Sales Of New Homes Off
Some housing bubble news from Wall Street and Washington. MarketWatch, “Boosted by warmer weather in the Northeast and Midwest, sales of new homes increased by 2.6% in March to a seasonally adjusted annual rate of 858,000, the Commerce Department reported Wednesday. Sales of new homes were off 23.5% compared with March 2006.”
“The inventory of unsold homes rose by 1,000 to 545,000 in March, representing a 7.8-month supply. Sales in the previous three months were revised lower as well. February’s revised annualized sales pace of 836,000 was the lowest since September 1999.”
“It can take up to six months for a trend in sales to emerge. New-home sales have averaged 924,000 per month over the past six months, compared with 951,000 in the six months ending in February. The six-month sales average is now down 23% from last March’s 1.20 million pace.”
“Home builders have piled on incentives to sell homes and reduce inventories. Such incentives are not subtracted from the sales price reported to the government. Home builders have reported a large increase in cancellations in recent months. Cancellations are not reflected in the government data, so the reported sales are likely overstated.”
From Bloomberg. “‘Considering the weather was unseasonably mild in March, the report certainly wasn’t overly positive news and is consistent with the idea that sales are still struggling,’ said Phillip Neuhart, an economist at Wachovia Corp.”
From Reuters. “Bank of Spain governor Miguel Angel Fernandez Ordonez attempted to reassure financial markets yesterday that the country’s housing market was in only a gradual slowdown. This came after real estate stocks tumbled on fears that a decade-long property boom was unravelling.”
“‘We think the property market, construction in general, is going to have a soft landing, which is what it’s having,’ Ordonez said after speaking in congress. ‘You know what the stock market is like: it’s calm one day, goes up the next. It doesn’t do things based on reality.’”
From Ireland Online. “Economist Diana Choyleva said holiday home owners who flocked to Spain over the last couple of years could now see the price of their investment fall. She added: ‘This is not good news for foreign investors in Spain. The problem is in supply. We have had over investment on a gigantic scale and it has already started a slowdown in house price growth.’”
The Financial Times. “Investors got the jitters after Astroc, a Valencian real estate developer, went into free-fall last week when its audited accounts revealed some of last year’s profits came from the sale of Astroc assets to Enrique Banuelos, its chairman.”
“Meanwhile, the heavy debt load of some real estate groups and worries about oversupply, with 800,000 new housing starts approved for this year, compared with an estimated demand for 600,000, also contributed to the sell-off.”
“Cheating on mortgage applications is so widespread and so seldom punished that it’s fueling an increase in foreclosures that will prolong the housing slump, said Robert W. Russell, counsel to the director of the Office of Thrift Supervision, which oversees savings and loans.”
“‘Misstatements about employment and income are being made every day,’ Russell said. ‘The brokers are just putting down on paper what the underwriters would require. There are borrowers providing false information as well.’”
“Loans that require little or no documentation of income soared to $276 billion, or 46 percent, of all subprime mortgages last year from $30 billion in 2001, according to analysts at Credit Suisse Group.”
“As part of a pending class-action lawsuit in State of Minnesota District Court alleging Ameriquest Mortgage Corp. charged borrowers extra fees, former account executive Mark Bomchill, who worked in the Plymouth, Minnesota, branch office, said it was ‘a common and open practice at Ameriquest for account executives to forge or alter borrower information or loan documents.’”
“‘I saw account executives openly engage in conduct such as altering borrowers’ W-2 forms or pay stubs, photocopying borrower signatures and copying them onto other, unsigned documents and similar conduct,’ Bomchill said in a sworn statement.”
“‘It wasn’t really done behind closed doors,’ Bomchill said.”
The Herald. “The shutdown of wholesale lender Mortgage Investment Lending Associates Inc. was sudden, but not a surprise to many of the employees laid off over the past year.”
“‘I’ve been waiting for it,’ said Amorita Simon of Everett, who lost her job there in February 2006. ‘And I knew the way that MILA ran itself, it was only a matter of time.’”
From Law.com. “While the bankruptcy engagements are likely to be short due to the lack of operations and asset selloffs by some of the failing companies, the selloffs will benefit other attorneys. Mergers and acquisition colleagues are stepping in to assist the companies in selling some of their loan portfolios at discount prices.”
“‘We’re seeing this hit across multiple practice areas,’ said Jerry Biederman, an attorney in Chicago, adding that this is the start of ‘a whole panoply of subprime-related legal issues.’”
“Investors who bought some of the mortgage-backed debt securities, which have also declined in value, may also have claims against subprime lenders, attorneys said. Class actions on that front may also reach beyond the lenders to the banks that were selling the securities on behalf of the lenders, said Chris Seeger, a plaintiffs’ attorney in New York who is researching a lawsuit he plans to file this month.”
“‘We have many people who are contacting us and feel like they’ve been victims of the subprime lending industry,’ Seeger said.”
From McClatchy Newspapers. “Anyone looking to point a finger of blame for the meltdown in the subprime mortgage market may need more than two hands. It took the action, and the inaction, of many players to produce today’s mess, which threatens to slow the U.S. economy further.”
“‘Everyone has a share in the blame; lenders, borrowers, regulators, investors. There were a lot of mistakes, and everyone made them,’ said economist Mark Zandi.”
“‘It’s hard to blame the regulators for most of this, because these guys like New Century and other outfits in trouble are unregulated,’ said Robert Litan, an expert on federal regulation.”
“‘We have a structural flaw in the system, and lenders and borrowers took advantage of this, and people got whacked,’ said Former Federal Reserve Governor Edward Gramlich. ‘Most of the fixes are, and have been all along, measures that could only be changed by legislation.’”
“‘We knew there was excessive use of adjustable (mortgage) rates. That was a time when the Fed had interest rates very low, for good macroeconomic reason, but it made everyone vulnerable to this problem’ that we have today, said Gramlich, a Fed governor from 1997 to 2005 and the author of the forthcoming book ‘Subprime Mortgages: America’s Latest Boom and Bust.’”
“Recovery of the US market for new homes could take another year if trouble in the adjustable-rate subprime mortgage market spreads to other types of residential lending, credit-rating agency Standard & Poor’s said.”
“‘We do not expect to see a recovery for most rated home builders until 2008, under the best of circumstances,’ the rating agency said in a research note. ‘In fact, a rebound could easily slide into 2009 if a subprime contagion spreads to the Alt-A and prime products.’”
“S&P said rising foreclosure rates and tightening consumer credit raise additional red flags regarding a cyclical housing downturn that was already deeper and broader than previously anticipated.”
The Vancouver Sun. “West Fraser Timber president Hank Ketcham said Tuesday the forest industry is facing the worst recession he can recall with no end in sight.”
“‘To us it is a typical cycle. We have seen it in the mid-’70s, early-’80s and early-’90s. In real dollar terms, lumber prices today are lower than they were in 1982, which was the worst recession I remember,’ the West Fraser president, a lumberman since 1973, told analysts.”
“The benchmark price for lumber from the B.C. Interior dropped to $253 US a thousand board feet in the first quarter of the year, down from $343 US a thousand board feet one year.”
“‘Every time you get into this it sure seems to take a lot longer than you would like. But sitting where we sit, we think we could be in this for a while and we’ve just got got to buckle down and drive our costs down. That’s what we are doing every day,’ Ketcham said.”
Here is the Commerce Dept report, WARNING, PDF file:
‘Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,544,000. This is 0.8 percent (±1.0%)* above the revised February rate of 1,532,000, but is 25.9 percent (±0.9%) below the March 2006 estimate of 2,085,000.
Single-family authorizations in March were at a rate of 1,114,000; this is 1.4 percent (±0.9%) above the February figure of 1,099,000.’
If someone clearly understands how to compare the building permit figure (1,544,000 SAAR) to the sales rate (858,000 at a SAAR), please share. My temptation is to assume that these are roughly equivalent to the rate at which homes are currently under construction (new home supply), versus the rate at which they are sold (new home demand), and to conclude that the excess supply at current prices is running at roughly a 686,000 SAAR, or 80% above current demand. I realize this may not be precise, but even if it is only a rough approximation to the truth, that seems like a huge rate of overbuilding, especially given that DOC sales estimates may be overstated due to potential order cancellations (which are counted as homes sold).
Also, the reported inventory of unsold new homes (545K) seems small compared to the rate of overbuilding. All taken, these numbers don’t mesh very well. Any thoughts?
Right, they have slowed down from a high level of construction (2 million plus per year) to an average level (1.5 million). Sales, it turns out, were lower than expected because many buyers were transitional investors. Actually sales are now below 1 million — indicative of a BAD year.
An average year for construction (after several big ones) combined with a bad year for sales (after several average ones) means the hole gets deeper.
“The inventory of unsold homes rose by 1,000 to 545,000 in March…”
This number is dubious. I think it is probably double and well hidden by accounting methods.
Not hidden from anyone with their eyes wide open, though. I drive past thousands of what appear to be empty new homes on my way to work every day.
P.S. Does anyone else find it ironic that the U.S. (with its supposed-free enterprise / capitalistic economic system) is starting to show symptoms of the problems that we have long recognized in planned economies (like the former Soviet Union), such as the severe mismatch between supply and demand of new homes?
No. Not when the government sets short term interest rates and there is a fiat money, I’m not. The exact same problem exists - the price signals are impossible to understand because the value of money changes as the money supply expands at different rates.
Entrepreneurs make huge errors. One day the printing presses are going full bore and the next they aren’t. Builders were left holding the bag this time. Last time it was early stage internet entrepreneurs.
If the U.S. was a freer market, especially in terms of banking and money, then the level of entrepreneurial error would be greatly reduced.
“If the U.S. was a freer market, especially in terms of banking and money, then the level of entrepreneurial error would be greatly reduced.”
I totally agree. Too bad that there does not seem to be much hope for ending the long-term regime of Fed-induced economic catastrophes.
The problem goes beyond the Fed setting interest rates. The Government is now a leading cheerleader for the business friendly policy of unending growth. And, as the keeper of the official statistics, they are in a position to fudge the figures and twist the numbers. Central Planning as brought to you by the Corporate Business Council of America (aka The Federal Government).
I have nothing against growth, provided it propertly takes into account all costs. But the effect of severely distorting the nature of the housing situation is to lead many economic actors (especially home builders, lenders and buyers) into a pattern of misguided decisions which will create a long-term drag on the U.S. economy.
I think the sales figures do not include homes built to order for the future owner, or housing units built for rental — only spec homes — but building permits do include all of those, and so are always greater. The difference is not necessarily added inventory in the speculative sale market.
“Cheating on mortgage applications is so widespread and so seldom punished that it’s fueling an increase in foreclosures that will prolong the housing slump, said Robert W. Russell, counsel to the director of the Office of Thrift Supervision, which oversees savings and loans.”
“‘Misstatements about employment and income are being made every day,’ Russell said. ‘The brokers are just putting down on paper what the underwriters would require. There are borrowers providing false information as well.’”
Throw in the corruption rampant in the appraisal industry and you have the perfect racketeering scam.
Feds and state bureaucratic parasites have known about it from the git-go, as the honest and ethical saw their businesses destroyed, but have chose to view it all with a blind eye until the entire charade collapsed.
Hell to pay now.
Why does the NAR not already have RICO charges against it? Give me a break. How many predicates must they have?
In another thread, there’s a quote from the FBI that they generally are not interested in mortgage fraud.
How nice for everybody who gamed the system.
I would think that in CA one could generate quite a bit of money from suing over this. California has a law which allows an individual to sue as if for the people in order to make businesses comply witht eh law. I can only imagine how much money one could bleed out of CFC or WM over fraudulent lending.
More spin….I can tell business is down when all more local malls are experiencing 40% vacancy rates….and they are still building “lifestyle centers” here in eastern suburbs of Saint Paul, Minn.
Hundreds of homes for sale in an 8-10 miles radius…few buyers except for the $100-150,000 dollar home which is usually small.
Retail is usually the first to go in a slide…..I think it is here. DJIA 13,000 is the final “pump and dump” for deflated dineros….
“Hundreds of homes for sale in an 8-10 miles radius…few buyers except for the $100-150,000 dollar home which is usually small.”
That’s nothing. I have 135 homes for sale within a one-mile radius of my house. One house finally entered escrow recently after the owner undercut everyone in the neighborhood by over $50,000. His neighbors are furious! It will be interesting if the sale actually goes through as it’s still $150,000 more than he paid for it in 2001.
“I have 135 homes for sale…”
Let me rephrase that:
“There are 135 homes for sale…”
I’m not a flipper or Realtor ( tm ).
We were worried there for a minute. Thought you might be the next Carlton Sheets.
135 homes for sale in a one square mile radius may be the scariest statistic I’ve heard on this board. Your moniker was well chosen.
let us know what happens with that house sale.
Palmdale CA has 103 sq. miles total. Currently there are 21.9 homes on MLS per square mile. About 75% of the city is vacant land so it would be pretty safe to bet we’re also looking at 80-100 homes /sq. mile.
Buy backs, currency, flight to quality…
“‘We think the property market, construction in general, is going to have a soft landing, which is what it’s having,’ Ordonez said from Spain.
The delusion is global.
but the Kool-Aid is local:->
Senor Ordonez called up his buddies in the US REIC to ask what lies are working best over here.
Speaking of spin, did anybody else catch this clown from Coldwell Banker on CNBC this morining?
http://www.cnbc.com/id/15840232?video=269326426&play=1
He was arguing that now is a good time to buy! Even Mark Haines essentially told him he was out of his gourd. I almost felt sorry for him.
Never indulge an idiot.
One of my coworker’s husband is a RE agent. She must have seen this piece. She knows I’m very bearish on housing and the economy and had to tell me “It’s a great time to buy! They were were just saying this on TV this morning”.
Luckily one of my faculty members was walking right behind her and literally busted out laughing. He went into the talk about cycles and affordability and I know she just heard “lalalalalala”. The guy isn’t even in economics. He’s a genetics and fish population expert. This does bode well for the word getting out.
I think the word gets out slowly in dribbles. The hard part is that people don’t want to hear what contridicts comfortable notions.
For instance, my sister a middle manager who majored in Economics at Tulane. I consider to be very intelligent and reasonably well informed.
We have occasionally have conversations about our abodes that go like this: Sister: “Well, whatever money you put into the house you can always get back out”. Me: “That’s not strictly true - it depends on what the selling price is of the house.” (Silence on her end…)
In my experience, people are just plain uncomfortable with the notion that America’s favorite “investment” could go down in price or that there’s an oversupply or any of those related ideas. I could probably more comfortably have a conversation about sexuality than housing prices in this day and age.
Vermonter and Gwnster,
I think this goes for most things in general in this country. The new paradigm is not just that housing goes up, but everyting increases. I have seen it from church growth to soup to nuts. Look at guys like Tony Robbins and his ilk. It is all rubbish. Things are not always so positive. Tell that to the mom or dad of 4 kids who just lost a spouse to cancer or the war on terror. Too many people have a rosy outlook about everything and that everything always goes up. Well, that is not the case. And even if it is, we need to ask, can we afford it? For example, gas. If everything always goes up, do I want to pay $10/gallon for gas in say the next 5 years? And if I do, will my wages go up, as well?
As for housing, people don’t like to see that it is going down because: 1. who wants to be upside down on a loan that HUGE? 2. Who wants to hear I told you so by us bears? 3. People are counting on HUGE runups to carry them through debt, wage decrease, when accounting for inflation, buying all the toys, moving up, and retirement. 4. They have an emotional attachment to basically a building and a plot of land.
There is a general predisposition to optimism in this country - realists are looked at with scorn. The second boss I ever had used to say, “Nobody ever made money betting against the US.” I can still hear him saying that…
Gab,
Even Rome and Britain, as great as they once were, finally lost their status as world leaders. All winning streaks come to an end. Even the US lost the America’s Cup after 132 or so years. Sure, the US track record has been great, but look at how the financial system works now. Is there anyone who truly understands all the ins and outs of it? And, look at how greedy these banksters are. At some point there is no omore water in the rock and this thing will go the way of the Dodo. If I were gambling, I would say the best of times are behind us in this country, unless there are drastic changes made to the entire system. The real question is not if, but when will the whole house finally collapse?
> Nobody ever made money betting against the US.
Nonsense. Speculators against the dollar made a lot of money 2002-2004 through their bets. The decline of the dollar, however, hasn’t fed on itself yet and accelerated, and I am not too bearish about the US long term - other countries have other problems.
> the US track record has been great, but look at how the financial system works now. Is there anyone who truly understands all the ins and outs of it? And, look at how greedy these banksters are.
Greed has made America rich. Greed is good for the economy, as a driving force for entrepeneurship and as long as it is honest. Envy is bad for the economy, because fear of envy makes people timid. On a personal plane, however, I think that greed and envy are bad for the smitten hosts.
I’m probably the exception to the rule but even though I purchased a house in 1999 that I could probably sell today for twice what I paid (and my mortgage balance is only about 20% of the current value), I essentially exclude my equity in the house when I think about my net worth. The fact that the house has appreciated 100% does me no good whatsoever since I bought it to live in not as an investment.
I would actually be better off if there had been no appreciation since it would be much less expensive to move to a larger home now that my family has grown. Another thing that bothers me is with the price increases over the last three or four years, it’s become more and more difficult for young families just starting out to afford a home. Why does our society seem to be delighted that one of the basic necessities of life (shelter) has become less and less affordable and any potential for decreases in home prices is characterized as a catastrophe? I would think that cheaper houses would be welcomed rather than feared since it would mean that families could send less on mortgage payments and have more money left for other things.
I’m beginning to feel like I’m living in some alternate dimension where nothing makes sense anymore.
“Why does our society seem to be delighted that one of the basic necessities of life (shelter) has become less and less affordable ….. I would think that cheaper houses would be welcomed rather than feared since it would mean that families could send less on mortgage payments and have more money left for other things.”
Couldn’t agree with you more, Confused. How does it make sense to subsidize any mortgage over, say $300,000? Why would you want to encourage over consumption of a fundamental commodity?
What to help first time buyers, families? Fine. But don’t subsidize mcmansions and massive debt that are often products of pure speculation.
Sadly, we’ve gone so far down this road that the political will, on either side of the aisle, will never be there to reverse this nonsense. Pray, at least, that someone caps (much less reduces) the mortgage debt tax write-off. I’m all for lower taxes but subsidizing hogish behavior is economically idiotic on any number of levels.
Confused, you are right to not include your personal residence in your calculations of net worth. Most are not willing to do this though because it would show them to be wanton spenders instead of thrifty savers.
I remember that just a few years ago there was serious talk of capping the mortgage deduction. For a while it sounded like a done deal, then quietly dropped off the radar. I wonder whose palms got greased by the mortgage/realtor lobbies?
Luckily one of my faculty members
I was right…..
“The guy isn’t even in economics. He’s a genetics and fish population expert. ”
Ecologists are well-versed in what happens when an animal population overpopulates with respect to its resources. It’s starvation time…
True, he’s one of our more savvy instructors. But then he has a PhD and the RE cheerleader has a only HS diploma.
And desmo, I’m anti-prop 13 not because I want it for the schools. I’m anti-prop because it jacks the market fundementals in CA. I think UC needs to raise tuition frankly.
Yes, but you are still in education, nothing wrong with that, but it probably tilts your opinion on Prop 13.In the last 5 years how many California homewoners would have been forced to sell had it not been for it?
Well if you look at it that way, technically I’m a federal employee since the UC doesn’t pay my salary, federal flow through money does. I get paid by the grant. I’m in research, not education.
technically I’m a federal employee
Ok, I said teacher or government worker. Technically you have not answered what is wrong with 13?
I know a fisheries scientist who works for Deutsche Bank. They hired a life scientist because they assumed they would get a more accurate model of the real world than if they asked an economist to do the job.
I can see that. Next time my old socioeconomics group needs to hire a someone for analysis work, I’ll mention it though they are focused on psych stats. They’re becoming more dependant on M-plus all the time.
Yeah, I watched this live, (and posted earlier on bits bucket)
It was crazy. I have never seen a CNBC host be so brutal to their guests (in a bearish way). it was AWESOME
Wow! What an idiot!
But he said by next Spring inventory will be way down, and you might not even be able to find a house then!
I typically read this blog every day and seldom comment. But I just wanted to say to the author that you are doing a terrific public service and the research and work here is high quality material. Thank you for the continued hard work!
Yeah, what he said…
headlines getting Orwellian
cancellations are through the roof, that’s a fact Jack
Loans that require little or no documentation of income soared to $276 billion,
this is why we might lose 1 billion in fraud !!! WTF
There seems to be something wrong with your keyboard. Your 100’s are coming out as 1’s. Is your ‘0′ key broken?
We’re not building enought houses!
Spain has about 40 million people and is building 800,000 houses/year.
US has about 300 million people and is building under 1,500,000 houses/year.
Or maybe the Euro bubble is much worse than ours.
I visited Spain (Barcelona) about 13 years ago. I remember seeing a developer selling tiny houses (1200 sq feet) on tiny lots in Sant Cugat (a Barca suburb). IIRC, they were going for $500,000 US.
I know that Spain has its own illegal immigrant problem, but how are poorly paid North Africans supposed to buy a 500K Euro flat?
The difference between Spain and the US, is that there is absolutely no way an illegal immigrant in Spain could get a mortgage. Particularily those from Africa, hardly…not a chance. I find it absolutely disgusting that it should be otherwise in the US. Why can illegal immigrants in the US buy property? What’s that all about then…..?
The bottom line is that in the US, once you have made it past the Border Patrol, you are home free. Your chances of being deported are close to zero.
What is truly insane is that illegals can get a Tax ID number (the ITIN) which they can use in lieu of a Social Security number. This way they can file tax returns and get refunds. They can use that number on loan applications as well.
The handwriting is on the wall. The powers that be want a shotgun marriage between Mexico and the US.
it is not so different from Spain as you think; people who could prove they had worked in Spain for some time also got all their papers from the government. In a few years it will probably be like the Netherlands, where all these illegal immigrants are also entitled to a free home; we need these people to do the dirty work for a low wage, while hundred thousands are sitting at home on social security (or often even a lot more than just that) because ‘there are no jobs’.
If there is to be a shotgun marriage, why not with Canada?
Thery have a literate and highly skilled population,plenty of natural resources, and they share a culture and legal tradition based on English common law?
Mexico? Poor, corrupt, lawless, crime-ridden, largely illiterate, polluted,racist, over-populated…
Canada is also invited to the party (for their natural resources) while Mexico will provide the cheap labor once Chindia stops accepting dollars (Ameros?) as payment. Welcome to the North American Union!
If there is to be a shotgun marriage, why not with Canada?
Thery have a literate and highly skilled population
That’s why not.
But Europe has a much higher population. The boom in Spain is driven by N. European foreigners buying second houses there. Spain is crawling with retired English, for instance. It will go bust, but it is not as far out of line of the US bust as it appears.
yes, the major difference with the US is the over-the-border speculation in Europe. There are simply not enough local homes to flip in most EU countries. The EU bubble has evolved gradually, starting in the financial capitals in the North about 15 years ago (e.g. Amsterdam, London), gradually spreading to neighbour countries (Ireland, Belgium, France) and vacation destinations (e.g. Spain). In the last five years it has spread beyond the EU borders (Eastern Europe, Balkan, Turkey, Dubai etc). The EU bubble is older and bigger by appreciation % than the US bubble and the leverage is HUGE. Unlike the US, much of the home equity gains in Old Europe has not been spent on personal consumption but on additional real estate in other countries. Because of all these ’second homes’, with ‘first’ homes in other countries as collateral for the loan, the Spanish market is firmly connected to the other EU bubble markets; when the Spanish market crashes the rest of the EU will follow soon.
To compare with the US, you’d have to look at all building throughout Europe. Considering that Spain alone is about 50% of US building (and overall US population is growing faster), I’d say there is more bubbly in Europe.
But, to really make a comparision, you’d have to make sure the numbers are counting the same thing. For example, for the Spanish numbers, are those 800,000 buildings (10-story condo/aprt bldgs ignored or counted as 1 building) or 800,000 dwelling units (including SFH, duplexes, townhomes, individual condos/flats/apartments - condos are very, very common in Spain). I’m not sure the US numbers include apartments and condos.
You have to be filthy rich to own a real house in Spain. I once asked A Barcelonan how big the average “Casa” was. Then I asked how big the “jardin” (yard) was. He had an Aha! look on his face and said, “oh, you mean a real casa”. He was talking about flats.
sure, but just like in the US it’s all about location. The big cities like Madrid and Barcelona, and some of the Costas can be extremely expensive. But outside the most bubbly areas prices are a lot lower and sometimes even dirt cheap (like 90% off) compared to Netherlands, UK etc.
Many Spanish people owned their home (no huge mortgages) before the bubble started. They are now paper millionaires because of the housing bubble; the trouble is that if it’s your only home it is very difficult to cash in (and risky, as long as the bubble lasts - rents are in a bubble as well, like in most of Europe).
New construction in Spain includes lots of condo/apartments, but there is also a bubble in new housing developments outside the cities, many of them with individual homes. You also have to take into account what the average lifespan of the home is; I’m sure there are huge differences between EU countries, the only thing they have in common is that construction quality is falling like a rock almost everywhere.
“Boosted by warmer weather in the Northeast and Midwest, sales of new homes increased by 2.6% in March to a seasonally adjusted annual rate of 858,000, the Commerce Department reported Wednesday. Sales of new homes were off 23.5% compared with March 2006.”
WTF!!!!!!!!??????????????
Wasnt all of Liareah’s double speak about yesterday’s numbers stating how bad sales were due to cold weather. But today’s numbers were ok due to good weather???? LIES LIES LIES.
Dude, those weather reports are, like, SOOOO yesterday!
Get with the
pogromprogram!Not to defend Liareah, but the new home sales number is based on contracts entered into in March, and the existing home sales number is based on closed escrows in March, which meant things going into escrow in January and February.
We speak with one voice.
Mr Lareah is actually telling the truth this time. The results are captured at different points in the sale cycle.
New Home Sales: “March” = March
Existing Home Sales: “March” = late January/early February (because it’s March Closings)
OK. I get it now. My bad. Go ahead and spank me.
Are you a seller looking for someone to “insult” you?
Unfortunately, Mr. Lareah wouldn’t recognize the truth if it bit him on the ass. Mr. Lareah is a used car salesman who represents used car salesman. He knows that the up cycle has reached it’s apex and he cheered the boom all the way up. He also knows his minions (realtors) cannot get blood from a stone and the buyer pool is exhausted so he is now changing course to suit the downside of the boom. The bust. His new mantra is that prices must fall and sellers need to adjust to that fact. This means that sellers will reduce prices.
Bottom line, he cheered all the way up and his minions (realtors) screwed the buyers but made lots of SALES. Now he’s going to cheer all the way down and screw the sellers and his minions (realtors) will make lots of SALES.
You seem to say: David Liereah trys to increase transfer volume (on which REALTORS can suck) and thereby increases the swings of the housing market. Well then, as a buyer in about three years, I would like to hear him more often now on the way down. Too bad his credibility is shot by now.
What you are saying is the true “March” existing home sales numbers will be out in April and May — and those will probably look even worse than nominal March existing home sales numbers, due to the progressively worsening impact of the subprime lending crisis over the course of the first quarter this year.
“Boosted by warmer weather in the Northeast and Midwest…”
Warmer weather in the midwest? Where was I?!
“sales of new homes increased by 2.6% in March to a seasonally adjusted annual rate of 858,000″
So if we have 1.1mil households created annually then this at least shows that sales have fallen behind household creation. To bad the builders haven’t gotten the memo yet.
Housing starts in my community (60,000 people) are down to 30. At this time 2 years ago starts were well over 100.
Keep the pressure on against a bailout, everyone in CA call the office of assemblyman Ted Lui, and any other assemblyman in your district or neighboring districts, his number is 916-319-2053, Mark or Tiffany are the legislative people in the office, tell
them you don’t want affordable housing bond funds wasted on a bailout, and you don’t want any bailout for that matter.
I called and spoke to Tiff yesterday and was pretty much blown off.
so what keep calling
also call the appropriations committee, that’s where the bill goes next
Looks like Tiff might have bought a house in 2006.
wonder if mr. lui has any $$ contributions from any type of lenders, such as the “predatory” variety
That’s Ted Lieu, arguably one of the more standup guys in the CA legislature. Tax credits for companies that lend money for companies to reduce their carbon output, securing voting machines, increased military benefits, he’s a pretty good guy. The interesting bill that he has up for debate is increased regulation of “debt management” companies to crack down on all of those fly-by-night companies.
60040. (a) Fees charged by a provider shall not exceed 25 percent of the amount of the debt brought into the program.
…and…
70030. (a) A licensee shall not (…) (1) Accept business from a consumer unless (…) the consumer can reasonably meet the payments agreed upon by the licensee (…)
Section 70030 tells me Ted is a HBB’er.
Yep, this is a ripoff, pure and simple (though a pretty ineffective one). If you check
http://www.lao.ca.gov/analysis_2007/general_govt/gen_02_anl07.aspx
the description of the program, you will see that almost all of the fund is supposed to be dedicated to public transportation, homeless shelters, etc. Perhaps as much as $750 million is supposed to go to low-income housing, downpayment assistance, etc. So is Lui proposing to loot the low income homeowner assistance money and downpayment money to bail out (non low income) FB? Which pool of money is being rerouted?
Sweet. Jose Solario is my assembly person, and he’s on the appropriations committee. I am filling out a feedback form on his site now. He covers parts of Garden Grove, Santa Ana and Anaheim.
http://democrats.assembly.ca.gov/members/a69/
“‘Considering the weather was unseasonably mild in March, the report certainly wasn’t overly positive news and is consistent with the idea that sales are still struggling,’ said Phillip Neuhart, an economist at Wachovia Corp.”
What?!? NAR just told me that the weather was terrible last month? Now Phillip Neuhart says the weather was fine. What’s going on?
Can we get a weatherman over here please?
“You don’t need a weatherman to know which way the wind blows.”
— Robert Zimmerman
…or that sales blow.
The new home sales number is based on contracts entered into in March, and the existing home sales number is based on closed escrows in March, which meant things going into escrow in January and February.
“‘I saw account executives openly engage in conduct such as altering borrowers’ W-2 forms or pay stubs…”
They act like this is a recent occurrence. I know for a fact that this practice was in full force back in 2002.
There are many who are just getting by that are NOT subprime borrowers. And these are people who purchased homes BEFORE the big run-up(2002,2003).
Its all about the job market for these people. A minor recession will sink these people.
“Its all about the job market for these people.”
I’m with you on that one, Mr. Vincent.
You know realtors are loving these:
Parents-Backed Mortgages
Wondering if these will be a significant factor in keeping prices propped up.
I beleive it’s one large contributor in keeping the game running this long. The RE’s have been “advising” this type of thing in our area for over a year now. We live in a college town and I have watched Mom,Pop along with Gramms & Gramps in tow shopping for JR’s house.
I think there’s a case of that across the street from me. Daddy bought her a house to live in while she goes to the University of Arizona. I think Daddy makes the mortgage payments, because darlin’ daughter sure doesn’t look to have the funds to do so. (She does rent out rooms in the house, but there’s a limit to what college kids will pay for a room.)
And did I mention that darlin’ daughter hasn’t been living across the street since earlier this year? I think she’s found a nicer bedchamber somewhere else. Meaning that her latest boyfriend doesn’t find her residence up to his standards. Or something like that.
Now, if she would just take her robo-barker dog with her…
AZ Slim, The plan is once darlin’ daughter graduates from school they will sell the house for big profit and pay off the college debt. I have heard this over and over again in our town. See how easy it is, no pain and everyone is a winner!!
These are the only people buying in Davis right now. That strategy hasn’t worked since 2002 if you figure on a 4 yr degree. The parents who bought in 2003 are putting the home on the rental market at 1800 for a 3br or 2100 for a 4br. It looks like they just want the monthly nut mostly covered while they wait for better times. We have new student housing for 4000 coming online next year. That’ll blow holes in their demand for jacked up, predatory rents.
A couple of things. First, if she has a boyfriend I am sure he doesn’t want her there if she renting to other guys. Wonder why? Second, if she is renting to other girls, why would she want him there? Wonder why?
As to parents and grandparents putting up money. Is there no end to this bubble? Man, the banksters will try anything to keep this grave train flowing. It is disgusting. Look, if mom and pop want to give junior 50K so be it, but don’t put them on the docs and don’t make it part of the stake. At that point, just buy a house big enough for everyone then. However, the disgusting part is that this will keep the credit bubble going for a little while longer. The banksters are so dammed greedy. Can’t wait to see the next loan product offered to keep this going.
Winner! We have a Winner: Grave Train!
OCDan wins a smile and a knowing grin from all here on HBB.
Way to go Dan!
“will try anything to keep this grave train flowing.”
Great image: row upon row of FB caskets on flatbed cars, chugging off into the distance to a building labeled “Foreclosure Crematory.”
*applauds OCDan*
~Misstrial
OCDan:
Grave Train or Gravy Train?
Actually Grave kinda makes more sense as they are going to bury themselves.
I too live in a college town - in a college neighborhood in fact - and I am surrounded by properties which have gone from ‘owner-occupied’ to child-of-owner-plus-renting-buddies-occupied’. The thinking is, and it’s really worked for a lot of people who’ve ridden this cycle up, that you can basically get your kid into kick-ass housing close to campus and that you’ve got a guaranteed (read: not dependent on the local job market) rental market. You are supposed to be able to house your kid, and earn, perhaps enough to pay for college, at the same time.
A house two doors down from me recently (1/1/07) went for $950k for this exact purpose; the previous owners held it for only ~1 year (since 10/05), for similar purposes and they paid $825k. Before that, the previous sale was in 2003, for $550k, but that was to owner occupants. I really wanted the first parents to take a bath, but the new ones will, I suspect. The new owners are very heavy into Miami Commercial Real Estate - commercial is supposedly still going strong - but they did also have some of the condo market going. I’m hoping they’re getting shellacked right now. Maybe their little princess won’t be staying in a palace while going to school afterall. It’s unreal…truly unreal.
The real estate agents must LOVE this. They get 6% and then, a year later, they get another 6%. With selling/buying costs factored in, the gain from $950 - $825 is feeble.
Try that crap in Ithaca (Cornell) and you will lose your shirt. Rental properties are a major portion of the local economy. There is no way as an absentee landlord you can compete with the locals.
And appreciation? Last thing you want is your values going up here. The school tax (a 2% property tax on top of the normal 1.2% property tax) will eat you alive.
Well that’s what happened with my Grandmothers house in central PA in summer 2005. Have you ever heard of Espy? Dad sold the place to another Grandma and Grandpa that bought it for the Grandson to live in while he went to the local school. He got $125,000 for the place and I was flabbergasted at the price he got.
This is a real problem in San Luis Obispo where students form about 30% of the population. Their parents typically use the equity in their existing home(s) to buy a home for their kid who then rents out the remaining rooms. This ain’t cheap folks, in SLO. We lived in an upper-class neighborhood of $600k+ homes and many homes, including the fully furnished models, were sold to out-of-town parents for their kid’s(s’) use.
Not to worry tho, some of these young adults acquired a criminal record prior to their senior year and whoops - we all know that it is virtually impossible to get a professional position, even with a degree, with a criminal record. Why did the kid(s) get into trouble??? Well, mom & dad weren’t there to babysit.
~Misstrial
Heh…yeah, well, that would be nice…in our case it is a struggle against them trashing the neighborhood and turning into a student ghetto.
And that’s PRECISELY what we’re dealing with in neighborhoods near the University of Arizona.
City Code Enforcement? Building Dept.(Code Violations)? Health Dept?
Police? Public Nuisance. The police will respond quicker if a minor is involved and who may be a possible victim of Indecency or other crime of moral turpitude.
Civil: Private Nuisance (CA)
Californians can sue in Small Claims for Nuisance against the property owner. $7000k max in Small Claims in CA.
~Misstrial
Okay - read through the Parent-Backed mortgages article. From the way it reads, they don’t have a plan if house prices go down. I’ve got a guess on who’s screwed if it happens - (Thanks, grampa!!!)
I hate, too, how it’s a given that with 2 small children in the house that it absolutely must be time to upsize. We bought our small 3-bedroom “starter” house assuming (as several generations have done) that we could raise our children successfully within the walls if decided to. As a matter of fact, we are in the process of selling our house and downsizing to a 2 or 3 bedroom apt or duplex. We might rent or buy more space when the kids hit teenage years but I have to admit I’ve never understood why more than 3 bedrooms was necessity unless you had more than 4 kids.
I have a question. It appears that this “Parent-backed mortgage” idea is truly idiotic. In the old days, parents with too much cash just gave their kids (or lent them) the downpayment. Now, it looks like they are partial owners, cosigning. Does this mean that if the house is sold in a short sale, the bank can try to get the losses out of the parents? After all, they might not be BK, might have a paid-up house, etc (in a recourse state). If they kept their name off the docs, they might be able to isolate themselves from the disaster.
The reason is simple: if the parents are partial owners, it makes it more difficult for a future spouse (of their kid) to get awarded the house as a marital property settlement should the marriage go to dissolution.
Notice how the parents are always underpinning, bailing out, subsidizing, mortgaging - trying to plan out life’s probs for Junior???
Thing is this: criminal court judges are usually not enamored of Junior as dad & mom are. Makes things interesting in the courtroom, for sure.
~Misstrial
I think the idea is that the bank can go after the parents; that’s the way it works in the Netherlands where this construction has been used for quite some years already. Of course, homeprices have been climbing for more than 25 years here so nobody mentions what-if? Parents here usually have tons of equity in their home or second/third homes (thanks to the bubble) and use it to ‘help the kids get on the property ladder’. It sure helps to keep home prices rising and of course increases the gap between the haves and the have-nots. Without equity-rich parents starters don’t have any chance on the Dutch housing market. But if the bubble bursts, all that leverage will shift into reverse and work its way through the system. I’m really looking forward to it …
My parents have the dough to help me out, yet they would never do this (nor would I actually want them to). Frankly, that makes me a sell-out to this housing crisis. I refuse to become an if-you-can’t-bea-em-join-em. Lots more pride in the goal if you get there yourself (IMO).
bea = beat
Well, at least this is one way to teach your children about debt… even if YOU the parent, never learned the lesson!
If you can’t gift the money, you can’t afford it!
“We knew there was excessive use of adjustable (mortgage) rates. That was a time when the Fed had interest rates very low…”
Stupid borrowers! When rates were at historic lows, that was a once in a lifetime opportunity to refinace higher interest rate debt into the lower rates using a fixed rate product. But nooooo, most just took on more debt and used ARM loans to do it.
Of course, Fed chairman at the time, Alan Greenspan, was telling borrowers then that using adjustable rate mortgages might be a good idea. So, the Fed can blame its former chairman for some of that “excessive use” since he encouraged it. (Oh, and yes I agree that borrowers were stupid not to refi into the very low fixed rates back then - I’m just saying that the Fed isn’t without some blame for the use of ARMs).
Looks like Jeff at sdcia.com, San Diego invetor is going
under. Read all about it……
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1854186
Spike
Spike, what a find.
Here is Jeff showing us why he shouldn’t be allowed to make financial decisions.
Through a series of misjudgments and being taken advantage of (and lied to), I am losing ~$1000 on month on each of these houses when they are rented. I am just sick about them and often cannot sleep–like now.
And later on…..
Yes, I had some successes. For example, I have two houses in SLC that have gone up ~100k between the two of them. So I will probably not be going to debtors prison…(I hate to sell them now though, just when the market is going gangbusters. SLC may be the only market in the country appreciating at >20% right now…)
But these Florida losses are threatening entirely to wipe out all of my gains in other areas. I need to know the best way to get away from them!
And jeff’s cute little closing tag line……”The first million is the hardest…”
Watch out for the Trout good buddy.
I agree, great find. Wondering what had happened to the night manager at TAco Bell and his multi-million dollar investments.
Also loved the advice he’s being given, by the RE crowd:
“Being a deadbeat actually gives you leverage to put your creditors over a barrel. Being a decent guy just leaves you beat up.”
“I have two houses in SLC that have gone up ~100k between the two of them”, I happen to track a few zips in the wasatch front. I noticed today that asking prices in 84604 (Provo, BYUtown) have dropped 12% in the last 30 days. That’s asking, not selling. This guy will be upside down on those SLC places before he knows what happened.
Yes, he goes on and on with his numbers and then thows this out…
” would LOVE to tell you about how my investments are doing. Sadly, in order to do that I would have to KNOW how my investments are doing. This is next to impossible given the fact that I have only been investing for roughly 3 months and I am a “buy and hold” strategy guy. I have just done the “buying” part and haven’t yet done the “holding” part–not by a long shot. In fact, I have only closed on three homes. Many of my homes won’t be built until the summer/fall, and at least 5 won’t be built for a year. The advantage, of course, is that I won’t be losing any money (due to negative cashflow, a distinct possibility, especially for the Florida homes) on these homes, but they will be appreciating all the same. This is why I liked this article so much, it was my first confirmation that perhaps I WAS making money (on paper). In fact, if I just see a 10% return on average over the next few years my 2.7 million portfolio will return (on paper) 270k a year. Such is the power of leverage. Of course, if “the bubble” bursts and we all see a 10% DECLINE, then I will be LOSING (on paper) 270k a year. This is why I have trouble sleeping at night (did I mention that all these homes were bought with 100% borrowed money? …even more stress).”
People Spike’s found a real gem here. Reading his posts, Jeff has got me laughing out loud. Makes me wonder if he’s not a twisted troll messing with the flipper crowd.
This is better link….
http://tinyurl.com/2p44lk
Tex would love jeff
Pinging Txchick!!!
Maybe now he can change his avatar to one where I don’t have to look at those big ugly teeth.
It’s amazing that fingers are being pointed at so many entities as this meltdown begins (and I do mean BEGINS) and unfolds over the next several years. There is only one culprit and one culprit only. There might be a lot of suckers who bought into this property boom illusion and a lot of carpetbaggers like realtors, mortgage brokers, lenders, appraisers, building contractors who exploited the illusion but one person unlocked and unleashed this financial horror story from pandora’s box and that person was Easy Al Greenspan, a.k.a. Mr. Magoo, a.k.a Al Redspan. However, he will walk away from the carnage, like most Washington hack’s who f*ck up, without looking back. Of course, being one of Washington’s biggest hack’s, he always covered his flabby ass with one liners so that, in future, he can always point out that he did warn this could happen. His one liners include, “Irrational Exhuberance”, for the tech boom and bust and, “The property market looks frothy in places,” for the property boom. It’s the Fed’s responsibility to control money supply (that’s now the biggest joke of the century with the whole world knee deep in worthless dollars) and to warn banks they need to be prudent when financial problems related to the currency seem to be appearing. Unfortunately, the Fed is no longer independant from government and, probably, never was but now they are one and the same.
Greenspan shares his part of the blame, but I don’t think his share is even that big. I blame the gambling instincts in a wide populace, supported by dishonesty in some dealings, like liar loans.
Looks like Jeff at sdcia.com. San Diego Investors
is going under. Read all about it.
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1854186
Spike
“Well…as many of you know I own three terrible houses in Cape Coral Florida. Through a series of misjudgments and being taken advantage of (and lied to), I am losing ~$1000 on month on each of these houses when they are rented. I am just sick about them and often cannot sleep–like now.”
He is using HELOC money from his primary res to cover the costs. Adding more salt to the wound.
This guy is no Casey Serin. He actually has some intelligence and THOUGHT he knew what he was doing.
When a tidal wave hits, even sturdy boats will sink.
Oh yeah, he was taken advantage of and lied to.
RIGHT…. this guy knew exactly what he was doing and now that the tide has gone out, he is playing the “victim”. He isn’t the victim, those he priced out of the housing market are the victims.
Um… Some of us saw this cliff and chose not to dive.
Hey Get Stucco,
My husband and I bought a canel front lot
in Cape Coral in 1989 for $20,000, then
sold in 2001 for $22,900. One day in 2005
I can across the strap# and looked up what it had sold for since. 2002- $49,000,
2004- $150,000, then in 2005 it sold for
$229,000.
Looks like all he needs to do is follow the ultimate wisdom revealed in “The Secret.” Ahahahahahahaha!
“‘We do not expect to see a recovery for most rated home builders until 2008, under the best of circumstances,’ the rating agency said in a research note. ‘In fact, a rebound could easily slide into 2009 if a subprime contagion spreads to the Alt-A and prime products.’”
Not to worry… subprime is contained.
“Not to worry… subprime is contained.”
Yep, just like Chernobyl.
Chernobyl did eventually get contained…
… after much loss of life, sickness, and a whole lot of concrete.
Same may happen this time, except the concrete will be in the form of shoes.
http://www.kiddofspeed.com/chernobyl-revisited
This is a cool site that shows pictures of what that area is like today.
“‘We knew there was excessive use of adjustable (mortgage) rates. That was a time when the Fed had interest rates very low, for good macroeconomic reason, but it made everyone vulnerable to this problem’ that we have today, said Gramlich, a Fed governor from 1997 to 2005 and the author of the forthcoming book ‘Subprime Mortgages: America’s Latest Boom and Bust.’”
I love it when former Fed governors speak their minds. I can hardly wait for a few years down the road, when someone spills the beans on how homebuilder stocks kept treading water for a couple of years against a steady deluge of terrible news. I am 100% certain that there is a great story to be told there.
…altering borrowers’ W-2 forms or pay stubs, photocopying borrower signatures and copying them onto other, unsigned documents…
If this is real, lawyers are going to have a field day! Warm up the shreadders, Ameriquest.
Love the ref to Ameriquest. You’ve just got to wonder how many loans they made would actually stand up to pre-1994 loan standards. Sheesh. When my wife and I bought in 1994, there were three types of loans: FHA, conventional 30 (maybe a 15), and adjustable. That’s it. You fit one of those after some serious screening, and I mean serious. We had to verify our credit history, explain that some of my student loans were paid off. In fact, it was a great time to clean up the credit report. However, the moral of the story was, there was no NINA, no NINJA, no stated, no 100-103-125% financing available. As if 13 years ago is that long ago. Bottom line is we were scrutinized with a pretty good fine-tooth comb. If I had asked for an 80-20 or 103%, they would have laughed at us and told us to move along. Man, how things changed because of Greespam and the greed of the banksters.
Exactly the same experience here. Bought our first house in ‘94 and had to go through the financial equivalent of a full body cavity search. Pay stubs, tax returns, credit report, letter from landlord to verify that we paid rent on time, an affidavot that none of the downpayment money was coming from anyone else, you name it and we had to produce it. When I started hearing about the no doc/stated income liar loans, I couldn’t believe it at first.
Nothing surprises me anymore. What a difference 13 years can make.
Similar experience when my wife and I bought our first house in 92.
* House puchase 79,500
* Minus a 25% down-payment
* Two income family (Software engineer and Registered Nurse)
* Stable job history
We still had to provide all kinds of documentation, etc.
Same thing in 1994, as discussed earlier. And we were putting 40% down, and had had the same steady jobs for years.
In 1997, we buzzed by an open house (SFH, we owned a Townhouse). The man inside whispered in low tones (I’m not kidding) “You know, you could really afford this place with an interest only loan”. We were flabbergasted (20-somethings). Had never heard of such a thing, never thought we could get one, and thought it sounded stupid. Last year, it seemed everyone we knew had one.
I truly believe that prices would collapse in a huge way if 100%+ financing was no longer available. Having to put down 3-5% of their own money (not a gift down payment) would really make people take notice of the purchase price.
about two years ago the BBC showed that this kind of fraud is daily work in one of the biggest UK realtor organisations; probably many UK realtors work like that on a regular basis. But nothing happened, except that a few small fish were fired. The realtors and the big banks say it is the exception from the rule and the government is not interested in publicly investigating what they already know. Fraud pays extremely well, in Europe too. In the Netherlands I know of a few similar cases that were taken to court, but in the end no one was convicted; we can’t have realtors and lawyers behind bars here, have to keep the public believing that they are all honest and law-abiding citizens.
I’m going to state how I really feel about this sub-prime mess .
I don’t care if Wallstreet is willing to fund these sub-prime fraud loans or not . I’m calling for the regulated lenders and lawmakers of this Nation to stop lending until the Sub-prime lenders are outlawed . The sub-prime lenders with their wallstreet backers have proven that they can only make fake loans ,therefore be done with them . Create laws and protections for the public against this sort of sub-prime lending fake market .
I’m calling for the regular lenders to protect the deposits of this Nation by refusing to use appraisal comps from sub-prime lenders because they are fake and not based on a valid “willing and able buyer “but rather the result of a massive amount of fraud loan packages . I object to lenders that hold public deposit accounts to continue to compete with the sub-prime fake loan crime packages and return to prudent underwriting now.
A unqualified buyer or a fraud package is a fake appraisal comp that will come back to haunt the entire market . I object to regulated lenders using fake comps so therefore all lending must stop until all the fraud deals can be weeded out from the comp base and the inflated property values are corrected .
How can a buyer buy into a market that is riddled with a massive amount of unqualified buyers and loan fraud .
I’m calling apond the lenders under duty to protect the deposits of this Nation and the lawmakers to go about the process of protection for the public NOW .
I’m calling upon the lawmakers of this Nation to order the sub-prime lenders to stop lending immediately . It’s not enough that they have a buy-back policy for fake loans because the destructive effect is to much for the market to bear and fake loans are causing to much damage to the general market .
So there
true, but as long as prices go up nearly everybody profits from this fraud: homeowners (increasing equity because of continuous supply of new meat at the bottom of the pyramid), realtors, appraisers, loan officers and developers (more profits), politicians (huge campaign contributions from the mortgage mob), Wall Street and of course the subprime buyers themselves: they get into a home that they can’t afford and if things go wrong, someone else will pay the bills for them because they simply don’t have the money.
If most people profit there is no way to stop it. And on the way down, changing the laws will not help a bit until the market has been fully flushed. One can just hope that everyone who participated in the fraud gets burned severely but that is not going to happen: the big crooks will be bailed out, the small crooks are too many to bring them to court so the taxpayer will be left with most of the mess.
nhz…..If we as a society don’t bite the bitter bullet and correct these grave mistakes we will encourage it to go on and get worse .I’m entitled as a citizen to not have massive fraud determine market values and property taxes .Its the only way out of this mess , but it will cause a big crash in prices ,but I don’t care anymore .
Would it really be that difficult to compare un-revised numbers to un-revised numbers, and then quote the percentage change. An apples to apples comparison would at least be consistent.
As I recall the unrevised number for February would have made this months numbers negative. I could be wrong.
I still think we should import mortgage products from China and Japan. They each have about 1 trillion dollars in US currency reserves that they can lend to mortgage borrowers in the US. Japan’s mortgage interest rate is only 2.375% Banks and lending institutions should be forced to compete globally, just like the manufacturing industry.
Actually, we do. We just don’t know it. It is a common ‘trick’ in hedge funds to buy mortgages (i.e. MBS, real estate ABS and CDOs) using massive leverage, often by borrowing from Japan at 3%. After all, the Japanese are awash with cash (especially US$). This way, an 8% CDO payoff is margined into a huge inflow of money. So, Japanese money is used to buy MBSs, which pumps money into securitizers, which pumps money into lenders, which ended up as mortgage money. Also, foreigners have directly bought about 50% of the mortgage-backed CDOs. Again, they are supplying the money but skipping the loan servicing. So we ARE importing Chinese and Japanese mortgage products.
But not at the low interest rates that Japanese citizens get.
What are you talking about?
You can get yen-based loans in Hong Kong, Latvia, Spain (supposed > 50% of all mortgages last year in Spain were yen denominated) and in the US… at least some states.
It’s all great until it isn’t. At some point the yen rallies 20%, and your mortgage is 20% larger than you thought it was….
http://www.magellantt.com/index.php?level=pages&sid=1&ssid=87&pid=8&action=list&mode=&lang=en&template_id=4
of course, but who cares about the principal? it’s all about the monthly payments … most of all the initial monthly payments, because homes are for speculating and not to live in.
Call these appropriations committee assemblymen, too:
Mark Leno - Chair Dem-13 (916) 319-2013 Assemblymember.leno@assembly.ca.gov
Mimi Walters - Vice Chair Rep-73 916) 319-2073 Assemblymember.walters@assembly.ca.gov
Anna M. Caballero Dem-28 (916) 319-2028 Assemblymember.Caballero@assembly.ca.gov
Mike Davis Dem-48 (916) 319-2048 Assemblymember.Davis@assembly.ca.gov
Mark DeSaulnier Dem-11 (916) 319-2011 Assemblymember.DeSaulnier@assembly.ca.gov
Bill Emmerson Rep-63 (916) 319-2063 Assemblymember.emmerson@assembly.ca.gov
Jared Huffman Dem-6 (916) 319-2006 Assemblymember.Huffman@assembly.ca.gov
Betty Karnette Dem-54 (916) 319-2054 Assemblymember.Karnette@assembly.ca.gov
Paul Krekorian Dem-43 (916) 319-2043 Assemblymember.Krekorian@assembly.ca.gov
Doug La Malfa Rep-2 (916) 319-2002 Assemblymember.lamalfa@assembly.ca.gov
Ted W. Lieu Dem-53 (916) 319-2053 Assemblymember.Lieu@assembly.ca.gov
Fiona Ma Dem-12 (916) 319-2012 Assemblymember.Ma@assembly.ca.gov
Alan Nakanishi Rep-10 (916) 319-2010 Assemblymember.nakanishi@assembly.ca.gov
Pedro Nava Dem-35 (916) 319-2035 Assemblymember.nava@assembly.ca.gov
Sharon Runner Rep-36 (916) 319-2036 Assemblywoman.Runner@assembly.ca.gov
Jose Solorio Dem-69 (916) 319-2069 Assemblymember.solorio@assembly.ca.gov
Against the bailout, using affordable housing bond funds.
Don’t forget to mention that this inappropriate use of “affordable housing bond funds” would have the perverse effect of helping to keep home prices at unaffordable levels, and not just for subprime borrowers, I might add.
Excuses, Finger-pointing, and victimization:
I think we are about to learn a new term:
Heloc-ism: “I just could not help myself. All this FREE money being offered to me. Everyday on the phone, mailbox and television…. Free money. Now, Im being foreclosed”
and
ReFi-ism:” Same as above”
These new medical terms will be treatable, and the Politicians will round up the necessary votes for a bailout. Here’s how it works. First, declare defeat in Iraq. Vote bush out of office. Spend money on FB and less on foreign soil.
Hooray, we are SOOOOO screwed.
“Boosted by warmer weather in the Northeast and Midwest, sales of new homes increased
I thought the NAR was telling us that the weather was bad and that was why existing home sales were so bad? So which is it?
“‘To us it is a typical cycle. We have seen it in the mid-’70s, early-’80s and early-’90s. In real dollar terms, lumber prices today are lower than they were in 1982, which was the worst recession I remember,’ the West Fraser president, a lumberman since 1973, told analysts. The benchmark price for lumber from the B.C. Interior dropped to $253 US a thousand board feet in the first quarter of the year, down from $343 US a thousand board feet one year.”
OK — lumber prices dropped 26% (in one year?), to a lower level in real $ than in 1982. Suppose there was a recession, but nobody reported it?
The forest industry is toast but BC’s economy is being kept going by… drum roll… residential construction! Population growth is at its lowest rate in decades, but growth of housing stock is at its highest rate since post-WWII. New construction is sprouting up in logging and mining ghost towns all over the province as well in formerly commercially zoned areas in downtown Vancouver.
And who is going to buy all those new houses? Why all the rich people from all over the world who are coming to see the Winter Olympics in 2010.
Oh BTW, in the 1982 recession house prices dropped 45%, but this time it’s different.