“In Good Times, Bad Loans Are Made”
The Times Herald Record reports from New York. “When it comes to housing, the hottest town in Orange County last year was ‘none of the above.’ The highest median price last year was boasted by Woodbury ($419,250), but that was down 4.5 percent from 2005, and the number of sales in Woodbury plunged more than 25 percent, according to the Greater Hudson Valley MLS. Around the county, results were similarly tepid.”
“The number of homes sold fell last year in 30 of the 37 Orange County municipalities covered by the GHVMLS. The median sale price slipped in 15 of 37. Some of Orange’s steepest price declines came in previously red-hot markets like the towns of Hamptonburgh and Goshen, two of the region’s priciest locales in recent years. Each town’s median price fell more than $40,000 last year, although it’s hard to pinpoint why.”
“Sunset Ridge debuted a couple of years ago with prices starting a hundred bucks shy of $700,000. When Roz Novick took over the project a year ago, one of the first things she did was drop the starting price to $579,000. She’s sold three of the homes since.”
“‘It was just a matter of offering a wider variety of prices,’ said Novick. ‘The market is the market. If you’re positioned right, you’re going to sell.’”
The Press Herald from Maine. “Mainers are finding it harder to keep their homes, as many people become squeezed between loans they cannot repay and lenders who are offering fewer financing options.”
“‘You have loans happen that should not happen,’ said Will Lund, who heads Maine’s Office of Consumer Credit Regulation. ‘There’s no doubt that we will see an increase in foreclosures.’”
“Donna Gillette said she started looking for a house in early 2006 and quickly found one that she liked in Sanford. The price was $165,000. The loan officer said she could get an adjustable-rate mortgage, with no money down and a starting interest rate of 8 percent. A few days before the closing, though, the loan officer told her that the rate had to go up, to 10 percent.”
“After a few years, Gillette learned, the interest would rise to between 11 and 16 percent. ‘I was already emotionally tied to this house,’ she said, and went along with what the loan officer told her.”
“It turns out (that) included a note for $30,000, due in six months, unless she paid $900 twice a year to renew the note. Gillette said she had no idea why she needed the note and was further amazed when her loan officer said she could get some cash back at the closing.”
“She later found out that the loan papers had listed her income as $60,000 a year, when it was half that, and that she was putting $21,000 down on the house, when she wasn’t putting anything down. Gillette said she ended up with initial payments of $1,274 a month, which she could barely make, that would soon jump to $1,400 and then $1,500.”
“Gillette eventually found help at Legal Services for the Elderly in Scarborough, where staff attorney Mary Kathryn Brennan said it was difficult for even a lawyer to sort out what Gillette had for a mortgage. ‘It took me two weeks to figure out what had actually happened,’ Brennan said. ‘I was sitting here with these loan documents, thinking ‘Where did this money come from? How did they come up with this figure?’”
“James Seely, CEO of RMS, said he subsequently fired the loan officer, has reworked another 10 mortgages that the officer wrote and is working to refinance two others because the terms were so poor.”
“‘The essence of the problem in our industry (is that) in good times, bad loans are made,’ said Seely.”
The Boston Globe from Massachusetts. “Tyrone Lobo quit his job last month as a deputy in the Barnstable Sheriff’s Department so he could cash in his pension and use the roughly $30,000 to…prevent their four-bedroom Cape-style home in Falmouth from being auctioned off.”
“Lobo and his fiancee had seen their monthly mortgage payment jump from just under $800 in 2002 to $2,700 last fall because of previous refinancing to stave off a previous foreclosure, they said.”
“They said they were able to hold off the foreclosure by refinancing at 12.8 percent interest, double what they were charged before, but bumping their monthly mortgage to $2,700. They couldn’t afford it.”
“‘It was the only deal on the table to save the house in that amount of time,’ Lobo said. ‘It’s been a struggle every month.’”
The Times from New Jersey. “Two years ago, when the housing market was booming, William Soodul figured he would reduce his costs with a ‘creative mortgage.’ He took out a $226,500 adjustable-rate mortgage on his A-frame home in Allentown with a 1.8 percent interest rate and monthly payments that were not applied to either the principal or the interest.”
“His plan was to refinance before his interest rate rose and higher payments kicked in. But Soodul got the surprise of his life when he tried to line up a conventional mortgage last month. Not only would his costs rise $7,000 a year if he kept the mortgage, he would have to pay a $10,000 prepayment penalty just to get out of the deal.”
“In county offices throughout the state, foreclosure filings are rising sharply. ‘We’ve seen a 30 percent increase in our foreclosures in the last five or six months,’ said Mercer County Clerk Paula Solami-Covello. ‘Some lending institutions made it easier for people to get mortgages, and maybe they don’t make the salary to pay for them. People are getting into situations where they just can’t pay.’”
“All towns in the county, even wealthier areas where homes carry price tags of $500,000, have seen increases in foreclosure filings, Solami-Covello said. In 1998 and 1999, there were about 1,000 new foreclosure filings in Mercer County for the entire year. This year, 421 were filed through the end of March.”
“Statewide, the figures are even more dramatic. There was a 70 percent increase in new foreclosure filings statewide from the third quarter of 2005 to the third quarter of 2006, said Jeff Posner, owner of a Web site that tracks the filings. In January, the state filings more than doubled over the same month last year; in March, filings were up 22 percent.”
“Experts believe boom-time credit practices are accelerating the pace this time around. ‘A lot of cheap money out there was fueling the real estate market,’ said Timothy Duggan, who chairs the bankruptcy and creditor’s rights group for (a) law firm. ‘Wages haven’t kept up with the increase in the housing costs. People, over time, have taken on too much debt,’ he added.”
“There was ‘an easing of underwriting standards, where we provided loans for people with poor credit, who maybe in the past wouldn’t have gotten loans, people who wouldn’t have been able to purchase homes in the past,’ said E. Robert Levy of the Mortgage Bankers Association. ‘There’s no question credit will tighten now,’ Levy said.”
“Frank Mancino, of Gateway Funding in Hamilton, said mortgage companies are already tightening their lending practices. While it was possible two months ago to get a mortgage without proof of income or a good credit score, that is no longer viable, Mancino said.”
“‘The money was flowing very freely and everybody wanted to get in on that lending,’ Mancino said.”
“Posner blamed lenders for the foreclosure surge. ‘It’s the loose lending,’ Posner said. ‘Not just subprime loans, there are also a lot of prime loans in foreclosure.’”
“People have been offered 100 percent financing, he added. ‘Three or four years ago, you could never get a loan like that,’ Posner said. ‘Even people with good credit want to put down less money if they can get away with it.’”
“From 2000 to 2005 housing prices in New Jersey rose 85 percent, said Pat O’Keefe, the CEO of the New Jersey Homebuilder’s Association. But beginning in 2006, the ‘housing market stalled,’ he said. ‘Particularly in the resale sector. It ground to a halt.’”
“Sales are down 20 percent since 2005, he said. This spring, prospective sellers are becoming more realistic and lowering their prices, he said. But sales are still ‘very sluggish.’”
The Record from New Jersey. “When Iraj and Michele Hastings began searching for a house in North Jersey recently, they were happy to find a lot of choices in their price range of around $500,000.”
“‘We saw at least 25 houses,’ said Iraj Hastings, who works in New York. ‘We thought it best to take our time.’”
“‘We had a remarkable six or seven years. We might be going into a more typical time,’ said Harry Collis of Collis Realty in Bogota. ‘We’re in a state of transition. Two springs ago, that was hysteria. Multiple bidding, that’s a thing of the past.’”
“‘I’m not optimistic about the spring home buying season,’ said economist Celia Chen. ‘Affordability still remains an issue for many people, particularly in markets that previously were hot, which would include the New York City metropolitan area. On top of that is concern about what’s going on in the subprime lending market…there are definite risks that conditions will get much worse.’”
“Many sellers are getting used to the idea of lower prices. Jay Noriega and Tara Voss Noriega first tried to sell their Rochelle Park Cape Cod by themselves, asking $415,000. They got a couple of low offers, including one for $330,000,- and then listed the property for $404,000.”
“‘I’m asking a little bit less than what the peak price was, and I feel we can get it,’ said Voss Noriega.”
“Not all sellers have gotten the message about lower prices, according to many real estate agents. ‘Sellers still believe that the old prices are the right prices, and buyers obviously don’t,’ said Robin Malley in River Vale.”
“‘The sellers who think they can get what they got two years ago for houses, their houses are not selling,’ said Joe Boreale in Wayne.”
‘A service set up by the county, refers those facing foreclosure to counselors. In the three days after the announcement, Suffolk received nearly 300 calls from homeowners. Nassau reported 260 calls. Across New York, 13 percent of subprime loans were 60 or more days delinquent as of the end of February, up seven percentage points since February 2005, with the highest increases in Long Island, Dutchess County and New York City, according to the report.’
‘With a glut of homes on the market, Pearl Kamer, chief economist of the Long Island Association added, prices are declining, particularly for homes listed for more than $500,000. And lenders have tightened requirements for borrowers, fewer of whom can thus qualify for mortgages.’
‘She said she believed all neighborhoods on Long Island would be affected, not only the less affluent ones. When real estate was booming, less affluent buyers ‘got into these more expensive homes with subprime mortgages,’ Ms. Kamer said. As home prices drop, she said, many homeowners are stuck owing more money than they can recover by selling the house.’
see, gov money already being spent
bail !
This goes far, far beyond subprime lending. Look at these multi-million dollar in foreclosure in Miamis and West Palm Beach. There is no way a lender is going to give millions of dollars to someone who can’t repay it unless something incredibly crooked is going on under the table with many, many people involved from the top to the bottom. I wonder if the FBI has enough agents to deal with this. The whole real estate bubble seems to have been (and still is) riddled with con artists, crooks, and thieves, INCLUDING the tens of millions of buyers who thought they could (and still think they can) get something for nothing, gambling with other people’s money.
Miami: http://tinyurl.com/2jf5nc
West Palm Beach: http://tinyurl.com/2s84ao
“Across New York, 13 percent of subprime loans were 60 or more days…”
Wow! It’s not different everywhere. This is really a national scandal led by subprime money pimps.
Where is that person that I blasted the other day for cheerleading NYC???
“Lobo and his fiancee had seen their monthly mortgage payment jump from just under $800 in 2002 to $2,700 last fall because of previous refinancing to stave off a previous foreclosure, they said.”
How is unemployed Tyrone going to continue paying for this? He couldn’t afford the payments at $800 (while employed)?
“Tyrone Lobo quit his job last month as a deputy in the Barnstable Sheriff’s Department so he could cash in his pension and use the roughly $30,000 to…prevent their four-bedroom Cape-style home in Falmouth from being auctioned off.”
Lobo is an idiot, now, without a gun. What a joke this clown is and with a badge.
“Tyrone Lobo quit his job last month as a deputy in the Barnstable Sheriff’s Department so he could cash in his pension and use the roughly $30,000 to…prevent their four-bedroom Cape-style home in Falmouth from being auctioned off.”
This guy is throwing away what little he has, at a lost cause.
well, Tyrone hasn’t acquired any good sense as a result of his FIRST bad decision, taking out an unaffordable mortgage
now, he has flushed the start of a retirement account down the toilet to pay the mortgage for the next few months…THEN WHAT??
jeesh…if the government bails out these people I will puke
let’s enable supidity-is that the next big gov’t program?
These people are losing their pensions because they are so enamoured with their buildings. Include in this group the people with the opportunity to build a pension but will not because they are chained to a building, unable to move.
I believe many who are today entirely dependent on Social Security without a pension are in this predicament because of RE.
But who cares, the only thing that matters is the 6% wealth transfer tax. As long as this tax is being paid to Realtor’s (TM), all is well.
Got 10% down?
I’m sure he found a job with a PD in another county or town and still carrying a gun.
Not to sound too morbid, but he may be using it on himself sooner than anyone might like to admit.
He may be stupid, but he hasn’t made his worst mistake. . . yet. Ben, feel free to remove this post if you feel it crosses a line.
When does most “spring” inventory come out? April, May? I’m not seeing any significant new inventory here in Southern MA as of yet.
On the North Shore, the inventory is piling on fast. In my city, we’re about where we were in May of last year and it shows no sign of stopping. Many of the homes we see on Zip are the same overpriced crap holes that were on the MLS last summer.
“Many of the homes we see on Zip are the same overpriced crap holes that were on the MLS last summer”.
We see this with the same prices that did not work last summer. In fact, there is one in our development where they had dropped their price by 10% in the fall and now are back to full price. They are obviously counting on the Spring market. I think their agent has given them bad advice.
“I think their agent has given them bad advice.”
Well. . . YEAH!!
“Cash in his pension.” Another FB who will never be able to retire.
Is this decline going to be a steady drip, drip water torture, or (to mix metaphors) is the bottom going to suddenly drop out and then stabilize?
My guess is the former. Annual declines in the 5% range in non-bubble areas to 15% in the worst bubble areas, for each of the next several years.
It’s death by a thousand cuts. In Florida, it’s even worse when you add taxes, insurance, and bailout hopes.
2008-09 will be the year-year biggest decline. This will be when the banks have been sitting on a lot of inventory for more than 1 year and will cave. Perhaps RTC II will be born in this timeframe.
Austin peaked in 1985 and it was 1988-89 where it became obvious the old prices weren’t coming back for many years, esp in the suburbs. I recall being able to throw a football from my front yard and able to hit about 3 empty foreclosed starter homes on the RTC or bank rolls for $40K-50K, down from $60K the previous year and $80K in 1985.
Heck, we had a freeze that winter, and I woke up to find water pouring out of my empty, foreclosed neighbor’s house (broken pipe)!
“Many sellers are getting used to the idea of lower prices. Jay Noriega and Tara Voss Noriega first tried to sell their Rochelle Park Cape Cod by themselves, asking $415,000. They got a couple of low offers, including one for $330,000,- and then listed the property for $404,000.”
“‘I’m asking a little bit less than what the peak price was, and I feel we can get it,’ said Voss Noriega.”
Voss is delusional. How can the press tout this bozo as an example of sellers that ‘have gotten used to lower prices’. When he eventually sells for much less, and after the realtor takes her pound of flesh, his net will be below the $330,000 ‘low ball’ he dismissed.
Seems to me the house is worth $330K - that’s what his best offer was. It’s high time for the MLS monopoly to be broken up, or at least allow sellers to place (for a fee) their listing on the MLS. The freakin’ realtors have established themselves as some sort of authority on pricing RE, and the public has bought into it. All the realtors do is jack up prices; that is, the sellers jack up their price so they can pay the realtor his fee.
I agree that the MLS must be opened.
Opened to sellers placing homes into it for a nominal fee.
Opened to all buyers for easy access for searching.
There is no reason a home sale should be a 6% commission. I’d be ok with 2% or even 3%. But 6%? There is no reason Realtor ™ fees hit 0.9% of GNP.
Let’s see if we hit the traditional bottom of 0.3% of GNP. I think we’ll undershoot by quite a bit. Oh… sales and Realtor ™ commissions won’t stop. None of us should want the sales to stop… that would mean its really ugly.
But I do agree, these people will pine about that $330k offer for years. This market is just beginning to slide. I still think it will take until June for ‘Joe Sixpack’ to know that home prices are declining. But once their attitude and behavior changes… we will see just how quickly a market can turn.
Got popcorn?
Neil
Neil,
What do you think about this… when we make our lowball offers, we also specify 3% total commissions, with the other 3% coming off the price.
Hey, some money is better than none, and if you don’t want to be my Realtor, I’ll find someone who does.
“‘I’m asking a little bit less than what the peak price was, and I feel we can get it,’ said Voss Noriega.”
It takes a lot of effort to ignore market reality. A year and a half away from peak and these sellers are pricing just below peak.
cape cod peaked fall of 04
like fall 87 they are the true canary
I think that cape code, san juan islands, and other 2nd home locations makes sense to me. Do you have any stats on price drops
From the SEC website:
http://www.sec.gov/answers/mortgagesecurities.htm
“An important risk with regard to residential mortgages involves prepayments, typically because homeowners refinance when interest rates fall.”
That’s it for risk from them.
“Timothy Duggan, who chairs the bankruptcy and creditor’s rights group for (a) law firm.
- ‘Wages haven’t kept up with the increase in the housing costs. People, over time, have taken on too much debt,’ he added.”
Slowly, “Wages haven’t kept up” message is starting to leak out in the media.
Ahhhh! The subtle consequences of a global economy. Debt substituion for real wage growth. “What do you carry in you wallet?”
I don’t carry anything in my wallet except for the license and insurance card - it keeps away the temptation of the impulse buy!
“Posner blamed lenders for the foreclosure surge. ‘It’s the loose lending,’ Posner said. ‘Not just subprime loans, there are also a lot of prime loans in foreclosure.’”
Posner makes a good case to keep the FED steady. After all the lender led shenanigans, the FED can no longer trust the lending industry. As a result, even if the FED wanted to lower rates to bail people out of horrible loans, it couldn’t. It wouldn’t work. The FED needs alternative distribution channels to get cheap money to the FBs.
“Donna Gillette said she started looking for a house in early 2006 and quickly found one that she liked in Sanford. The price was $165,000. The loan officer said she could get an adjustable-rate mortgage, with no money down and a starting interest rate of 8 percent. A few days before the closing, though, the loan officer told her that the rate had to go up, to 10 percent.”
“After a few years, Gillette learned, the interest would rise to between 11 and 16 percent. ‘I was already emotionally tied to this house,’ she said, and went along with what the loan officer told her.”
If her teaser rate was 10%, in 2006, her credit was so bad that she had no business buying a home. Foreclosure and bankrupcy (maybe thats what FB should stand for) really ARE her best options, and probably won’t hurt credit that bad since it was soo terrible to begin with.
My sympathy for FB’ers continues to erode on a daily basis (and I didn’t start with much). The better half and I were watching “My first home” on some network last night and there was a single woman (no kids, job as a roller derby contestant going no-doc, stated income) in St. Louis who fell in love with a home. The original asking price was $179,500. She offered $155,000, the counter was $174,500 with no inspections. The two parties finally agreed to $165,000 when the inspection revealed that the 70 year old cast iron sewer pipe was paper thin and ready to go any minute, so the buyer dropped their price to $135,000. The owners said no dice so the buyer walked away.
Soon thereafter, the owners came back with a price at $155,000, and which point the buyer accepted. The final shot of the show was the buyer raising a glass of wine with her parents toasting “Here’s to the sewer lasting a few more years!” I hope she wakes up next week with a basement full of sewage and a $20,000 repair bill. “I love this house”. Morons, the whole lot of them.
I’m so sick of the sob stories. I wish just once the newspapers would do an angle from the point of view of people that walked away from the madness. The more I’m reluctantly forced by the government to provide taxpayer funded charity the less likely I am to provide charity on my own.
Hate to reply to my own comment, but I just remembered one other thing the moronic FB’er said.
“This is my trophy”
The more I think about it, the more the people who bought into this mania deserve all the scorn we’re giving them.
I do agree with the essence of what you say here. As a former newspaper reporter, however, I can tell you that most reporters know exactly how bad these supposedly sympathetic people look to the informed public. If they blatantly flogged these people in their stories, no one would talk to the reporter again. But they feign sympathy and then just let the FB hang him or her self in the story. Reporters know that their newspapers make tons of money on real estate advertising, but they’re also (generally) not dumb. They just have to find creative ways to get the truth out. And that’s getting harder to do in this corporatized news climate. Although that line from yesterday’s blog about the “good news” being that house prices only went down $10,000 a year in Santa Clarita–that is totally biased reporting. At least say that is good news for homeowners, and bad news for anyone else earning the median income who wants to buy a house without a suicide loan! It’s obvious that we’ve become an “us versus them” society…those few of us who held out during the boom, against all the rest of the people who are in denial and desperately trying to hang on to their paper “wealth.” I personally refuse to give in to this madness. I’ve been reading this blog practically daily (I do believe this is the biggest news story of my 40-year lifetime, and the newspapers should be lined up and shot for the way they are covering it) for at least a year now and I have learned so much. It’s so nice to see other sane people out there. I’m not at all the money manager that most of you appear to be on this blog (easy credit is a terrible temptation for me, especially because I have an awesome FICO score and can still get it at 0% interest), but at least I resisted the temptation to jump into a market that defied common sense, even though my parents were willing and able to do everything they could to help me get in. I’m a teacher making less than $50K! I know I can’t afford a condo costing $300,000, let alone the median price of about $450K in my area. A good friend in Seattle makes about my salary and bought a 2/2 condo for about $150,000. That’s what I can realistically afford. Is that ever gonna happen in the SFV?? I doubt it! But this blog gives me hope that if we stick together and refuse to buy into an insane market, prices will eventually come back to earth. Many thanks, Ben, for such a great blog.
Now, if I could just find a decent place with cheaper rent…
“As a former newspaper reporter,”
You’re a former newspaper reporter and you write that post without a single paragraph break? No offense, but I can see why you are a “former”. I liked your post but I now have a headache from reading that clump of letters. In the future, be kinder to your audience. Thank you.
You need to be kinder as well, your remark about “former” was unnecessary.
Totally agree - he seems like a nasty person.
Hey, there’s a BIG diff. in writing for a blog like this and writing for someone with a 5th grade education (what most nespapers write for) - I used to be a journalist, also. This particular writer assumed you were more intelligent than average - maybe not, eh???
Thanks for all the support for my way-too-long paragraph. It makes the single “flame” worth it.
I think I got carried away. I usually only have time to read this blog, not post, and I had a little time while my son was occupied with other things this morning (being a single parent makes time a precious commodity). I know enough not to have spelling mistakes on this blog (and even though I’m an English teacher, we all hit the wrong key once in a while). But hey, who knew my long paragraph would draw such ire!
My writing and reporting were excellent, BTW, even though I never made it to the big time. It was the incredible push for profits at the expense of good journalism that made me run screaming from the field.
excellent post
yes I do think we will see $150K condos in the San Fernando Valley
the book Sell Now! predicts a return to 1997 prices, inflation adjusted, which would be about 2000 prices
thanks for your excellent and clearly composed post - to criticize it because it’s a single paragraph is asinine.
Yes, saw that…thankfully they’re starting to be more up front with the numbers on these real estate shows, and anyone with a calculator can see through the BS.
Notice that the realtors did nothiing to suggest to her that she was in over her head, or that she was a fool for caving on the final price.
The following segment was a young couple in San Francisco, who paid about $730,000 ( in fall of 2006) for a tiny new condo apartment The based on the clues the show was throwing out, looks like their monthly payment (incl. HOA dues but not taxes or insurance) figures to be about $4,000 - this, on a combined income of about $100,000 - so , most of their income for housing.
Granite countertops and a balcony with just enough standing room for 4 close friends. Insanity.
I saw the TV programs also and what struck me is how the realtors did not really help these borrowers get a fair deal .
For instance on the SF condo , I would of got the price down more because the buyers were willing to perform within 10 days to the benefit of the builder . When the realtor said that new construction was at a set priced he lied .Also the RE agent stressed urgency because other buyers might be interested .
I wanted to slap that RE agents lying face when he smiled when he knew he had this young couple in his grip .
The young women who overpaid for the house needing thousands in repairs made me sick . It was clear that the appraiser did not include the repairs needed in the appraisal .I would of handed the inspection report to the appraiser and than he would of came in lower on the appraisal and than the seller would of had to come down in price or the deal was dead . So again it’s clear that the realtors were working for the seller not the buyer .
On this deal you had a seller who had saved money for years by not doing any repairs on this fixer upper yet this young girl did not get the proper appraisal or discount for the sellers greed .I would like to know how this young girl is going to get the money to make these repairs and it was clear she was put on a toxic loan .All I could see was the smiling faces of these members of the REIC that had a live one in this young girl . The parents will end up bailing this brat girl out ,yet at the end of the program the young girl acted like she was real smart and had done everything on her own ,(she put a lousey 8k in the deal and her parents put up 12k ).
“If her teaser rate was 10%, in 2006, her credit was so bad that she had no business buying a home.”
Not necessarily. I’ve heard from several friends and family members who refi’ed over the past few years that the first lender they went to promised (via phone) a fixed mortgage at a good interest rate, only to jack them around with a higher-interest ARM at closing, telling them take it or leave it. They walked, found another lender, and got their fixed-rate mortgage at the good interest rate from the second, less ethically-challenged lender.
Moral: the terms of these toxic mortgage could have depended as much upon the loan officer’s greed as on the borrower’s credit rating. After all, they were earning bigger bonuses for writing ARMs vs. fixed, for loans with higher rates, loans with shorter reset periods, and big prepayment penalties.
So either she had terrible credit, OR had been hit with the stupid stick so hard that she didn’t even realize that 10% was a terrible interest rate? Either way, she probably shouldn’t have been buying a house.
“‘The essence of the problem in our industry (is that) in good times, bad loans are made,’ said Seely.”
Why is Seely still in business? Why aren’t the regulators all over him?
‘I was already emotionally tied to this house,’ she said
Stupid to get emotional about something that dramatically affects your financial future. It’s a good summary statement for both sides of the aisle right now.
People got emotional and “had to buy now or be priced out forever”…
Now the sellers are emotionally tied to their mistakes. “I am entitled to sell my house for more than I paid for it, regardless.” That’s what’s going to make this such an entertaining year as I think most people on the sidelines are just going to wait out the sellers. New home manufacturers and folks that have owned for decades will continue to undercut the people who got caught up in the hysteria and if they continue their stubborn ways, will be the ones who will suffer the most.
Wheee.
The greatest power you have in a negotiation is the power to walk away. Do NOT get emotionally attached to a house. Realize there are plenty of houses out there if you don’t buy this one, some just as nice as this one or even better.
“Two years ago, when the housing market was booming, William Soodul figured he would reduce his costs with a ‘creative mortgage.’ He took out a $226,500 adjustable-rate mortgage on his A-frame home in Allentown with a 1.8 percent interest rate and monthly payments that were not applied to either the principal or the interest.”
What many of the articles, on borrowers who refinance, fail to tell you is what the “cash out” part of the transaction was.
and now there is no equity to cash out in 07
= slow gowing
“He took out a $226,500 adjustable-rate mortgage on his A-frame home in Allentown with a 1.8 percent interest rate and monthly payments that were not applied to either the principal or the interest.”
Huh ? How does that work ? What were the loan payments applied to ? The loan agents BMW payment ?
wow. some of these stories make me scared. this will get really ugly.
“He took out a $226,500 adjustable-rate mortgage on his A-frame home in Allentown with a 1.8 percent interest rate and monthly payments that were not applied to either the principal or the interest.”
I don’t understand. Then where did the money go?
I was wondering the same thing. Had to read it 2 or 3 times to make sure I read it right. Hmmm….you wrote this post early this morning and no one has replied.
Does anyone have an answer out there? If no one catches it here, I may take the question out to the current topic.
BayQT~
Yes, please. I am very curious.
“When Iraj and Michele Hastings began searching for a house in North Jersey recently, they were happy to find a lot of choices in their price range of around $500,000.”
If they can rent for a few years those same houses will be available for about $300k. If they buy now, they will be throwing their money away.
Sign a one year lease and forget about buying.
Got 10% down?
I second Silvertoad; and I, too, am a former newspaper reporter.
Don’t underestimate what Waiting in LA wrote about our former profession’s profane alliance with Realtors. Not that newspapers can’t do their job once in a while: two of my alma maters won Pulitzers last week, one for what may have been the most important American journalism of the decade.
If only they had come to Jesus when it mattered…
Certainly in the WaPo, the difference between what you read in the Real Estate section and in the Business section is stark. The RE section is all “Sales are harder, but a fresh coat of paint will help you sell,” while the business section is more “Subprimes are going under and draging house prices with them.”
“They said they decided to refinance with Option One Mortgage Corp. and take on a $192,000 loan to remodel the kitchen, pay off credit cards, and help Hergt’s son pay for college.”
Living high and now they are complaining