losses, or
an increase in loan charge-offs, which could have an adverse impact on
financial results.
This recent guidance suggests that institutions whose commercial real estate
loans exceed certain percentages of capital should implement heightened risk
management practices appropriate to their concentration risk and may be
required to maintain higher capital ratios than institutions with lower
concentrations in commercial real estate lending.
Based on our commercial real estate concentration as of December 31, 2006, we may be subject to further supervisory analysis during future examinations. …”
http://tinyurl.com/2pj8o6
10K (online report at MSN)
This bank is history.
How can you tell? (It looked like they could sustain $4M/quarter for quite some time from the cash assets. Not the simplest balance sheet I’ve ever seen tho.)
The reason this bank and many others in similar positions are done is the “subject to further supervisory analysis”. The bank is borrowing money short term and lending at longer term; there is no profit. As the housing problem increases for this bank, which seems to have taken huge risks in commercial and residential real estate, the asset values carried on the books decreases and the liabilities increase. Deposits disappear as lending disappears.
Classic failure scenario = borrow money short term high rate (deposits), lend long term low rate (mortgages), burn thru assets. Saw similar with Enron.
High earning banks average (mean) -0.45 real estate loans to assets not the -0.77 and possibly getting worse ratios that are being seen in these small banks.
“The problem isn’t limited to subprime loans.”
The problem of subprime loans is contained, right? Unfortunately, it keeps coming to light that other kinds of mortgages besides subprime face similar problems…
Sure it is contained, kind of like “all real estate is local”.
The problem in subprime is contained, and the problem in alt-A is contained, and the problem in prime will also be contained. See, nothing to worry about.
they’re in commercial and losing money ?
commercial is still booming
I am looking for community banks and regional banks to short/ buy puts on. Much of “commercial real estate loans” are loans to residential developers. I think that this will be the downfall of many banks. Check out analysis by Suttmeier on Real Money and his own site , “Rightside advisors.” He points to many banks that have exposure to commercial real estate at 200-300% of the limits “recommended” by the FDIC. For the most part, reserves for losses were lower in 2006 than in 2005. I wonder what the loss reserves will be for 2007.
I just did some research on First Mariner Bancorp FMAR, mentioned above. They had record earnings in 2005 and record earnings in 2006 through the third quarter. So far this year, the stock has lost 22% which is a good chunk for normally low volatility bank stocks. On IBD, there are 131 banks in the “northeast” category, with sector fundamental and technical ratings both of “E” (with A the highest and E the lowest. Out of the 131 banks, IBD gives FMAR a rank of 122. So they are near the bottom of a sector, “northeast banks” that is at the lowest 10% of the total stock market. I think that Midwest banks are even lower and, of course, South and West are heading in the same direction. If banks get much worse, it’s difficult to see how the stock market as a whole can stay positive as banks keep going down. My vote: next week is the next leg down for banks, lenders and builders.
Excellent post and well thought out. One needs to really wonder what the outcome of the spreading mortgage and real estate implosion may be on some of these banks. Don’t think that many if any are too big to fail but in aggregate we may see some kind of systemic crisis develop before too long. After all, there was a Bank “Holiday” back in the 1930’s which was the last time there was a systemic credit deflation. Looking forward this definitely is not “feel good” material.
FMAR seems like they are FUBAR
Sharon PA:
“‘The guy’s house is worth maybe $12,000,’………Staggering to most of us $12K is pocket change………
800sq ft does that include both floors?
there are plenty of homes in Sharon for that price.
Chances are the house is 60-80 years old.
Taxes are high!
“‘They can’t sell their property and they can’t refinance their property and they can’t get a tenant, and you’re seeing them throw up their hands and say, ‘You know, I’m out,’ said Brett Carter, president of First Mariner Mortgage.”
I wonder why they can’t hold out for the post super bowl surge?
You know, getting out sooner rather than later is really the way to go. The foreclosure sale now will bring in more money than a foreclosure sale 2 years from now. That means the forgiveness of debt income reported to the IRS will be lower. And that is a debt you can’t get away from. The smaller the better.
Just saw a Bank REO in Las Vegas close at $245,000, all other listings for same sq. ft. asking $295,000. Even if they find a pigeon, will the lender find an appraiser to overlook the Foreclosure comp, or will the new lending standards bring pain to all those listings hiding their head in the sand?
Soon enough the only comps in LV will be at the REO comp level. I wonder if the bank had to carry paper to unload at that price? I don’t know anything about the particular property you mention, but it seems like if the other listings for similar property are at $295, no bank would want to loan money at $245 with the market obviously headed south…
Typically a foreclosure sale is not used as a comp in an appraisal, unless the majority of sales are foreclosures. A foreclosure sale is considered a distress sale and shouldn’t be given the same weight as an arm’s length transaction.
I’ve never really understood this. A foreclosure sale involves a buyer, right? A sale is a sale, and prices are set at the margin.
What is the definition of distressed? A house that sells quickly? When prices were rising at a blistering pace, and multiple offers were accepted on the first day, were those considered “distressed” since they took place quickly?
I think the key difference is, at a foreclosure sale the buyer frequently has to come in with all cash. So, those comps might be considered unfair (vis a vis the neighbors).
davidcee,
Could you provide details on the house (i.e., general location, square feet, etc.)? Just curious…
“Some homeowners are in trouble before their first reset. One foreclosure filing in affluent Howard County last month, for an almost $1 million home in Columbia, affects an owner whose interest rate isn’t scheduled to change until 2011. Not one dollar of the principal had been paid off at the time of the court filing. Three days later, another lender filed for foreclosure on a $480,000 split-level in Ellicott City with an adjustable-rate, interest-only mortgage that also hasn’t reset. The home changed hands only last summer.”
Have any updates on bailout plans come forth recently from Senators Dodd, Clinton and Obama? I am curious whether they plan to ask priced-out renters to help out those who bought million-dollar homes avoid foreclosure?
Yes, you will have to help that lettuce picker from California pay the mortgage on his $600K house. You don’t expect him to rent do you? As much as the Republicans disgust me, the Democrats are making me even more ill.
Ditto.
It’s all politic. Universal healthcare, bail out, Social security reform. We heard it all before. It makes good campaign talk.
Barney Frank is recommending more regulations for the industry to take unpayable loans off the table, Dodd has proposed a bail out for his local banker buddies, and Hillary appears to be endorsing banks to move ARM holders to fixed rate before they splat and restructure exploded ARM loans with lower rate loans so they can get their principle back. Only one of those has the government paying out, and the Frank proposals are actually bordering on hardcore. Obama is taking the high road so far and that is consistent.
I’m all for bashing bogus political operators but let’s be real at the same time. It is worth talking about actual proposals at face value because there is the prospect of actually getting stuck with one of these options or non options or whatever.
I’m all for a bailout as long as the banks pay for 100% of it. We all know that won’t happen.
This whole “ownership society” kick that the pols have been on lately is a perfect demonstration of the law of unintended consequences.
Yes, studies show that when people own property rather than renting, they take better care of their property. Seems reasonable. But putting people in houses they cannot afford does not result in them acting like owners, particularly if they have no skin in the game (100% loans, etc.). Meanwhile the nation’s financial system is put at risk, prices are driven through the roof, responsible buyers are priced out, people are put in jobs that should not exist (excess mort and RE brokers), lenders collapse putting their employees out of work, and savers are punished with risky products like CDOs hiding in their investments. Not to mention the inflation that now accelerating. And a lot of capital that could otherwise have gone to productive purposes went into granite countertops and gold-plated faucets.
The “financial innovation” that made all of this possible could not have been acomplished without government pumping of the money supply. And I blame the pols of both major parties - I sure didn’t hear any of them complaining while this scam was running, but now they’re all in CYA mode and promising to fix the problem.
The trouble, no one is going to get elected in 2008 telling people to take their medicine, so there is not much that the voters can do about it, even if there were a majority of responsible voters. I’m just waiting for one of the candidates to propose a “Housing Security Administration” to socialize the damage, and going on to win with it. The timing just might work.
Now, I’m going to have nightmares tonight.
“Yes, studies show that when people own property rather than renting, they take better care of their property. Seems reasonable. But putting people in houses they cannot afford does not result in them acting like owners, particularly if they have no skin in the game (100% loans, etc.).”
Putting people into houses they cannot afford tends to make it too expensive to purchase furniture, much less to pay what it takes to properly maintain a property.
Ah, but you can buy furniture on credit, with no payments until 2008. I wonder when gardeners and handymen will start taking credit cards. Then at least places might be maintained properly until the homedebtor goes BK.
That was, I think, one of the reasons that HOAs became popular - negligant neighbors are less able to blight your neighborhood. But as we all know, HOAs have their own unintended consequences, such as overspending on landscaping, lawyers, and frills, while forcing an ugly conformity by dictating paint colors and other crazy rules.
http://www.bankrate.com/brm/news/real-estate/HOA-horrors1.asp
Yes, studies show that when people own property rather than renting, they take better care of their property. Seems reasonable. But putting people in houses they cannot afford does not result in them acting like owners
Or to put it more clearly, people used to become homeowners because they were already responsible (20% down payment and income qualification), but making other people “homeowners” (0% down, liar loan) does not make them responsible.
another goofy part of this cyccle
folks over 50 getting mortgages - like a car after age 30- you should buy what you can for cash
How about a 50-year-old getting an interest only 50 year mortgage with a balloon due at 30 years?
What if they’ve got it in other semi-liquid investments?
Age discrimination is unlawful.
Older people taking out long-term mortgages is only “goofy” if one assumes that the mortgage will be held to term. In practice, few people do this. No one says a 35 year shouldn’t be given a 30 year mortgage because he’ll probably just sell within 10 years anyway. Let Grandpa have his 50 year mortgage. He’s probably got a better shot at fulfilling his obligation than many of the overleveraged 30 and 40 somethings out there.
Many people over 50 have access to a thing called “pensions” as well as “social security”. They have an income stream, albeit a fixed one. These are things that those of us under age 50 may or may not ever have access to.
“Symbols of affluence. And, as recently as the past few weeks, all in foreclosure.”
Symbols of affluence. Symbols of status. Sugarcoat it, whatever. These people will be financially ruined for many years to come, and for what, an empty show of affluence??
More like an overt show of gullibility.
Off topic but sad news… The following is a report from the LAtimes Homocide Blog from March 12-14, 2007. http://latimesblogs.latimes.com/homicidereport/
A Man Killed Holding Sign on Street
Lancaster: Darel Thomas Smith, 22, a black man, was shot ankilled at 45th Street West and Avenue K in Lancaster at 12:08 p.m.
Sunday, March 18. He was standing on the street holding a sign advertising new homes when a group of men or youths drove up, and someone shot him. One of the attackers then got out of the car and stood over him before the group fled the scene.
Wow, sounds like sign twirllers deserve hazard pay.
Wonder if the shooters had purchased houses from the same builder 100K and 1 year ago?? LOL
I meant 100K higher
Very soon the financial tide will finally be low and we’ll see what all these “affluent” people are wearing (or not wearing) as they march off to BK court. I’ve been waiting 5 years for this and the anticipation is killing me.
Got diversified assets and debt to equity ratio under 1:1?
It seems like those people need a taxpayer bailout to help them pay their bills. They can’t be expected to rent and we can’t let them live in cardboard boxes. Call up Senators Dudd, Edwards, Hillary and Osama
Hey Jerry,
Dunno if it’s a typo, but it’s Obama…not Osama.
Talk about drinking too much Kool-Aide, here you are parroting all the BS and kooky ideas that Anne Coulter and the folks at FOX are peddling….SHeesh, your probably less informed/more in denial than David Leareh. At least he’ll admit that he may have been wrong about his rosiest predictions of double digit housing price increases for as far as the eye can see.
Not to speak for Jerry, but I *think* he was being sarcastic.
If he was being “sarcastic” that wasn’t funny.
Maybe you should lighten up a bit
And maybe you should f/o. That is not funny whatsoever.
shh, let him feel smart
Those are the four Senators running for President who are calling for a bailout so far. So you can gripe here about a bailout and go vote for them. That would make alot of sense.
I don’t know what you’re talking about when referencing Ann Coulter and Fox. I never read any books Coulter wrote and I don’t have cable, so I can’t watch Fox. Maybe you should keep up with the news if you want to feel smart.
“Some homeowners are in trouble before their first reset. One foreclosure filing in affluent Howard County last month, for an almost $1 million home in Columbia, affects an owner whose interest rate isn’t scheduled to change until 2011. Not one dollar of the principal had been paid off at the time of the court filing. Three days later, another lender filed for foreclosure on a $480,000 split-level in Ellicott City with an adjustable-rate, interest-only mortgage that also hasn’t reset. The home changed hands only last summer.”
Does it not occur to these nimwits that it is the MORTGAGES and not the “HOMES” that are worth ‘almost $1 million’ or ‘$480,000.’ That if they looked closely, particularly the latter, they would find appraisal fraud, cashback at closing, the mortgage broker-whore walking away with a hefty fee…
“But Brockelman sees an upside. ‘One person’s loss is another person’s gain,’ she said. ‘As prices go down, more people will be able to buy.’”
Everyone repeat after me… “Real Estate only goes up!”
“The Pocono Record from Pennsylvania…”
~~~~~~~~
The Poconos is an interesting place. Forever this place has been a popular alternative for people from NY, NJ. It’s always been overrun on the weekend, but full-time residents commuting to the city was a recent phenomenon, especially post-911. Now the crime has followed, as have the increased prices. There used to be a time when a person could sell their home in NJ that they’d recently built for $500k, and have the exact same home built in PA for half that amount, and on more land with less property taxes.
My friend runs telephone lines out there and frequently tells me stories about how horrible and shoddy the construction is. Scams abound.
But Brockelman sees an upside. ‘One person’s loss is another person’s gain,’ she said. ‘As prices go down, more people will be able to buy.’”
True. But when people see prices coming down, they don’t necessarily lunge to buy. They wait and see how much lower they go. No one wants to catch a falling knife.
Take it from a potential bailout recipient’s vantage point:
“While reading this article, I felt very frustrated. Are we going to just stand by and let these families fall into despair and financial ruin? Back in the 1980s, when our nation’s lenders became mired in a credit mess of their own making, taxpayers bailed them out. It is time for our government to require payback by offering a way out for homeowners.
Legislate a moratorium on foreclosures on owner-occupied properties. Modify the terms of these mortgages so the payments become affordable. Roll back and delay rate adjustments for five years or more. Penalties could be forgiven and credit reports modified. I believe that ultimately this would be better for the lenders than foreclosures and short sales. Certainly it would help keep the dream of homeownership alive for those at the bottom of the economic ladder.
GENE MENZIES
Rodeo, Calif.”
http://www.latimes.com/news/printedition/opinion/la-le-tuesday3.5apr03,1,5623774.story?coll=la-news-comment
It’s not called the “dream” of home ownership for nothing.
If those on the bottom of the economic ladder had merely dreamed of owning homes priced at $500K on up, that would be one thing. But thanks to subprime loans, many of these folks are now the proud owners of homes they cannot afford, and are hoping to get the first politician with clout who will listen to steal other peoples’ money to pay for their unaffordable homes.
Jake Blues: I ran out of gas! I got a flat tire! I didn’t have change for cab fare! I lost my tux at the cleaners! I locked my keys in the car! An old friend came in from out of town! Someone stole my car! There was an earthquake! A terrible flood! Locusts! IT WASN’T MY FAULT, I SWEAR TO GOD!
Gene, another West Coast idiot calling for a bailout. Let’s see, how do you modify the terms so that the median income of $50K can afford the median $550K home? Then he wants to delay rate adjustments. So what happens to the yields on the bonds that were sold? Not only that, but the person who wrecklessly signed up for the teaser rate ARM gets to keep that rate for 5 more years while the responsible people who got a 30-yr fixed will have to keep paying more. On top of that, he wants credit reports modified. So now the irresponsible financial behavior is hidden from future lenders and the subprime idiots can get more loans and get in more trouble instead of learning from the school of hard knocks.
I can empathize to some degree with the sob story about how people were lied to, etc. and jimmied into loans they didn’t understand or couldn’t realistically afford… but what about all the hucksters who out & out lied to get their loans (and how can we tell the difference between the two)? How do we guard against bailing out all the fraudsters and thieves? What about all the Casey Serins out there?
If the fraud and rot is as pervasive as it seems, then perhaps the cold reality of that will shock people into their senses about any “bailout”. Hopefully, any misrepresentation on a loan application renders someone ineligible for help (and maybe gets sentenced to many years of community service into the bargain). But that unfortunately still leaves us manning the sump pumps for people who were just plain stupid.
How much of this bubble and its resultant crisis is due to criminality rather than just stupidity (even if it was criminal stupidity)? Wouldn’t that be nice to know…
Empathize??? I certianly can not. These people who bought houses they couldn’t afford at teaser rates weren’t buying anything at all!!! They were paying the same price I was to rent the place!!! The only bailout necessary for them would be to repair their credit rating to pre-home purchase levels. Empathize? Absolutely not, they didn’t lose any money on the deal. Instead, they just rented a place for a year at the going rate (with a tax break to boot).
Let the corrupt bankers, and the inept investors who bought into their shady risk management accounting schemes foot the bill.
The next couple of weeks are going to be interesting now that stories are coming out about lending problems extending beyond sub-prime. I’m interested in seeing how the stock market reacts and what type of feedback another (potential) dip in the market has on housing. I suspect that a 10% haircut in the financial markets will really freak people out (cause the markets are the economy, right, the MSM says so) and freeze up any boneheads still out there thinking about buying. The psychology of this whole mess is the most interesting.
agree 100%. CNBC began harping on alt-a last week. My opinion is that once the MSM stops cheerleading, and begins asking questions (aka poking and proding), that’s when we go from denial to fear.
Sure, it’d be nice if they’d ask tough questions and perform a real analysis of things, but I try to be realistic.
I agree, but MSM has a short attention span. They will quickly move on to something else they think will mesmerize their viewers. For example, how many Evening News shows have we seen in the last three weeks talking about the “Pet Food Contamination Scare”? It directly affects or has affected far, far fewer people than the RE crisis, yet it has probably had as much if not MORE media exposure….
I don’t think that MSM and CNBC even matter that much. When hedge fund managers, securities traders and other institutional investors start to really understand what’s happening, the market will react very strongly. Big money selling and going short has a lot more effect than us “retail investors.” Maybe those guys look at the financial sites listed above, but they are responding more quickly to 10K’s and company announcements that those of us not glued to Bloomberg all day are not going to get in time. Barrons and WSJ also seem to be able to move the market. However, the one big advantage that retail people have over institutional money is that big money can’t buy or sell so much that they drastically effect the market for a particular company—they would like to move their money in or out over days or months without others catching on.
When Fidelity or Legg Mason start unloading, people will notice. Who could absorb all of Legg Mason’s AMZN holdings? I bet the stock would drop about 33% if Bill Miller decided to unwind.
Strange absense of California bubble news today…
Because there *is* no bubble here. House prices will never go down here because *everyone* in Cali is rich. And stupid.
The 1000sf shacks in Compton are listed at $400,000. I wonder if it comes with bulletproof walls and flack jackets.
How much would they have to pay you to live there? LOL
Hey, that’s down from $500,000! Never been a better time tro buy!
I think they come with 50-caliber machine-gun turrets
Here’s another bailout candidate:
In one recent case, a consumer paid $80,000 for a home but got a loan for $159,000.
“I don’t know what she did with all of that money, but she suddenly ran into problems,’’ Ms. Ferringer said. “The house is in foreclosure now, and the woman had to file for bankruptcy.’’
http://www.sharon-herald.com/local/local_story_097191324.html?start:int=15
I’m watching a Jim Carey comedy about foreclosure flimed in 2005.
http://www.imdb.com/title/tt0369441/
Its a MUST SEE soo funny.
“Frank Christoffel of the Lancaster County Association of Realtors (said): ‘When you look at our market overall, it’s still doing rather well,” he said. ‘Prices are still going up, not as much as they were, but we’d been drinking out of a fire hydrant.’”
Lancaster’s own version of David Lereah. Whistling past the graveyard–and the excessively overbuilt McMansions that have devoured the Amish farmland. Lancaster County: puppy mill capital of the world–and using some of the finest soil in the world to grow houses!
Living in California I saw many of my neighbors pull equity from their homes to buy such necessities as massive flat panel televisions, Harleys, boats, SUVs, and lavish vacations. I also saw legends of low qualified individuals “purchasing” the American dream on deceit, poor planning, and cliff terms that ignored future consequences. A bailout with my tax dollars for these circus clowns and those who funded their Tom foolery is simply criminal.