Apprehensive Homeowners See ‘For Sale’ Signs Languish
The Queens Chronicle reports from New York. “Foreclosures are rapidly rising in Queens, which has been the hardest hit of New York City’s five boroughs. As of March 19, some 1,223 homeowners lost their properties through foreclosure this year, up 57 percent over last year’s already abnormally high total, and up 91 percent from the last quarter of 2006.”
“‘It’s hugely spiking,’ said Sarah Ludwig, executive director of the Neighborhood Economic Development Advocacy Project. ‘What we’re seeing is that the way in which loans were being made wasn’t sustainable.’”
“Desperate to get out of debt, Marie Eduard put her house on the market four months ago. So far there have been no offers. ‘I pray to God to sell the house quickly,’ Eduard said. ‘Now I’m scared to go into foreclosure, because my credit will be ruined.’”
“Eduard told her broker she was uneasy taking out a loan for $495,000. ‘I told him I didn’t think I could afford the house because my income was too low. He said, ‘Don’t worry about it,’ that he’d take care of it.’”
“Eduard believes that her broker inflated her income by $60,000 to qualify her for the loan. Now it takes almost every dollar of her $30,000 salary to pay her $2,400 monthly mortgage bill.”
“‘These loans were created for savvy investors, they were a niche product,’ Ludwig said. ‘Now they have been broadly sold to the public.’”
“In Eduard’s case, she received a $99,000 piggy-back loan at 12 percent interest, with a balloon payment of $90,000 due at the end of 25 years. With such a loan, a borrower will never build equity and will virtually never be able to pay off the loan, Ludwig added.”
“‘All of this was foreseeable,’said Ludwig. ‘The regulators, the industry and Wall Street in particular have known about these problems for years.’”
“The good news was the recognition that there was a fundamental problem. ‘At this point, the whole subprime industry is a mess. I don’t think anybody really contests that,’ she concluded.”
The Sentinel Online from Pennsylvania. “It’s easier these days to sell a house in Cumberland County than most anywhere else in the United States. ‘The growth is cooling but we’re still growing,’ said Sherri Pursel, spokeswoman for Greater Harrisburg Association of Realtors.”
“‘It’s certainly not the seller’s market we had previously,’ said Karen Detwiler, owner of Help-U-Sell Detwiler Realty in South Middleton Township. ‘Buyers have a little more control of the market than during the selling market heyday.’”
“Lenders have tightened standards with the rising delinquencies in mortgages especially in the subprime market, where borrowers with weak credit histories obtained their loans. Detwiler said subprime lenders are scrutinizing the details of housing transactions, including appraisals and 100-percent financing purchases.”
“She added that lower interest rates and a sellers market favored subprime buyers. With the increase in the number of foreclosures, ‘banks are becoming more accountable.’”
“Locally, homes priced under $200,000 are ’still moving at a good clip’ but sellers with homes over $300,000 should choose their asking price carefully, she said.”
The Gazette from Maryland. “Industry experts use words such as ‘correction’ and ‘balanced’ to describe the ongoing housing slowdown. The insider jargon is little consolation to apprehensive homeowners who are tired of seeing ‘For Sale’ signs languish in their front yards.”
“Average time on the market for a Montgomery County home was 93 days in March, compared with just 50 days in March 2006. In Prince George’s County, time on the market increased from 40 to 76 days and in Frederick County from 65 to 110 days, according to data from Metropolitan Regional Information Systems Inc.”
“‘The drop in existing home sales in Maryland in the first quarter this year from a year ago was a ‘correction’ to a more normal homebuying market,’ said Ilene Kessler, president of the Maryland Association of Realtors.”
“‘In 2005 and 2006, there was a lot of interest in buying,’ Kessler said. ‘It’s now a more balanced market. A lot of people have already bought.’”
“The resale market is down by 15 percent in Maryland and 18 percent in Virginia from the same time last year, according to Metrostudy. ‘Flipping is over, but the good news is that homebuilders have slowed down, restricting sales,’ said Kenneth Wenhold, regional director of Metrostudy. ‘It is a great time to be a buyer.’”
“Maryland’s homebuilding industry, which slumped last year, has continued its slowdown this year. Building permits for new single-family homes fell 20 percent in 2006 from 2005 and continued to slide in January and February.”
“‘Some experts are saying we’ll reach the bottom later this year,” said John E. Kortecamp, executive VP of the Home Builders Association of Maryland. ‘But you never know when you will see the bottom until it’s over.’”
“‘The slump began some 18 months ago, said Dan Ryan, president and owner of Dan Ryan Builders of Frederick. ‘It was just a matter of time before it cooled off,’ Ryan said.”
“Prince George’s County led the state in foreclosures in 2006, and has continued that pattern for the first quarter of 2007. A total of 1,558 foreclosures were recorded in the county last year, with 590 in the first three months of this year, up 56 percent from the same period in 2006.”
“Darrell Carrington, a senior loan officer with Freestate Mortgage Services in Bowie, said high home prices in Prince George’s, in relation to other nearby counties, is a factor in its high foreclosure rate.”
“The parents of many of today’s homebuyers needed to make a 20 percent down payment, ‘but those days are kind of gone,’ he said.”
“Such a down payment on a $350,000 house would be $70,000, and most people don’t have that much cash, he said. The result is that more of the purchase price is borrowed, resulting in higher mortgage payments.”
“Mortgage broker Kip S. Douglass in Upper Marlboro, said he has seen the rise in home loan defaults in Prince George’s County. In a listing he surveys, Douglass said, he noted 16 new notices of default filed on April 17.”
“That total, about double what he used to see, is no longer atypical, he said.”
“‘The trend is that the market has slowed nationally, said S. Lynne Pulford, senior vice president of Sandy Spring Mortgage in Columbia. ‘There is a large inventory of both new and resale homes. Consumer confidence due to energy prices is having an [adverse] affect on the overall market and pricing.’”
“The home mortgage market is nowhere near where it was two years ago, many say.”
“‘There’s been a tightening in the subprime market, and Wall Street is not buying loans as much as it did,’ said Charles DiPino, president of the Maryland Association of Mortgage Brokers. ‘That’s hurt some customers. It’s really based on the real estate business. People are nervous. They’re not willing to take on a riskier loan. They want facets that are locked down. Housing values are stabilizing now, and they’re scrutinizing values more.’”
“According to Michael Galeone, executive vice president of The Columbia Bank, the subprime market was ‘abused’ during the mortgage boom of two years ago.”
“‘The subprime market got into trouble as lenders began lending to people with less-than-sterling credit qualifications,’ he said. ‘Sub-prime lending lets you borrow based on the value of your home, maybe up to 125 percent of the value. The trouble happens when the market goes against those people.’”
“‘People bought more than they could afford,’ he said. ‘In the past, they could buy an $800,000 house at 3.5 or 4 percent interest. Then the market shifted and their monthly payments doubled. Many people didn’t have the cash to cover it, and they’re struggling.’”
“Galeone called subprime lending ‘a ticking time bomb. It creates a great potential for failure and can lead to high foreclosure rates.’”
“‘Foreclosures are accelerating,’ he said. ‘People have seen their monthly payments double or triple as rates have gone up, and they’re finding it hard to continue to meet their obligations.”
“Foreclosures in the first quarter of 2007 totaled 2,031 in Maryland, up 88 percent from last year’s first quarter, according to RealtyTrac.”
“‘In the last few years, you had a lot of people who were not really qualified to buy a house buy a house anyway,’ said Cary Reines, executive VP of Mason Dixon Funding in Rockville. ‘Now they’re finding out that they can’t afford to keep them. We’ve seen a lot of that in the last six to nine months.’”
“‘The refinancing market has declined, but not terribly,’ Reines said. ‘You’re seeing a decline in housing values. Houses just aren’t going for the same prices that we’ve seen in the last couple of years. The values have dropped, and that affects the refinancing value.’”
We’ve been looking off and on in Montgomery County for a while. Our broker, who was wildly optimistic about the market a couple of years ago, now says that since early March, sales activity has fallen off a cliff.
hold fast
08 at the earliest
remember the early 90’s ?
wow! an honest Broker….be patient and wait until summer or fall, you will get a much better deal. I am tracking M County and prices are slowly but surely falling.
Summer or Fall?
By fall we’ll just have enough REO’s hitting the market to start the downslope. Or did you mean Fall of 2008? While the bottom will be later, I can create scenarios in excel that justify buying then. I cannot create one to justify buying earlier than Fall of 2008. Cest la vie.
It takes time for prices to drop. Until the slope of price declines slows… avoid putting money in RE.
Got popcorn?
Neil
I don’t know where you are but REOs in northern CA are often above market. So you buy a trashed home for more then a new or well taken care resale home?
Oh yea - sign me up for that >; )
What you’re seeing is foreclosure “wishing” prices. Once enough REO’s hit the market the lenders won’t be able to ignore that their property is only worth what someone is willing to pay.
ROTFL
That won’t last. It never does. When the FDIC starts to audit books and instructs banks that by such and such date to clear the inventory…
Oh, I’m ok if a resale is at market. But look at the inventory versus sales and we have a price imbalance.
I’m going to wait until the REO’s are such a flood that resales have no choice but to undercut.
Got popcorn?
Neil
So…any idea when such a book review takes place. How often?
There’s a close correlation, I’ve found, between the “honesty” of realtors, and their perception of how ready you are to buy. They tend to be more candid if you say up front that you’re a bubble-sitter and think the worst is yet to come, in which case they have nothing to gain by “don’t worry, be happy” NAR-speak.
Montgomery Co RE charts:
http://www.recharts.com/mris/mris_4.html
I hope you also know you can get great information on MoCo here:
http://propertyrecords.montcopa.org/Search/Disclaimer2.aspx?FromUrl=../Search/GenericSearch.aspx?mode=address
tax funded soviets ?
Neighborhood Economic Development Advocacy Project.
“Eduard told her broker she was uneasy taking out a loan for $495,000. ‘I told him I didn’t think I could afford the house because my income was too low. He said, ‘Don’t worry about it,’ that he’d take care of it.’”
“Eduard believes that her broker inflated her income by $60,000 to qualify her for the loan. Now it takes almost every dollar of her $30,000 salary to pay her $2,400 monthly mortgage bill.”
Now, unlike some of the regulars here, I am *somewhat* sympathetic to borrowers that were completely flim-flamm’d into a completely different loan that the one they were promised. Most of us are not RE lawyers, and the closing process can be very intimidating, especially for clueless FTBs. I can understand how a really sleazy broker could pull an 11th hour bait-n-switch on someone without them realizing what happened until after the fact.
Even so, what in the world could convince someone who makes $30K/year that they can *really* afford a half-million dollar mortgage? Shouldn’t this have raised some red flags for her? Her broker should never have inflated her income like that (good argument in favor of regulating the mortgage industry more like securities IMO). But to what extent do we need to protect people from themselves?
“Now it takes almost every dollar of her $30,000 salary to pay her $2,400 monthly mortgage bill.”
Hmmm, let’s see, $2400 X 12 = $26,800
Ya don’t say? That leaves $3,200 a year for everything else - whoops, I forgot to take out the taxes…
What taxes? Her home mortguage interest deduction leaves her with $5K a year. Add in a personal exemption or two…
How about property tax on a $500K home, and of course the various other costs FTBs sometimes disregard when they buy their first home (PMI, HOAs, larger utility bills, maintenance/repair, etc).
I’m sure her savings (if she had any to start with with only a $30K salary) are burning out very quickly.
Don’t be sympathetic for a fool like this at all.
If you are an adult, you can create a budget and estimate what you can or cannot afford.
Insane. She purchased a home for 16.5 times her annual income!
Even here in the SF bay area, 8x or 10x is more typical.
“to what extent do we need to protect people from themselves?”
To what extent do we need to be protected from these people? A half-million dollar home on a 30k salary? That’s what, about 18 or 19k after taxes? Would she have volunteered to pay 3 or 4k a month to rent an apt.? This is all about people hearing how easy it was to make money in real estate and jumping into the pool knowing that they couldn’t swim. Drowning is what happens. Bailouts mean these Darwin award winners stay in the gene pool.
I agree that stupid, reckless actions deserve harsh consequences and no bailouts. Problem is, when 2 or 3 million “Marie Eduards” start doing this en masse, THEY end up setting the market price. And responsible borrower/savers like you and me get completely priced out of the market for several years –at least.
I don’t mind seeing Marie and her ilk (Casey, SDCIA Jeff, etc.) dorwn in a flood of their own making. However, I’d much prefer to see the return of realistic risk premiums, full borrower qualification, and some *gasp* minimum level of fiduciary responsibility on the part of mortgage brokers in the future to PREVENT this from getting *this bad* again.
I’m not so naive to think that speculative bubbles can ever be prevented from happening again –there is no regulatory magic wand to prevent human greed and stupidity. Even so, would things have gotten this far out of hand without, uh “help” and complicity from the Fed, Congress, GSEs, and a lot of asleep-at-the-switch “regulators” at all levels of government? Is it really too much to ask regulators to actually, you know, um… “regulate” once in a while?
Nice post. Echoed my thoughts exactly.
“And responsible borrower/savers like you and me get completely priced out of the market for several years –at least.”
The morons set the market price. Unfortunately, there are more that are stupid/lazy/greedy than there are those who are intelligent and productive. And it will remain so as long as the stupid/lazy/greedy are bailed out (through welfare, food stamps, government jobs, etc.)
You can’t stop stupid people from doing stupid things. You just get the hell out of the way and stay out of the way until sanity returns.
So you’re priced out of the market for a time. Big deal! In the meanwhile, rent for much less than it would ever cost to own, pocket the difference, quit whining and count your blessings.
“…pocket the difference,…”
Be sure to find a suitable inflation hedge strategy for whatever you pocket.
You can’t stop stupid people from doing stupid things. You just get the hell out of the way and stay out of the way until sanity returns.
I agree, crisrose, but one thing we CAN do is demand that our sage, benevolent government “leaders” NOT keep re-writing the g@dammned rules to encourage and subsidize this nonsense. Exactly why the Fed “needed” to drop rates to 1% and hold it there so long, or why Congress “needs” to tax-subsidize the 24-month Flip Club, or why Fannie/Freddie “needs” to bailout subprime borrowers is completely beyond me.
” Is it really too much to ask regulators to actually, you know, um… “regulate” once in a while?”
You know, interesting question. Since these folks were paid to regulate, and failed in their fiduciary responsibilities, have any of them been canned? Better yet, canned and forced to repay monies received for work not done?
You can take a non-performing contractor to court…what about these dead men?
Well, at least she got to live in a house I could never afford for at least 18 months.
I remember when I bought my first home about 12 years ago for $32K, a fixer-upper in Philadelphia. My sister laughed at me: “on your salary, they’ll lend you $200K” (I was making about $35K at the time). That’s the mentality out there: why buy what you can afford when you can borrow more than you can afford?
I would say this is the mentality everywhere in US… a byproduct of decades of mass consumption, RE propaganda, and the inevitable thirst for more (greed).
Not to mention gov’t incentives (tax breaks). IMO, that’s what encourages the most overspending
Take your annual salary and multiply by 3. Do not buy more house than that.
3x salary is way too high for comfort. What if you get laid off? The tax deduction effectively disappears then, which makes it even more unaffordable.
Exactly. This “I’m a victim” is a bunch of crap.
If she was incapable of comparing her expenses to her income, she’d have been homeless long before this.
No, she thought she was in for some easy money and lost.
Too bad.
Get her out of my face.
I recently closed on a home. At the closing, both the title company rep, and my own buyers broker made fun of me for being “a reader”. Apparently we engineers and lawyers are the most notorious professions for being readers. It was late in the afternoon, and they obviously had better places to be. At that point, I made sure to carefully read e v e r y s i n g l e w o r d. I guess I can see how somebody with no experience in such matters might fold to such pressure, but I don’t have a lot of sympathy for making such an irresponsible decision.
My husband and I recently bought a house, and we were “readers”, too. We both work in engineering/IT (why we read), and my mom is a lawyer - I always use the latter as an excuse if people bug me about it. “My mom’s a lawyer and she would kill me if I didn’t read a contract that I signed!”
Oh boy did I give the bastar… er, I mean, the “nice people” at Countrywide aggravation when I refinanced years ago. (Why I refinanced with them, a different matter, and no longer with them anyway but…)
I absolutely insisted on having the contract the night before, and after much stalling on their part, I finally told them we’d have to postpone the deal if I didn’t get the docs. Boy were they mad. But they did it. And after reviewing it and calling them back on a problem with $400 extra costs they’d slipped in, they agreed to fix it.
Lo and behold, we get to the signing at the title company the next morning, and like the anal retentive engineer I might be, I am checking my own marked-up copies against their new copies. And of COURSE they had neglected to remove the $400 charge! I’m not signing that! They had to rework it on the spot, and they were even MADDER! The poor lawyer there was shrugging and telling me that they do this a lot, but most people don’t push back; they’re more interested in finding out when they get their cash-back cheque!! He was resigned in this case to sitting it out till new docs came through, and I almost felt bad for him. Boy was that an aggravating morning.
Later on I refinanced with ING, and it was the smoothest, most seamless RE contract I’d ever done, a very few pages of papers, everything spot on accurate, signed off at home one morning before work, and cheap on costs as well.
Oh yeah, and before you get the wrong idea, on none of these refis did I want any cash back. No thanks, Mr. Banker, I’m here to PAY DOWN the mortgage more cheaply, not borrow more and more.
I like ING direct. I know someone who works for a financial services firm, and the company 401K is with ING. ING’s mortgage product does seem worth pursuing. Thanks for the tip.
Their 401k products are only about average, I would say. not bad, just average. Their website for that is also dreadfully slow compared to some others like Fidelity, TRowe, Schwab, etc. Still, reliable. I have an Orange saving acct with them, and I’m happy enough, though I’d be happier and keep more money in there if they paid higher rates. Reminds me, I better check out their new checking option.
As for their mortgages, they did definitely keep the costs down compared to some competitors — and best of all: No Surprises! It was also convenient if you like the phone, thoug hif you are an “in person” type, maybe that’s not so good. And like I said, not that much mass of paper to deal with. Their appraisal cost was only $15, not $300! Was it a “real appraisal”? I didn’t care, and it seemed on par with previous ones and didn’t matter so much with 70% LTV. Anyway, I was borrowing THEIR money, so appraisals are their problem.
Their rates are not as competitive now as they were a couple of years ago when you could get a 5/1 ARM for 3.99% like I did. Still, they are definitely worth considering, and if I were buying another house (please God, no, not now!) and wanting a hybrid ARM, I would probably go with them, sheerly because I know it’s a straightforward, no-tricks deal.
I’m a reader too. But it’s OK because I can read faster than they can think.
At our closing last year (as sellers), after we’d signed (and I’d re-read) all the previously-reviewed documents (and we had to specifically ask to get review copies a few days in advance), the nice happy its-all-routine escrow lady comes up with a couple of documents that the _buyer’s lender_ (countrywide) wanted us to sign! We had no agreement with the buyer’s lender, of course. I refused to sign. The now not-so-happy escrow lady left the room for awhile to talk to her manager, then came back and said of course they couldn’t make us sign anything. We then left, and the sale was closed anyway.
I believe that on general principles, as either a buyer or seller, at a closing one should always make as much trouble and inconvenience as possible for the closing agent, and always assume that anything not fully understood is screwing you in some way. And this goes double for any dealings with a realtor.
You know $495K is 16.5x her $30k income.
Even if the broker inflated her income to $90K, that’s still 5.5x.
Can’t this ginch do basic math? $30,000 a year - after tax, I’m assuming - buying a $495K house?!!! Is she incapable of using a free online calculator to determine just how much that house is going to cost each month over the period of the loan?
I have no sympathy. None, zero, zilch. This FB, like most of her ilk, was “victimized” by her own pathological sense of entitlement. Her greed made her an easy mark for the sharpies, but she’s far from blameless, given what she knew about her own financial situation relative to the huge financial obligation she was taking on. She no doubt justified the unjustifiable by willingly going along with the fraudsters who put her into the house, in the blind faith that “real estate only goes up” and that somehow, everything would work out down the road. Now she’s screwed - too bad, so sad, grow a brain next time. I will be SO glad when all the FBs like her are completely flushed out of the market and sanity returns.
This is going to be a theme moving foward, “I just didnt know”, after all how was she to know she couldnt afford a half a million dollar house on a 30K income, GIVE ME A BREAK!
My question is when is this going to hit the fan? Come on lets get this bust over with and move on!!!!!!!!
One can only hope that these FBs, by their example, serve as an instructive object lesson to the next generation. Just as the Depression-era “Greatest Generation” spawned the most worthless, self-absorbed generation this nation has ever raised up - the Baby Boomers - maybe the post-iPod generation will actually embrace real values and virtues as they recoil from the sorry example set by their parents.
‘…maybe the post-iPod generation will actually embrace real values and virtues as they recoil from the sorry example set by their parents. ‘
Maybe they would if they could hear the lessons. But that would require pulling the earphones out of their heads.
…And living in the real world. Horrors!
This “return to values” is highly unlikely without a Depression or Energy Crisis or both.
And then who knows what “values” we’ll return to?!?
It will hit the fan like it is now in slow motion….bottom is 2009-10 most likely.
I have two co-workers who bought houses at the top of the bubble (Inland Chumpire, Southern California).
Both are re-financing already, taking out even more money. Their excuse, “Hey, it’s only X dollars for month over the course of the (40 year) loan. It’s free money”.
No, this isn’t going to end well.
A good summation of all “last in the pool” purchasers who drank the RE marketing kool-aid in 2005 and 2006.
I recently attended a Home Buyers seminar, and was surprised to - even now after all the negativity about RE in the MSM today - hear the RE spew about how RE is a great investment, don’t wait to buy, etc. Sick.
A calculator costs about $5…..If you are responsible/mature enough to sign for a mortgage, presumably you should also be capable enough to enter a couple of figures, study the result, and make a rational decision. No sympathy here at all.
I nearly get into arguments with a neighbor. Houses here haven’t moved in 18 months (Northern VA). I ask “why don’t they reduce the price?” (There are even three vacant ones). These are true McMansions, as big as barns. The answer: “Because selling them cheaper wouldn’t be fair to the neighbors . . . duhhh”.
I’m glad I can vent here, because it seems so absurd. These are houses that are asking way above what the owners paid a few years ago, and they won’t budge an inch. And inventory keeps getting piled on.
I can’t believe anyone would wish to pay heating/cooling/maintenance bills on an empty house, just because they don’t want to take a $50K profit over a $200K profit.
You have really nice neighbors, who are SO thoughtful to not want to reduce the price in order to protect each other’s interests. I think eventually they’ll reconsider…
When did a neighborhood start being a cartel?
Slim, I think neighborhoods started becoming cartels in 2004.
That was happening in 90274 in the last downturn. Then my best friend’s father received a job offer in San Jose…
Put his house on the market 5% “below market.” Buyers bid it up to ~98% of “market.” Funny… that was the new market price…
All people are doing is providing a quick out to smart sellers. If a few neighborhoods do hold firm… they will simply be priced out of the market. There has to be some sort of perceived value for money…
Ahhh.. the tide has almost turned. Now to ride the big waves.
Got popcorn?
Neil
Good point!!!!
A Prisoner’s Dilemna. One of them will get desperate and break ranks, and the others will follow.
“Because selling them cheaper wouldn’t be fair to the neighbors . . . duhhh”
Do these people believe the neighbors would come running over with pitch forks and torches if they shaved 10% off their asking price?
What about the vacant McMansions? If the owners have moved on, why should they care what the neighbors think?
In my own neighborhood, I’m more concerned about IF the neighbors think, rather than WHAT they think.
Yes.
“…..then I’m gonna to get Medieval on your ass.”
Get Jurrassic out of here, on the double.
When you sell don’t you lose the neighbors anyway?
This notion will vaporize shortly, count on it.
NO! You must take them with you!
“These are houses that are asking way above what the owners paid a few years ago, and they won’t budge an inch.”
Thats what I’m seeing here in Sarasota Fl. The owners will not budge an inch. I guess the reality has finally hit me that this is going to take a long time to adjust. This isnt going to happen anytime soon.
You would think that with computer information available to everbody, that sellers would get the picture.
But I guess when it involves money and human stubborness the sellers who won’t budge will have to be slowly dragged kicking and screaming all the way to the bottom. A slow process.
The problems IS,
There are neigbhorhoods closer in to D.C. that have gobs of foreclosures, and those closer in *will* eventually sell for rock-bottom pricing (we’re not there yet). We do have some really stupid real estate agents around here who give advice about “waiting it out”.
We’re in a rental now where the listing agent took a contingency without bothering to check if the “buyers’” house for sale was priced realistically. It’s not. It’s 100K overpriced. There are three on the same street for less, and they’re not selling. Letting that contract happen is not something a smart agent does.
in NVA foreclosures are rare - weren’t many in 90’s
gov workers never lose their jobs
off 13% from peak so far
not much change since spring
In the 90s there also weren’t nearly as many subprime loans, and almost no liar loans, option ARMs, or loans with teaser rates that reset. While I am a firm believer in the quote that the four most expensive words in the English language are “it’s different this time,” that doesn’t mean that you should completely ignore the facts that distinguish one example from another. Here, these facts will help NoVA be more like other areas, despite its large population of govt workers.
flatffplan,
During the Great Depression, my father remembers a relative who said while living in the D.C. area and working for the government, it barely seemed like a depression to him.
For now, the worst-hit foreclosure areas are outside the beltway. But that’s significant for those who were “forced to flee” as it were, and find themselves unhappily under water.
We moved further west in 2001 to find a single-family home in our price range, which we sold in 2005. At this point I refuse to move even further out. Someone tried to tell me today that Culpeper would be where the government was moving and that prices would escalate there. There is vastly, mind-bogglingly *gobs* of flat land to build on there and in Orange and Spotsylvania counties. I don’t see that a few government buildings are going to cause a big investing furor. Prices and sales have nose-dived there and speculators want out. There are a huge amount of empty houses - both brand-new and old tear-down slums.
I said a few months ago when sales were picking up here in the D.C. area that it would be a short season. (I learned the pattern from Jim Klinge at bubbleinfo.com). It really appears as though the spring selling season is over for now, and the listings are piling on again. I’m seeing very little going under contract.
There are a number of foreclosures listed on my blog that were purchased in 2006. Some of those are probably fraud, but I imagine many thought they were getting a “bargain” that year and were in it for a quick flip. Just like what I think will happen with purchases made this past winter of 2006/2007.
IMO this time around public servants will be layed off in huge numbers.
The coming depression will absolutely murder tax revenues, and the government’s already neck-deep in the red just on a cash basis. Raising taxes will be political suicide, too.
Printing money’s no longer an option when you need $2B/day in new foreign funds just to operate. OTOH, if the Fed chooses to defend the dollar then rates go through the roof and debt service alone will kill the budget.
Monetize & die vs. defend & starve — pick your poison.
It will hit sooner than later. strength of the chain is it weakest link. Wait till one of these homes go into foreclosure. Once that domino falls, next one will fall soon too.
Only caviet is that owner bought long ago and they have not HELOCed/Refied to death and they can rent and cover the mortgage.
I see here in Newbury park, CA one condo where I live went for 350 (foreclosure), another 470 at the same time, now I see new listings coming in at 430.
In another condo development near by , a fore closure is listed at 375 where as others in the same complex at 440+. Once the foreclosure becomes the same, it is THE COMP.
with the current -ve psyche, the next sale will less than375 , assuming forclosure sale sells for listed price.
Any seller who won’t budge an inch indicates to me someone in serious trouble. Better to budge sooner than later, the later you budge the more you’ll have to.
the battle of the budge
I agree. I budged early and often, because I had room to do so.
This was against my broker’s wishes. I wasn’t getting showings and felt like I had to convince THEM why. I took my price under a key threshold and WHAM, showings left and right.
Sold soon after. For sellers now, it may be stubbornness and greed but I bet most can’t “afford” to budge.
Agreed. My perception is that either these buyers have HELOC’d out most of their equity already or have serious credit card bills and are trying to pay off debt, or they are not really “serious” sellers and are just waiting for the right fish to bite…
“these buyers” should read “sellers that don’t budge”.
Other possible explanation for this behavior: they are RealtorsTM themselves!
Yes…a very slow process….
Yup, the RE fools in Sarasota think the market has bottomed but there are mass foreclosures on the way. We looked at numerous houses over the past few months and nearly all of them can’t afford to come down any on the price…hence you have tons of houses still priced above the peak. Many here cannot afford to sell their house for what it is now worth. This is going to get ugly…..
By 2010 they’ll sell or walk depending on if they are upside down or not.
If you’re selling… why would you give a rat’s ass what happens to the nieghborhood comps. If it is an investment, you’re selling (in theory) becuase it’s either underperforming or you think it is about to. The worse the neighborhood does going forward, the better your decision to sell looks in the rearview mirror (you almost “hope” it goes down, because it makes you look smart for selling).
If you’re selling a personal residence because of a move, you likely need the equity to buy a new place- and as much as you would like to be nice to the neighbors, your need to establish the new home or get rid of the 2nd alligator is going to win.
I sold a home about 5 years ago, and later learned that some of the neighbors were upset about me letting it go at the price I did. The impact on the neighborhood I was leaving paled in comparison to my personal/family needs at the time. It was amazing to me that they even thought that was a tiny factor in my decision (it wasn’t).
Why would I give a rat’s ass, you ask? Well, in cases like my neighbourhood where everyone knows each other pretty well and are friends, maybe “it’s different here”. Ouch, I had to use that phrase! But seriously, some of these are friends for life, so I don’t want to shaft them.. .er, much.
HOWEVER… There’s a whole opposite take on it. You can actually be doing them a favour:
I’m probably in my home for the long term; otherwise I’d have sold already and pocketed the cash. So for me, the only damned advantage of my neighbours selling high is that the property assessor sees the comps slams me with a high assessment in the next cycle. NO THANKS! Sell ‘em low and keep the assessments and ongoing taxes down.
In retrospect, they should have thanked you. At least they probably got a couple of years of lower property taxes due to your “lowball” sale.
“Because selling them cheaper wouldn’t be fair to the neighbors . . . duhhh”.
I never understood this mentality, unless you’re moving to another house in the same town/neighborhood. But if you’re moving away, who cares what they think.
Hi,
Having problems posting on your blog with the Google sign-in. Yes, here in NOVA they seem to be holding out for a min. of 50k appreciation per year.
My neighbor just put there house on the market for 60k below comp. Should be interesting as they still stand to make 25k year appreciation.
“Eduard told her broker she was uneasy taking out a loan for $495,000. ‘I told him I didn’t think I could afford the house because my income was too low. He said, ‘Don’t worry about it,’ that he’d take care of it.’”
I want to feel sorry for her but I can’t. You can’t leave the home buying process entirely in the hands of someone else.
Many people seem to though.
Buying process……commissions/fees and bonus come first for lenders/real estate agents. Everyone knows that don’t they?
“Eduard told her broker she was uneasy taking out a loan for $495,000. ‘I told him I didn’t think I could afford the house because my income was too low. He said, ‘Don’t worry about it,’ that he’d take care of it.’”
Oh, for the love of pete….yet another victim, completely unwilling to take care of themselves. Did anyone grow up in the last 50 years?
Man, there are enough real victims in the world for my sympathy to handle…I can’t take these babies rolling around in their jammies with feet, complaining of colic.
“I can’t take these babies rolling around in their jammies with feet…”
Do they sell those footie PJ’s for adults? I loved those things.
http://www.bigfeetpjs.com
Very warm, and absolutely hilarious on a grown person.
OUTSTANDING!!! Thank you!
I don’t care I look in them. PJ’s aren’t a fashion statement, especially during Chicago winters when you don’t want you heating bill to exceed your take home pay.
I’m glad I could help. I think that it’s the integral butt-flap that makes them so funny to me. Butt-flap. HA!
I grew up in NH and had these until I moved to NYC after college. They are very warm and like chicagobubbleblog said, who cares how you look in them as long as you aren’t barfing out cash to your local heating utility.
Growing up during the winter if we complained that we were cold, my parents would tell us to put on a sweater.
We had the footie pjs made out of thermal long john material and a big thick sweater. I still can’t stand it to be too hot in the house even though I live in VA.
I haven’t been able to find footies anywhere since I left NH. Thanks for the link.
Why was she looking at a 500k home IN THE FIRST PLACE?!
Even if she got a 30yr fixed at 1% she couldn’t afford the payment (much less taxes, maintainence and insurance), no?
Since she can construct A coherent sentence I have to assume she’s lying. No one who can speak can imagine they could afford that on 30k per year. She’s LYING.
Bingo! The key indicator is the statement below:
“Eduard believes that her broker inflated her income by $60,000 to qualify her for the loan. ”
Now why might she “believe” this unless she was, in fact, party to this fraud?
All of this “victim” talk is tickling me pink.
Once banks are seen as predators, how much do you think they’ll be willing to sell these kinds of loans.
Once a few good lawsuits get filed, that type of funding will be choked off for a long time, maybe forever.
I say bring on the sob stories. Fewer and fewer buyers every day.
Chuck Ponzi
http://www.socalbubble.com
Good pick up Groundhogday…..
WTF? What did she think he’d take care of, making her payments for her? I call BS.
“In Eduard’s case, she received a $99,000 piggy-back loan at 12 percent interest, with a balloon payment of $90,000 due at the end of 25 years. With such a loan, a borrower will never build equity and will virtually never be able to pay off the loan, Ludwig added.”
Just when I begin to think I won’t be shocked by what I read here I read something like the above.
Unbelievable.
yeah, that one was blatantly disgusting.
that broker should be jailed, or pummelled, or both.
We need to bring back tarring and feathering and riding dirtbags out of town on a rail. The deterrent value of public chastisement and humiliation would be immeasurable. Of course, our FB heroine would get exactly the same treatment, since as far as I’m concerned she was either in on the fraud, or so incredibly stupid she deserves to be tarred and feathered as a warning to others.
I agree. I doesn’t take a genius to see that no matter what you do, you’re not going to be able to afford that mortgage on her salary.
She was counting on flipping it in a couple of years and making some money.
Boo, HOO, HOO.
Not.
Was driven and should be!
Arwen:
It’s going to get pretty ugly when another year goes by for the people that own those houses.
what does this second paragraph mean????
“‘All of this was foreseeable,’said Ludwig. ‘The regulators, the industry and Wall Street in particular have known about these problems for years.’”
“The good news was the recognition that there was a fundamental problem. ‘At this point, the whole subprime industry is a mess. I don’t think anybody really contests that,’ she concluded.”
I think they’re trying to say that before you can fix a problem, you first have to recognize that there is a problem. They’ve cleared the first hurdle (recognizing the problem exists), so that’s at least some progress. Now, as to how they fix the problem (personally, I am in favor of just letting the market sort it out)? All sorts of theories have floated around, such as foreclosure moratoriums, bailouts by Fannie, Freddie, WaMu, etc., although I don’t think any of them will have any significant effect. But, hopefully they’ll at least follow the age old adage: if you find yourself in a hole, stop digging. Here, that would mean stop the flow of stupid loans.
At least, that was how I interpreted it. (I also had to re-read this sentence, because it didn’t really make a lot of sense initially).
Bring it on! I’m tired of people not understanding basic financial aspects. Why in the world would someone who makes $30K/yr even think about a half-million dollar mortgage, slimeball mortgage broker or not?!
People need to start taking responsibility for their actions. Just admit…you made a mistake by buying into the hype, mail the keys back to the bank, let your credit take the hit, and you’ll probably be able to buy again in 5 years when prices are a whole lot cheaper.
Of course, in the USA, it is so much easier to blame someone else. Hmm, who can I blame for that lousy stock investment I made in 2000? Where’s MY bailout!! Ha Ha!
“Bring it on! I’m tired of people not understanding basic financial aspects. Why in the world would someone who makes $30K/yr even think about a half-million dollar mortgage, slimeball mortgage broker or not?!”
It was easy, home prices went up 20% and they would make a cool 200K grand in two years!
Well, the FBI’s decided to take off the dark glasses and get involved:
http://www.mortgagefraudblog.com/index.php/weblog/permalink/fbi_arrests_9_of_10_charged_in_widespread_mortgage_fraud_scheme/
“‘Some experts are saying we’ll reach the bottom later this year,” said John E. Kortecamp, executive VP of the Home Builders Association of Maryland.
- ‘But you never know when you will see the bottom until it’s over.’”
Perhaps I can share this thought … The bottom will be near when Income to Debt are in a correct ratio.
What is a correct ratio of debt to income? Historical values? They might change due to technical or demographic processes (commuting, population movements etc.). I think that the proper measure for the value of an asset “housing” is the rent you could get out of it. It should cost “about” the same to own as to rent, with some deviations, some of which favor owners for the risks they take and some of which that favor the renters for the limits of freedom they have in modelling their home as they want.
when conventional wisdon says only fools buy real estate… that’s the time.
Does anyone here really feel any sympathy for these greedy pricks and stupid foolish debt zombies?
You make stupid foolish greedy decisions then pay the friggen price.
Yes. I feel sympathy for uneducated low income buyers who fell victim to predatory lending financed by the very wealthy. However, I also don’t agree with proposals to stick the tab to taxpayers. The REIC should have to pay for the mess the REIC created, including the losses on subprime loan defaults.
“I feel sympathy for uneducated low income buyers who fell victim to predatory lending”…
GS,
have you ever met members of America’s “underclass”? The urban version is far from stupid. Maybe not formally educated, but cunning like a fox and a whiz at gaming the system. I think Ben noted earlier that when he used to do tax returns pro bono he was amazed by the folks who had learned to play the “earned income tax credit” game to their advantage. I think your sympathy is misplaced…anyone who has convinced themselves that they are entitled to a half million dollar house on 30k gross is not deluded, just willing to play the housing lottery. In this game, you keep your winnings, but claim victim is the game turns against you and demand a federal bailout. Even better, you are an illegal earning around 15k and you buy a 750k house with a couple of sometime mushroom pickers and scream foul when you can’t make the monthly payment.
This isn’t about a budgeting mistake by the nearly honest–this is out and out fraud and theft by scammers.
Yep I do, and I’m a fence-sitter who sold at the peak. You have no earthly clue how aggressively lenders lied, cheated and preyed on people to make sales and commissions in NYC.
Yes, she was foolish, but fools are the reddest of herrings in this bubble. There were fools before the bust, and there will be fools after. Fools did not make this bust — it was crafted by wolves that were given carte blanche to sell lies to the fools — And you and I, along with this too-trusting fool, are going to pay for the aftermath, while the wolves profit.
When the crime rate goes up, when we can’t collect enough taxes, when blight happens, or when we have to bail out the newly house-impoverished with more social programs (which we will, because the wolves make laws that exempt them from responsibility) we all pay. You and me. I myself am going to focus on the real villains here -and fight like hell to make the brokers/lenders/bankers pay mightily to clean up their own damn mess. Because if we don’t recognize who the real villains are, and hold them to account, then they have made fools of all of us.
If somone dangles a pound of cocaine in front of your nose, aree you obliged to take it (assuming you know a little bit about cocaine)?
The fact that money was easily had shouldn’t absolve these individuals from their SUBSTANTIAL part in this fiasco. No buyer, no transaction, no bubble.
These buyers were greedy. Greed is about getting something without having to wait for it, without having to “earn” it in some fashion.
Its sad. It will cause a great deal of pain for some and some pain for all of us. But good will come of this only to the extent that a substantial portion of the public recognizes the age old lesson of “personal responsibility” again.
If we let them off the hook, if what really drove this process (individual greed and recklessness) is generally ignored and blame is apportioned to the secondary facilitators (who, admittedly were rotten), this fiasco will just be repeated again, with some other “asset” shortly down the road.
How will that serve society?
Personal responsibility kicks in when the consumer is informed clearly of the risks. Cocaine is simple … buying a house in NYC (which I’ve done a few times) is absolutely fraught, even if you know what you are doing. And when you are not financially savvy, and your broker, banker, lawyers and realtors can all collude to make fabulous money by playing you for a sucker, it’s hopeless.
Personal responsibility can only go so far with a fool — I want the personally responsible who made the biggest bucks in this to get on the hook and stay on the hook.
Yes, major purchases can be difficult, but come on, I call baloney on this woman. Unless you are “developmentally disabled” or whatever sub 60 IQ is called nowadays, it takes about 5 seconds to figure out that a 500,000 purchase is going to be out of reach for someone making 30,000. She saw everyone getting into the market, and whether she did it just to buy a house or to make some money, she knew what she was getting into. And if she didn’t think about it, that’s just as bad.
When I signed my mortgage, the monthly payment was on at least 3 or 4 pages. I’m sure it was in her documents as well.
We’ve constantly battled over the years on this blog against the drumbeat of the industry claims that — ‘housing always goes up’ — ‘buy now or be priced out’ — ‘you can always sell or refi later’ -you think this woman’s broker was not handing her those lines? (in addition he was overtly forging her docs!) If any of these people truly ‘knew what they were getting into’ they wouldn’t have got into it. Why is it so hard to place blame on the ones that take advantage of gullible buyers? She’s not a player or a flipper, she just wanted to buy a house in a city where you were almost forced to take out a risky loan to do so given the divide between affordability and prices - and where, as I have pointed out many times here, the press offered little to no journalism or reporting to counterbalance the RE hype -in fact, it cheerled it something awful. And her pain, one way or another, will be my pain, unless we make the appropriate culprits hold this bag.
” she just wanted to buy a house in a city where you were almost forced to take out a risky loan ”
You mean like I just want a Maserati so I am forced to take out a risky loan.
BS. She had no business buying a house. NYC is expensive, and at 30k gross, she cannot afford to buy in NY. Period.
End of story. There is no constitutional right to a house. Or a car. Or private tutors. Or orthodonia for the kids. Or a Maserati. Or steak for dinner.
If you want something,then earn the money to buy it. If you can’t make enough money, substitute, learn to live with less, do without. I am not obliged to underwrite the cost of what this jerk “wants”. Neither is any other taxpayer. If you feel strongly that she has a “right” to own a house, then write her a personal check.
GEEK………Please dont get me mad at you……
No one forced them to go even look at buying a house, No body forced them at Gunpoint, no they fell for the Krap…..
Added to the fact Most people today ARE MORONS with very little critical thinking skills, you had a perfect set up to fleece them…..
Plus how many people really use a computer to educate themselves????? Most play games or are in chat rooms…
Here is MY suggestuion to clean up the mess………
any Broker or loan officer etc involed in getting a loan that forecloses in a year or two will have to pay back all their commission on that loan….Like a warranty.
——-I myself am going to focus on the real villains here -and fight like hell to make the brokers/lenders/bankers pay mightily to clean up their own damn mess. Because if we don’t recognize who the real villains are, and hold them to account, then they have made fools of all of us.
aNYCdj,
I disagree. Most people aren’t morons. Yeah, everyone makes stupid mistakes. Probably more stupid mistakes are made in liquid markets than elsewhere. But the problem isn’t stupidity, its greed. I’ve known lots of “educated”, otherwise pretty smart people (some worth millions) get sucked into this real estate fiasco. It isn’t about intelligence, its about being blinded by greed.
Greed happens at every income and intellect level. The “real villains” in this play really is only one; greed.
Greedy buyers, agents, brokers, builders etc. But don’t forget; the game begins and ends with an individual making a decision to buy. If that individual steps back for a moment and considers a few things; nothing happens.
Naive homebuyers were the endgame. The real beginning of the game was banks deciding to accept no- and low- doc loans because they were permitted bundle the risk and sell it as securities. Had banks not been able to foist their risk, there never would have been any incentive to lend to buyers whom -even a MORON broker could figure — could never pay back the loans given.
“Darrell Carrington, a senior loan officer with Freestate Mortgage Services in Bowie, said high home prices in Prince George’s, in relation to other nearby counties, is a factor in its high foreclosure rate.
“The parents of many of today’s homebuyers needed to make a 20 percent down payment, ‘but those days are kind of gone,’ he said.
“Such a down payment on a $350,000 house would be $70,000, and most people don’t have that much cash, he said. The result is that more of the purchase price is borrowed, resulting in higher mortgage payments.”
Not quite, Mr. Carrington. The reason these folks are going TU is that they borrowed way more money than they can ever repay. They couldn’t have done so without your facilitating it by not requiring them to put any skin into the game. Tough cookies, bud.
‘most people don’t have that much cash’
I think the average cash saving is about 25K per household, and the sigma is very fast on the high side. I doubt that 5% of households have 70K for a down payment.
“The result is that more of the purchase price is borrowed, resulting in higher mortgage payments.”
And higher housing costs. Bring back traditional lending standards and quit trying to get everyone to own a house and more people will be able to, long term.
‘I pray to God to sell the house quickly,’ Eduard said. ‘Now I’m scared to go into foreclosure, because my credit will be ruined.’”
Hello. Hello. God to Marie, I feel your pain. Sorry I am busy helping those in California. I’ll get back to you in 2008. Try to hold out.
Sorry to you sensitive types, but that is entertaining.
“Now it takes almost every dollar of her $30,000 salary to pay her $2,400 monthly mortgage bill.”
12 X $2,400 = $28,800.
That leaves $30,000 - $28,800 = $1,200 / year = $100 / month after shelter expenses to pay for food, clothing, transportation and leisure consumption. IMO, the lender should have to go to jail for predatory lending in this kind of a situation.
My guess is that she only planned to hold for 2 years and sell. In the meantime, she probably had some savings to help pay for expenses. Or she put it on credit.
A little short term pain for a big payoff in 2 years. I’m sure he helped convince her she could do it. But she had final say.
Of course - she’s a speculator.
Playing dumb like a fox, apparently.
“Galeone called subprime lending ‘a ticking time bomb. It creates a great potential for failure and can lead to high foreclosure rates.’”
It was a ticking time bond, until it exploded in the first quarter of 2007.
GetStucco,
Good analogy. However, its a series of timebombs. They’re still going off… getting bigger… and no one has figured out how to get around the anti-tamper detonator.
At first it was homes… then blocks of homes… rumor is that in Florida and Phoenix a few developments have been taken out.
And yet the mad bomber’s factory hasn’t slowed down. In fact, the denial of his existence for so long has allowed the fiend to set up quick an arsenal of pyrotechnics. Coming to a neighborhood near you…
Got popcorn?
Neil
Interesting chart. Super Composite home index vs. Nasdaq vs. China. Yellow is the home index chart. See the one head and shoulders breakdown and then a larger one forming now. Would imply much lower prices.
txchick,
Thanks for the chart. I hope you’re feeling better. We need you here. I shorted some more HB’s yesterday.
Oops. Here’s the chart
https://image.minyanville.com/assets/FCK/File/SG5/sg362977(1).gif
? Sorry. There was an error with your request
You need to copy the link and paste it into your browser address bar because Wordpress is not parsing it properly
So, I was eating luch with a group of co-workers when one says, “So, you found a renter?” to another co-worker. Let’s call this guy JD.
JD says, “Yep, a guy in the French Air Force that is stationed at Luke.”
A conversation ensues. The jist is that JD bought a 2200 sqft home a couple years ago for $375,000. But now his non-working wife wants an even bigger, brand new place since their’s is no longer the newest and nicest of their friends.
So, a 4 months ago they signed a contract on a $500K, 3000 sqft place. The builder was offering upgrades, a free pool, and to pay all the closing costs.
So, they put their old (2 year old) home on the market. It sat for 90 days, but they couldn’t sell it for what they owe. So, they went looking for someone to rent it.
Hmmm… could it be that they can’t sell because the builder is selling for less? Oh no. They builder isn’t selling for less, he assures me. I respond, sure, they’re charging the same, just throwing in $20K in extras and paying $5K in your closing costs, meaning they really are selling for less. He pouts at me.
Any, so he’s renting out his 2-year-old, $375K house to a 26 y/o military guy that has 3 kids and 2 big dogs. He got a 2-year lease and the price is only a few hundred a month less than his mortgage payment.
He’s sure the market will be back up in the 2 years, and the renters can’t trash it that much, can they?
SUCKER!!!!!!!!!!
“…and the renters can’t trash it that much, can they?”
I can asure you that the average 26 year old french renter with two big dogs can turn his 2 year old house into the average french countryhouse…which is…slightly different to American standard housing…
Here is what i wrote these Morons:
—-Not surprisingly, the foreclosures are concentrated in Southeast Queens, in African-American neighborhoods like Jamaica, St. Albans, Cambria Heights —areas that have long beenvictimized by predatory lending.———
=============================================
No the only preditory thing about those communities is they cannot read write and speak English and cannot figure out 5th grade math….or they would NEVER have bought a home in the first place.
No more excuses based on color….they CHOSE not to be smart in America.
“….they CHOSE not to be smart in America.”
What? Willful ignorance, you mean?
What? Willful ignorance, you mean?
Uh Ghetto Rap hip hop, and basic stupidity….add to the dumbing down of America….
Its preditory NOT because they are black but becuase they are DUMB……big difference.
Black, white, brown, yellow…makes no differnece, friend.
Let’s not make this a racial issue. THAT is stupid.
BUT THEY are making it a Racial issue…read the article, they want it to be a racial issue….and we have to fight back and say is NOT!…Its a stupidity Issue.
It is definitely not a racial issue. A cultural issue that demeans being good at the “three R’s” as being too “white?” Yes. Tolerance of that has to end.
But also the quality of the degrees must increase. We must expel kids who do not want to learn. Put them in military schools or other high discipline environments… but make the ones who get a diploma have something that will get them a job.
I know *all* of the aerospace companies are effectively having to give literacy tests to new hires unless that have an accredited college degree. (Ok, I know a Harvard MBA isn’t accredited… but we can accept those prestige exceptions.)
Unless someone is more educated than the average Chinese, they’re going to have a future worse than that average Chinese (or Indian… whatever). The US is no longer the sole supplier of airplanes, trucks, electronics, etc. to the world. Heck, even the London financial markets are growing faster than ours.
I think its an education issue. Notice I’m not blaming the schools? I do blame the parents (or lack thereof). I do blame social promotion (but that’s the lawyers).
Ignore the problem all you want… it is driving the employers who only need high school levels of education to areas where the workforce has enough workers with an 8th grade operating level in reading, writing, and math.
They’ll make noise about saving some racial groups… but the fact is, if you can’t read English, don’t sigh the legal documents.
I’m as frustrated as everyone else is about this… but let’s put the blame where it really belongs.
Got popcorn?
Neil
The reality is, subprime borrowers and other people with poor credit are disporportionatley “disadvantaged minorities” - black or Hispanic. And it will BECOME a racial issue when rabble-rousers like ‘Jes’ Me’ Jackson and Al Sharpton bring their extortion rackets to bear on the “predatory” lenders, which can be applied to mean any lender who actually had the gall to expect their money back. If and when entire categories of people can be released from their financial obligations by virtue of their skin color, the ramifications are going to be felt a lot more acutely by everyone else.
By the way…the author of the following sentence: “Its preditory NOT because they are black but becuase they are DUMB” should be working on his GED and basic literacy before than castigating others for being “DUMB.”
LOL!!! Didn’t I tell you this was coming,
“The Man gave me too much money. My civil rights got violated.”
Guys at Implode O’ Meter has another Wholesale Finance company closing down real fast!!
Millinium Financial of Indianapolis. This thing is really starting to roll.
http://ml-implode.com/imploded.html#lender_MilleniumFundingGroup_2007-04-27
From their website:
——–
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• 720 FICO
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Holy crap!!! I am thinking 90% of our financial institutions are built on a landfill that is about ready to do down the hill like a cheesebox crapmansion on a California hillside in the rain…..
I better start checking on my credit union and start moving into a cash position.
Crapburner,
I’d say 70% of our financial institutions are built on landfills that are about to slide down the mud hill… while at risk of being burned from the wildfire (funny how there is a sharp line of monsoon rain/drought through the hills…).
Keep less than the insured limits… anywhere. Money markets might be distributed enough to be ok… otherwise, watch out.
Got popcorn?
Neil
Yes, Neil, have been keeping it way below the limit at credit unions in case things fold. Saw my credit union go from asmall operation serving members to a 4 story mansion/office complex out in Burnsville. Scary…what is it all build on? Weird financing of cars and homes and McMansions and Hummers…..
Talked to one guy today and he lost a bundle when New Century folded…his shares are worth 50 bucks now!!
Make popcorn regularly.
“Today, after 20 years of hard work as a health care worker and bus driver, she owns her own home, a two-story, three-family house in Laurelton she bought for $500,000 last year. ”
I find it hard to believe that Marie did not rent out parts of her home to pay the $2,400.00 mortgage. Isn’t that the whole reason people buy a three-family house? You want to generate enough rent to pay the whole mortgage. If she had gotten market rates for for two of the three units she shouldn’t have had a problem. I used to live in Rosedale, Queens which is right next to Laurelton and I know that’s what many people do there to get by.
Marie is probably going to be renting out parts of her body when all is said and done.
LOL. Nice one.
Holy smokes. I was just looking over the Census Bureau vacancy data. 1Q06 to 1Q07:
Total housing units up 1,893,000
Occupied units up 415,000
Vacant units up 1,478,000
Seasonal units up 262,000
“Eduard told her broker she was uneasy taking out a loan for $495,000. ‘I told him I didn’t think I could afford the house because my income was too low. He said, ‘Don’t worry about it,’ that he’d take care of it.’”
Oh where do I start ?? Whatever turnip truck this woman is claiming to have fallen off does not exist. If one cent, ONE CENT of my income goes to pay this loser’s mortgage while I wait it out in my rented 1 bdrm apt there will be @#ll to pay! Hell hath no fury like a renter F’d.
The bailout will consist of FRE and FNM cherry picking. Everyone else is screwed.
http://biz.yahoo.com/ap/070427/freddie_mac_ceo.html?.v=1
“According to Michael Galeone, executive vice president of The Columbia Bank, the subprime market was ‘abused’ during the mortgage boom of two years ago.”
Everyone please note the spin in the above statement. The subliminal message is that the boom and the abuse all happened two years ago, so implicitly the market should recover any moment now. All that nastiness is over and done with. Nothing to see here, move along now.
Did anyone else notice that fastasy loans were still being made in quantity right up until TSHTF in February? Or that just a bad dream I had?
Ummmmm. It seems they are still being made. All you see on CNBC is ads for home loans and Nutrisystem porker food.
Last Contango in Paris I guess.
In reference to the Queens case, not too many years back when certain “disadvantaged” groups were being denied loans- the lenders were accused of “redlining” or blocking out certain parts of a city for certain races etc
Now this case may be lender fraud - however we are supposed to believe that this woman was so idiotic that she had no idea that her income was being enhanced?
The 3 major factors (aside from cheap asian money etc) that allowed this super credit bubble to be created: The use of no doc/little or zero down/Intrest only and/or negatitve amort ARMS - often used in combination
Lets just subsidize STUPIDITY - so more dumb ass..s borrowers like this will be around for the next BOOM
http://www.dissidentvoice.org/2007/04/housing-bubble-boondoggle-is-it-too-late-to-get-out/
Has very one seen this “Housing Bubble Boondoggle”, some scary stuff.
You guys see this? Anyone wonder now why KPMG is suing Fannie Mae?
http://www.itulip.com/forums/showthread.php?t=1245
txchick,
Glad you feeling better and back on the blog. It’s not the same without you.
txchick,
you ok? Didn’t know you weren’t well…if so, hope you’re better.
Yeah txchick, and I think it’s hot stuff. I never had any school education in accounting, but I can’t find any reasonable logic in such a scheme. No wonder they keep coming out with rather benign profit figures.
I just started to follow the macro economics a year ago, trying to get some answers for better preparing my kids for the futur.
I can tel you that I found all the answers…but sometimes I wished I never would have asked for them.
“The way lenders or portfolio-holders of pay option mortgages account for negative amortization is surprising to the lay person: THEY SIMPLY TAKE THE NEGATIVE AMORTIZATION–that is, money not received–AND ADD IT TO THEIR EARNINGS. This is called “capitalization of income from negative amortization” or “CINA.”
Where this starts to become a potentially significant accounting issue is in how a number of mortgage lenders and bankers who have done extensive dealings in pay option products have begun to show a significant and increasing portion of their net income is now provided by this capitalized negative amortization…”
” Yet Eduard’s story is not about the fulfillment of the American Dream”
Hillary Clinton and her upper west side limosine lib socialist friends - simply need to get a law passed that GUARANTEES home ownership - for all those seeking the “american dream”
Instead of taxing america’s most productive people 40% plus for fed/state taxes for every extra dollar earned - lets just tax them 70%
????
Hello? Ownership Society? Nevermind.
HarryD,
Check the American Dream legislation passed by your very own republican president…on the white house website. It’s waiting for you there with all sorts of no or low down payment programs and a smiling photo of our current republican prez and his “ownership” society.
You want to stick it to a pol?? Then stick it to the author of this mess.
Sorry if this is a double post…
http://money.cnn.com/2007/04/27/news/economy/gdp/index.htm?cnn=yes
“But Peter Schiff, president of Euro Pacific Capital, a Darien, Conn. brokerage firm that specializes in overseas investments, said the consumer spending will not be able to continue due to the problems in the housing sector, the continue growth in the trade gap and the nation’s negative savings rate, where consumers are consistantly spending more than their after-tax income.”
“I think this report is even weaker than the numbers suggest,” Schiff said. “Home equity loans have been financing all this consumer spending. We’re just at the beginning of the housing slump. Housing is going to collapse, and when it does it’s going to take the rest of the economy with it.”
Yeah, that line about taking the rest of the economy grabbed me too. Seems like every week a new sacred cow is tipped… over.
Schiff is God.
That guy cuts right through the crap, totally eviscerating the bulls.
For example,
The Bullcrap: “Revolutions in technology have increased American productivity”.
Schiff: “Really, why do both partners in a family have to work now when in the 60’s, a man alone could provide for an entire famliy.”
Q.E f*ckin D.
Ding, dong, badabing, one after the other this guy just destroys the economic crap being spewed by these losers on CNBC.
http://www.msnbc.msn.com/id/18353653/
“confirmed that the ongoing housing slump is weighing on the broader economy. And by most accounts, that slump will likely persist well into the year — and possibly longer.”
Ummm, hello. Brokers are still making “risky”, AKA predatory, loans. We’re not going to see an end for at least a couple years after the government steps in and shuts down the lending industry. It certainly won’t be this year with a trillion dollar in ARMs set to reset for the first time.
Back to the article….
“But despite the sluggish growth — and the outlook for continued slow growth this year —inflation is still running higher than the Federal Reserve would like to see.
“It’s very important that the Fed maintains its vigilance about inflation, that we not let inflation expectations get out of hand,” said Philadelphia Fed President Charles Plosser last week. “If inflation doesn’t moderate as we expect, the Fed would need to think about what appropriate action will be.”
That means the waiting game for the Fed to cut interest rates will probably continue for some time.”
HELLO!!!!! Waiting for them to lower????? Are you NOT Listening????
“If inflation doesn’t moderate as we expect, the Fed would need to think about what appropriate action will be.”
He’s doing everything but coming out and telling you that they’re actually thinking about RAISING rates you dolts!
Lowering short-term rates kills our exchange rate. Killing the exchange rate is inflationary and hurts our balance of payments since so much of our consumer goods are imported. Inflation and balance of payments make long term interest rates go UP!!!
They’re not going to drop interest rates to avoid a recession. They are going to raise them to help the exchange rate and stop inflation.
There is like this GIANT disconnect between the press and reality. I don’t get it. Every day there is bad news, and yet our local news is all about trying to SPIN it to the positive.
More houses on the market than ever: Yeah, but March was 2.8% better for sales than Feb. Who flippen cares? Feb was off 16%, which you’ll said was due to weather. A 2.8% increase after a 16% drop shows your “weather” spin of last month was way off. Why not just say that sales are off 25% from last year?
Sales are up, and the average house that sold was one the market for only 6 months, down from 6.3 months. Yeah, but the same report said there are 50,000 homes on the market, and selling at 5K a month. Did the “10-month supply of homes” get the headline, or was it “Homes selling faster than last month”. Yep, homes selling faster.
500 foreclosures last month, 1500 new defaults, making people suspect there will be 1000 foreclosures a month within a couple months. 1000 foreclosures a month in a market selling 5000 homes a month. The spin was how hard mrotguage holders are working with owners to avoid foreclosure.
I don’t get why the media is working SOOOOO hard to cover up what is going on!
no thanks on BiG GOV “helping”
the markets will adjust for risk if left alone
no bail
I don’t get why the media is working SOOOOO hard to cover up what is going on
Maybe advertising dollars?? -
It’s really bad. Countryslide and IndyMac were down 5% in early trading a few days ago and NOTHING was said on CNBC for hours.
The past few days have been all about “The Rally”. What rally? We had one big up day, a down day, and virtually flat today. Cramer is bouncing and down like a mexican jumping bean over what?
http://www.msnbc.msn.com/id/18355590/
“I don’t think it’s troughed yet, because of the class of 2006,” Syron, chairman and chief executive of Freddie Mac, said before speaking at a housing conference. “The mortgages written in 2006 in the subprime market are probably the most troublesome. They haven’t hit the reset point yet on interest rates.”
Hello people!!! It has been 1 month since they tightened the sub-prime lending standards. That means a year or two before we see THE TOP of the foreclosure spike.
Over yet…. It hasn’t even started yet!
Back to teh artlice:
“The problems could worsen as nearly 2 million so-called adjustable-rate mortgages ARMs are resetting to higher rates this year and next.”
Ummm… You THINK it could get worse? 2 million people have houses thay probably can’t afford. Yeah, that could, just maybe, be a bit of a problem!
Hello people… the ship has struck the iceburg and is flooding in all compartments. It is going to take years to go down, but it is going down!
‘‘The biggest problems I’m aware of were delayed settlements, not canceled settlements,” Frederick said. ‘‘There are plenty of programs that replace these types of loans, so I don’t see the problem being as big as some people think it is.”
yeah right