Tightening Credit Disrupts The Real Estate Food Chain
The Boston Globe reports from Massachusetts. “The meltdown in the subprime mortgage sector is making it harder for first-time and other home buyers with little down payment money to get even conventional loans, adding more troubles to a slumping real estate market. These are typically buyers who once easily got 90 to 100 percent financing for a home, but now either have trouble getting loans or are paying more for them.”
“‘It’s a knee jerk reaction to what happened with the subprime market,’ said Rosella Campion, loan officer in Boston.”
“Ryan Mulvoy is shopping for a new condo, but may not have much money left over from the sale of his current Quincy one-bedroom unit after he pays off a few bills. He was able to buy that first condo with just 5 percent down; now, anticipating he might need 100 percent financing, his agent, Joe Clancy Jr. in Weymouth, said Mulvoy might have a harder time getting a loan.”
“The Warren Group estimated that roughly 30 percent of Massachusetts home buyers last year bought houses with little or no down payment. ‘A deferral of home purchases by even 10 percent’ of buyers, said Warren chief executive Timothy Warren, ‘would mean fewer sales and further pressure on prices.’”
From Bloomberg. “The U.S. housing slump has hit New York City’s richest suburbs. The average price in Westport, Connecticut, fell 8.2 percent to $1.56 million in the first four months of 2007 from the same period last year, according to MLS data.”
“The tightening of credit in response to rising subprime defaults has disrupted the real estate food chain, bringing the national housing slump to Manhattan’s doorstep. Prices fell as much as 18.8 percent this year in 15 of the 24 areas in which data was collected.”
“‘People who may have bought their first home may not be able to do so now, and that stops some of the movement,’ said Doug Werner, a broker in Darien, Connecticut. ‘Whales eat plankton. If the plankton disappears, what will happen to the whales?’”
“First-time home buyers are more likely to be subprime borrowers. Every purchase of an existing house by a first-time buyer triggers four other sales in the housing market, said Jeffrey Otteau, president of Otteau Valuation Group in East Brunswick, New Jersey.”
“‘They are largely trade-up purchases,’ Otteau said. ‘The buyer of the $300,000 house enables the seller of that home to buy a $450,000 house, and up the line until you get to a luxury home. None of that can happen unless the first-time buyer makes the purchase.’”
“David Smith just sold his 11,000-square-foot Westport home on two acres for $5.9 million, about $600,000 less than originally listed. He said he took a loss.”
“‘It’s a buyer’s market now,’ said Smith. ‘There’s so much to choose from, you don’t get them to focus. Their attitude is, the longer I wait, the less I have to pay.’”
“The biggest price declines are along the Metro-North Railroad line in Westchester County, New York, just north of New York City. Prices fell in eight of the 11 areas in which data was collected.”
“Larchmont and Mamaroneck experienced a drop of 18.8 percent to $1.08 million. In Armonk, prices declined 17.3 percent to $1.39 million. In Bronxville, the slide was 12.4 percent to $1.34 million.”
“At the peak of the northern New Jersey real estate boom in 2005, the inventory was between one and three months, meaning that the ratio of buyers to sellers was about one to one, Otteau said. A year ago, inventory had swelled to 5.6 months of homes, and now it’s 7.3 months.”
“‘Some sellers took their homes off the market,’ Otteau said. ‘That’s made the picture look brighter than it actually may be.’”
The New Haven Register from Connecticut. “Single-family home sales in Connecticut sank nearly 9 percent in March compared with a year ago, The Warren Group reported Wednesday. The 2,740 homes sold in March marked an 8.6 percent decline from the 2,998 sold in March 2006. The median sales price also fell, dropping 2.8 percent, from $272,250 a year ago to $270,000 in March.”
“‘I was a little surprised,’ said CEO Timothy Warren Jr. ‘It just didn’t pick up as much as everybody wants it to.’”
“The peak spring home-buying season, which typically begins in March or April, seems delayed this year, said John Cuozzo, partner at Press/Cuozzo Realtors in Hamden. ‘The uncertainty that was looming in the market in the fall and winter’ is causing many would-(be)-buyers to ‘drag their feet,’ he said.”
“Looking ahead, Warren said he hopes the state’s housing market will rebound as the year goes on, but for now, ‘It’s looking like it’s not heading in the right direction.’”
The Morning Call from Pennsylvania. “Average Lehigh Valley home sales continued to fall and the amount of time it took to sell houses lengthened.”
“It was the 11th consecutive month of falling home sales, compared year-over-year, according to statistics released this week by the Lehigh Valley Association of Realtors. April’s results show a continuation of slowing trends that started last year after three years of a boom market.”
“The high number of homes for sale is slowing the pace of transactions, and possibly depressing prices. New listings rose 25 percent last month to 1,713 units.”
“‘Our inventory is skyrocketing,’ said Loren Keim, who owns Century 21 Keim Realty in Allentown. ‘There are a lot of reasons for that. [Sellers] think this might be the end of the good market. The good market ended last spring.’”
“The market has been bolstered by strong demand from buyers moving to the Valley from more expensive towns in New York and New Jersey. Some real estate agents say the influx of New York and New Jersey buyers is slowing. ‘What I have heard personally is, ‘Connie, I can’t take the drive. I won’t have as much house but I won’t have to get up at 4:30 in the morning,’ said Connie Ulans, with A. R. Ulans Realty in Allentown.”
“National builders have said they are facing a glut of unsold homes. At the conference Tuesday, an executive with the National Association of Home Builders said there are 1 million to 1.5 million vacant new homes. The official, senior staff member David Crowe, said the statistic is ‘troubling.’”
“‘Something’s got to give. The economy can’t sustain itself with this number of homes on the market,’ he said.”
“Chuck Hamilton, the local association’s executive officer, said some of the national builders with subdivisions in the Lehigh Valley have had to offer incentives here. The local association does not publish statistics.”
“Hamilton said the impact of changing market conditions has been significant, and ‘almost all builders have noticed a slowdown in demand.’”
“Local real estate agents are beginning to see the impact of higher default rates among sub-prime loans. The rash of failing lenders has prevented some transactions from closing in the Lehigh Valley.”
“Keim said at his firm’s Allentown office, 18 sales fell through in February because the lenders involved had closed, or no longer offered the mortgages the clients had qualified for.”
Seems there are still lots of people trying to catch that falling knife.
“David Smith just sold his 11,000-square-foot Westport home on two acres for $5.9 million, about $600,000 less than originally listed. He said he took a loss.”
I find this real hard to beleive.He to drinking too much kool aid.
David Smith is probably one of those “nouveau riche” of the dot.com days who was lucky enough to bail out before the bottom dropped in early 2000. Most millionaires do not spend ostentatiously like that on RE. Most millionaires live in modest neighborhoods.
“Most millionaires live in modest neighborhoods.” Well, yes, Bill, because most millionaires are not multi-millionaires. A debt-free millionaire might choose to buy a $500K house, counting on the income from the other $500K to pay the property taxes, insurance, and maintenance. Assuming he or she is still working to pay for other stuff. If the $500K house is in a coastal state, it will necessarily be modest.
Is that the definition of a “millionaire”, having assets which may be tied up/subject to market conditions, as “worth” $1M?
To me, it’s when you can write a check for $1,000,000 at any given moment.
Sorry, but that isn’t a very good definition. Who in their right mind would keep $1M in a checking account? Now, maybe if you had said that the check could be post-dated thirty days in the future…
or at least in a checkable money-market account?
orlando sentinel article….very short
http://www.orlandosentinel.com/business/orl-bk-homes051007,0,7538842.story?coll=orl-home-headlines
I personally know four extremely well educated people who bought homes in the past few months in LA & SF. Or to be more precise, condos.
What is your definition of “well educated”? Because most of todays college grads are just indoctrinated idiots.
Two lawyers. One doctor. One MBA. Each with an advanced degree. Little financial sense.
This is how the rich get poor and the poor get rich.
“Whales” in vegas parlance, are gamblers that risk much…
Appropriate.
“‘People who may have bought their first home may not be able to do so now, and that stops some of the movement,’ said Doug Werner, a broker in Darien, Connecticut. ‘Whales eat plankton. If the plankton disappears, what will happen to the whales?’”
A “Warren Report” of dubious value…
“‘I was a little surprised,’ said CEO Timothy Warren Jr. ‘It just didn’t pick up as much as everybody wants it to.’”
“‘Something’s got to give. The economy can’t sustain itself with this number of homes on the market,’ he said.”
With the way they’re building around here, I bet this number doubles by years-end, and this doesn’t even include older houses, condos, etc., for sale, which must number in the millions, or which will number in the millions, too. On my little street in an old neighborhood, almost one entire block of old (”restored”) houses is for sale. A second block of new townhouses had for sale signs in front of most of them, but then the reators took some of the signs down.
A few blocks away, an entire new development of 500k and up townhouses is being built in an otherwise trashy, low-rent neighborhood. I wonder who is supposed to buy these things when for the same amount of money, buyers could actually move somewhere that didn’t have welfare recipients for neighbors.
“With the way they’re building around here,…”
Where are you?
I am equally as incredulous about San Diego home building, that continues apace at a high rate into a swelling inventory glut (up 20% in 3 1/2 months) and rapidly rising NODs off a record level. I was quite astonished to learn in last weekend’s Sunday SD Union Tribune Home section that there are 130 “New Home Communities” in San Diego county currently trying to find buyers for vacant McMansions. Good luck with that!
I’m in Tampa in an area called Hyde Park, that borders on another called (believe it or not) Soho (named for the street South Howard Avenue). Soho is horrible, but the prices are sky high. Between Soho and the next big street to the West is an area that pretends to be Palma Ceia (another expensive area), but it actually made up of old junk and new junk: I think it’s where the maids who worked in Hyde Park and Palma Ceia once lived. This is where the building is continuing. To the East, Hyde Park Village, a once thriving, but now drooping, shopping area, is planning on building tons of new condos, and wants to built a seven or eight story condo building right up to the sidewalk. We’re talking prices up to and way over a million per unit. There are already a ton of these sitting empty all over Hyde Park and Soho, so why the city would allow any more to be built . . . . We all know, why, don’t we? Meanwhile, ghastly signs are popping up everywhere offering “historic lofts” (there are none in Tampa; they’re make-do junk in slum areas), and, of course, the obligatory high lettered signs offering any deal possible. I understand that in some of these real estate seminars, audiences are told to get hand-lettered signs printed up (so the final product isn’t handmade, it just looks that way) because they work better than nice ones.
” so why the city would allow any more to be built . . ”
Because we live in a country that has “property rights”, that I am all in favor of. IF some idiot wants to expand the inventory, I am all for it.
They City should only be looking to see if the plans meet the zoning and code requirements.
Whether the project makes any economic sense is the developer’s gamble.
-d.
BTW, for those not familiar with the “old Tampa”, the area around Hyde Park had become a ghetto back in the 70’s. The fine old homes got turned into rooming houses and section 8 properties in the neighboring district. The CROSS_TOWN expressway cut a swath through the ghetto and isolated more of Hyde Park and the Bayshore houses from the crime infested mess. The barrier helped alot, but still there are transitory incursions. Bayshore prices are ridiculous, but that’s for the buyer to decide. Keep building I say.
diogenes, I disagree. There is not a single piece of land left in Hyde Park because of hideous overdevelopment. The place looks like junk-o-rama, and the crowding is terrible. We had (past tense) zoning laws that would never have allowed any of this, but with enough money and contacts any developer can now get a variance allowing multi-family dwellings in single-family neighborhoods, and eliminating all setbacks and yard-size requirements. This isn’t a property rights issue; it’s an issue of ignoring decades of zoning rules and turning them on their heads in order for the city to make more money from property taxes.
As for public hearings, well, now they manage to privately schedule them behind closed doors where nobody but the person seeking the variance or his lawyer is present. I believe the whole thing has turned into a giant criminal industry, which mucho bribery going on, but I don’t see any mention of it in our glorious Tribune, though one wouldn’t have to look far or long. Just a one hour visit to the variance board’s records record department would, I believe, uncover a wealth of crookedness.
Actually, i think we are on the same page here.
Your issue isn’t development, it’s the lack of enforcement of set-backs and lot sizes, to which i agree.
The Tampa City Council is corrupt. They have passed many rulings for allowing ZERO set-backs for auxillary buildings (garages) and eliminated the alleys that used to exist. But that is another issue.
I have a CONCRETE RECYCLING PLANT adjacent to my house, because the City Council, with John Dingfelder leading the pack allowed the property adjacent to my residence to be zoned HEAVY COMMERCIAL. It’s hard to believe, but they did.
The irony, is the property was originally owned by the City of Tampa, about 5 acres covered with grandfather oaks. It is on a canal into McKay Bay, a national bird santuary. A GREAT PLACE for a CONCRETE RECYCLING PLANT woudn’t you think? I could have been a PARK and a CANOE or KAYAK launch site for the Citizens of Tampa. But not anymore.
So, I very well understand your complaint, but I can’t control corrupt politians, and they got re-elected.
My mistake……….HEAVY INDUSTRIAL.
The highest and worse zoning available.
Adjacent to a mangrove swamp, covered with oak trees. All the trees were plowed down and the City Council allowed them to put back some palmetto trees around the perimeter of the property to continue operating their “business”.
If you or I had done this, we would have been heavily fined and the operations stopped.
I did get Hillsborough County EPA to temporarily stop them, but now we have continuous monitoring, violations, and “new approaches” to continue the business. What can you do?
Sue them, city and all. They’ve pulled this stunt so many times, maybe you could contact 60 Minutes or something. The city and county continue to allow developers to destroy wildlife habitats at will, with not one drop of concern for the harm done. Last week the ASPCA actually listed Tampa as one of the top ten animal-friendly cities in America. I wonder who pulled strings there? Tampa has one of the worst records in the country when it comes to animal rights and animal welfare. The county, by citizen voter approval, sells homeless shelter animals to USF for medical experiments. The fire department will not rescue cats stuck in trees, so one man a couple years ago, after trying for days to get someone to help, climbed a tree to rescue his cat, and fell to his death. Our animal control agency kills over twenty thousand animals a year, and now the local Humane Society refuses to take in most homeless animals, so I guess Animal Control is killing tens of thousands more these days. There are no free clinics, or low-cost clinics, and poor people have nowhere to go when their pets are sick of need vaccinations. People who are cruel to animals here never go to jail; the police don’t even bother investigating in most cases.
The destruction of property next to you is just standard operating behavior here, and yet the same city council and county commission that throws the books at people for tiny transgressions (unmowed lawns), has managed to turn this area into a giant cesspit. Sue the hell out of them.
There was a time when I thought the conversion of the old Wonder Bread factory to lofts would be interesting. The problem is that the factory is less than a hundred feet from the Crosstown Expressway. Oops!
We’re talking prices up to and way over a million per unit.
In F-ing TAMPA? I’m sorry, i don’t mean to knock Tampa because I’ve never been there. But in high-power DC, a million dollars will buy you
1) A top-of-the-line (comparitively) McMansion almost anywhere in Northern Virginia, probably on a 1-2 acres.
2) A large historic craftsman 4-square SFH in any of the very good neighborhoods in Northwest.
3) A 3-4 level townhouse (I mean the REALLY nice restored historic ones) near hoity-toity gentrified DuPont Circle, within walking distance of the White House and K Street (where all the lobbyists work). The home usually includes an English basement to rent out.
4) A 2-bedroom condo in the Watergate building. (not sure about he price, but they did do a condo conversion there)
I can’t imagine ANYTHING in Tampa costing a million dollars.
You’re right. No property in Tampa is worth a million dollars; the whole city of Tampa isn’t. And we’re talking cheaply build junk with no yards, no views, no nothing. After 9/ll about a zillion rich old New Yorkers decided to take over
Tampa, like everything they’d destroyed in Florida, and this is the result. It’s nauseating.
i’ve been in Tampa; it’s disapponting and it’s crap. I’d prefer Lakeland or another smaller town on the Gulf.
I really like some restored Hyde Park bungalows, and made an unsuccessful inquiry about renting one, but the townhouses you speak of are complete charmless crap that have little to no appeal for locals.
And I actually saw a development planned for Kennedy Boulevard immediately west of downtown Tampa, which developers apparently are now calling “NoHo,” for North Howard. I don’t care how you brand that neighborhood, I wouldn’t walk around there at night with an AK-47.
Noho? I remember when they renamed it “North Hyde Park,” apparently at the urging of real estate agents. It used be called Sugar Hill, I believe, and was considered one of the worst areas in town. It’s officially part of West Tampa, and riddled with gangs. Developers are trying to unload all kinds of junk there at Hyde Park prices.
You’re right. I have seen “NoHo” somewhere, though. For potential purchasers, the question that remains is who wants to live next to a crack dealer?
A crack dealer-wannabe who is trading up?
Should get the gangbangers out of the area, no self respecting gangster could live in a town named “NoHo”.
north hollywood ones do!!!
No champion of reasoned thinking, this one…
“‘It’s a knee jerk reaction to what happened with the subprime market,’ said Rosella Campion, loan officer in Boston.”
“First-time home buyers are more likely to be subprime borrowers. Every purchase of an existing house by a first-time buyer triggers four other sales in the housing market, said Jeffrey Otteau, president of Otteau Valuation Group in East Brunswick, New Jersey.”
First time i’ve heard the 4 number in print. But it sounds about right to me.
so how many 1st time homebuyers where there in 05, 06, and now in 07, and next year? multiply the difference by 4 and see if the national aggregate numbers mtach up.
“first-time buyer triggers four other sales in the housing market”
- This seems to be the absolute truth. Only the man on the street seems to pick up on these truths that seem to be hidden from the talking heads on the news.
- These new sales also lower all of the comps for the new sales.
In PHX we’re seeing new home sales in the 1000 a month range, and existing in the 5000 range. So, looks like we’re closer to 5 move up for every new first-time buyer.
New house != New (first time) homeowner
New House = increased inventory.
Increased inventory BETTER equal new first time buyer now that the speculator has gone away.
Otherwise, that is a vacancy, and the list of vacancies can’t just grow forever.
The number of vacancies around SD must truly be huge, given the replacement of wealthy outmigrants with less wealthy inmigrants over the last half decade coupled with the ongoing mass construction of new McMansion tract homes that are only affordable to families at twice the median household income. This is what I call the elephant under the rug, and elephants are very hard to hide indefinitely, as they eventually either emit loud sounds or stink up the room.
With bailout talk surfacing its only a matter of time…
http://newsimg.bbc.co.uk/media/images/41742000/jpg/_41742980_monkey_203getty.jpg
Ode to Billy Joel…
Well we’re living here in Allentown
And we are driving a long way to Big Apple town
Out in Jersey they’re killing time
Not filling out loan aps
Or standing in line to buy
Well we used to be responsible folks
Now we seem like a bunch of real estate dopes…
““‘It’s a buyer’s market now,’ said Smith. ‘There’s so much to choose from, you don’t get them to focus. Their attitude is, the longer I wait, the less I have to pay.’”
IT’S NOT A BUYERS’ MARKET! When prices fall another 30% to 50%, then it’s a buyers’ market. Because then, buyers will be paying what the homes are actually worth. Having more overpriced homes on the market just means there are more chances of making a bad deal.
BTW. The Bloomberg article has to be wrong because I’ve been told that it is different here and NY real estate NEVER loses value.
The Bloomberg article has to be wrong because I’ve been told that it is different here and NY real estate NEVER loses value.
Their in the state of denial. Who would want live in a rat invested area, with trash on the streets and sewers fuming out funky odors.
WOW people might start having some common sense agin. The ONLY reason i see for paying Top dollar for a house or apartment is:……drum rolll……..
So you dont have to commute and get up at 430 am……..yes a nice 10 minute walk to the job increases you chances of making a Lot in Overtime, to offset the cost of the house /apt. This makes sense just about everywhere in America.
Seriously if someone calls in sick on your day off who are they going to call first? the person living in Allentown with a 2+ hour commute to NYC, or me with a $10 cab ride and there in 15 minutes?
==============================================
Some real estate agents say the influx of New York and New Jersey buyers is slowing. ‘What I have heard personally is, ‘Connie, I can’t take the drive. I won’t have as much house but I won’t have to get up at 4:30 in the morning,’ said Connie Ulans, with A. R. Ulans Realty in Allentown.”
“So you dont have to commute and get up at 430 am……..yes a nice 10 minute walk to the job increases you chances of making a Lot in Overtime, to offset the cost of the house /apt. This makes sense just about everywhere in America.”
HUH? Overtime…everyone here raise your hand if you get paid overtime…anyone, anyone at all?
How is it that the very same people who claim to have hundreds of thousands or even millions invested also work at jobs where they get paid overtime?
Not me!
I worked over 600 hours OT in 2005, over 400 hours OT in 2006, and so far over 220 hours OT this year. I’m a software engineer (22 years in this career).
p.s. 13 mile commute but have an economy car. No sweat.
I used to live in Scottsdale and drive 20+ miles. Gave up on 101 and just took Greenway or T-bird across.
Changed jobs.
Now it is 2 miles to work up 59th. If I put a CD in as I leave the driveway, the first song isn’t even over as I’m pulling into the parking lot.
You need to qualify that as “I’m a contract software engineer who is paid hourly” or “I’m a software engineer who bills out Corp to Corp on an hourly basis”… the vast majority of us IT’ers are not contract or hourly, but salaried… hence no overtime, even though we may put in 50+ hour weeks regularly.
Got Overtime?
http://www.gotovertime.com/computer_pro.html
C’mon Bill, stop loafing! 600 OT is a slow year in my book.
BEEP! BEEP! Back that truck up, Ed.
I’ve got hundreds of thousands in the banks, and my home in downtown Phoenix is paid for. I was an hourly non-union factory worker all my life. Retired at age 51.
How?
I never paid interest on anything but my house, never bought a new car (they smell), cooked my own meals, had a garden, saved, saved, saved; cashed out my 401k in December 1999 (I just had a feeling).
Why?
My parents were adults during the Great Depression… they raised me right.
Contractors still get paid OT…We work with a company where the contractors have been there for 10 years or more. Company just doesn’t want employee count showing up on their books. In the long run they pay out much more money for same job. But the stock looks better.
And when that contractor gets hired? which you’d think was a good thing? Huge drop in pay.
And the reason contractor rates are higher than the equilivent salary is: a contractor has to pay self-employment tax and take care of health benefits him/herself. A contractor has less job security than a full-time employee (i.e. no severance, no vacation, no unemployment insurance, the first to be let go when business slows, could have contract cancelled any time, etc.)
I’ve been a contractor and I’ve been a full-time employee. Contracting can be lucrative, but you need to continually sell yourself, keep a good portion of your earnings for the slow periods between gigs, constantly keep your skills up to date on your own dime, and be flexible enough to relocate when opportunity presents itself elsewhere. Not the best thing when you’re starting/raising a family, but great if you have no baggage or are at the tail end of your career. A full-time job pays less, but has more safety nets available (though you still need to do those things mentioned above, just on a lesser scale).
To be honest, this constant race to catch up and keep up with technology is why I switched from programmer to QA.
C, C++, VB, VisC++, PERL, Java, VisJ++, J2EE, C#….
HTML, CGI, ASP, DHTML, ASPX…
New version of Oracle or SQL Serv every couple years…
Functional decomp, Rational, Rapid Prototype, UML, xtreme, Agile….
I finally got sick and tired of constantly running to keep up with the tech. In QA I get paid just as much, but don’t have to constantly run to keep up.
Um, Ed, I don’t think that DJ ever claimed to have a 100K income or overtime.
WOW people might start having some common sense agin. The ONLY reason i see for paying Top dollar for a house or apartment is:……drum rolll……..
So you dont have to commute and get up at 430 am……..yes a nice 10 minute walk to the job increases you chances of making a Lot in Overtime, to offset the cost of the house /apt. This makes sense just about everywhere in America.
I am one of the lucky few that walks 10 minutes to my job. But I rent far, far more cheaply than buying. No need to buy yet, the prices downtown still have room to drop.
Whales eat plankton. If the plankton disappears, what will happen to the whales?
Whales survived on Flippers. Now they’ll have to survive on regular old Jonah’s.
Up to my ears in bitter tears
Can’t believe I’ve sunk this low
As I walk the plankton inner sanctum
Got outta Dodge,
sailed on a bon-less Bon Voyage
You said north, I headed south
Tossed overboard
Good Lord, that’s a really large mouth.
I’m sleeping with fishes here
In the belly of the whale
I’m highly nutritious here
In the belly of the whale
Bad food, lousy atmosphere
I don’t wanna bellyache
How long is this gonna take?
David Smith just sold his 11,000-square-foot Westport home on two acres for $5.9 million, about $600,000 less than originally listed. He said he took a loss.
Boo phucking hoo.
I was thinking the same thing. BFD!
There is a Vast difference between borrowing $1 million ON CREDIT and Earning and Saving $1 million as J6P and his Ex-wife ARE about to LEARN the HARD WAY.
These are typically buyers who once easily got 90 to 100 percent financing for a home, but now either have trouble getting loans or are paying more for them.”
“‘It’s a knee jerk reaction to what happened with the subprime market,’ said Rosella Campion, loan officer in Boston.”
Knee jerk reaction??? the fact that some mortgage company will not lend 100% of the value of an over priced asset to a person with probably a very short and weak credit history?? I’d say it’s a return to sobriety .
I thought the same thing.. Knee jerk reaction? You mean the lenders woke up and actually decided that they wanted to be paid!
The knee jerk reaction was the lenders coming out of their “loan origination” induced coma and realizing that somebody needs to actually pay these things! Then they closed the barn door (after most of the horses had left) after leaving it open for 4-5 years!! That’s not a knee jerk reaction! That’s a reaction to a deteriorating market, and redisiging your products (looks a lot like the OLD design that worked well for 100 years) to reflect the new market realities!
Duh.
I’d say it’s a return to sobriety
Maybe a “morning after” what have I done reaction.
The business with credit scores and history though. I have excellent credit and a long history. I could most likely qualify for a loan I cannot afford on an overpriced home with falling value. If I did that, in a short time, I would have a terrible credit history. So in a sense, credit scoring models should look at those applying for more credit than they can afford to handle and lower their score on the basis of risky behaviour, thus making all risky loans sub-prime.
Alt-A loans apparently have a longer teaser rate period, so these loans will take longer to fail, but when they do, they will fail catastrophically and over many years, resulting in an anemic lending industry, tighter and tighter credit standards and continued price declines.
That’s how underwrtiting used to be, say 10 or so years ago. One of the criteria was ability to pay (job title, job stability, industry prospects, etc.).
Rosella should start her own mortgage company and lend out her own money.
All I can say is: wow. I didn’t realize that a third of Bostonians used no money down on a house last year. I’m thinking that Boston is going to get beat down badly. They and NYC and LA and all of the big cities are having a helluva time even staying afloat. I can’t see how anyone can afford to live there, even those who make six digit figures (and I doubt that many do). This housing nightmare is even spreading to the smaller cities. I was in Madison on a trip the other day and the whole area was on sale. Everyone was trying to sell 200K - 500K USD houses, and I couldn’t understand who was buying these. If the per capita income in this country is 30K (65K if you are a household), how can either afford a 200K house? The numbers don’t work, and there’s no way you can spin the numbers to make it so. I think a lot of people will get burned badly in this mess, and most won’t get back up again. I say the blame is on both the citizens of the states and the government, for they let this happen.
” If the per capita income in this country is 30K (65K if you are a household), how can either afford a 200K house? ”
$65K a year can easily afford $200K home. My first home cost $300K, I was making $60K at the time and had no problem affording it.
I call BS on this one. 300k house on 60k a year aint easy.
Ed did not say how much he put down. he may be a dedicated saver and put 100K down on his $300K house.
I doubt he comfortably took on a $300K mortgage on that income though, since 3X income would only put his safe range at $185K. Beyond this No entertainment, Top Ramen and an unfurnished house with thrift store sheets hanging in the windows.
Ed did not say how much he put down. he may be a dedicated saver and put 100K down on his $300K house.
My thoughts exactly. Please, Ed, tell us you had a large downpayment. Otherwise, I too call b.s.
Also, why is it always assumed home purchases are made by dual income households? Why can’t a single income household buy a nice, little “starter” or townhouse or condo? With a per capita income of $30K, those smaller homes should be in the $90K-$100K proportionately (to the $65K / $200K ratio). Nothing at all like that in my neck-o-da-woods.
I hate to say this, but a lot of us here have under estimate buyer mentality. I know it is very odd but in recent years buyers are conditioned to expect paying out of their nose for a house. You may argue, shouldn’t older generation (mom and pop) offer prudent advise in this opportune time. I believe a lot of buyers now think that it is normal to pay 40% to 60% of income to a house per month.
Underestimated buyer mentality, or stupidity? Everyone was “conditioned” to pay 32 times earnings on the S&P 500 in 1999, too. Different movie, same ending.
Cinch;
Mom and Pop don’t educate their kids because:
(a) they likely don’t have the financial savvy - most homeowners who say “may house was the best investment of my life” have just been fortuitously caught up in the bubble and are now sitting on huge equity (which they’ll need, see below); their poor track record in other actively managed investments (since the house outpaced them all) shows their ability to manage money long-term;
(b) they are woefully underfunded for retirement outside the equity imputed to their homes, and they know that the Social Security gravy train is is peril; so they play a game with their peers called “You screw my kids and I’ll screw yours, and we’ll all retire in Boca together”.
Depends on what taxes go with that $200k home–and other costs of living that vary with locale
I was making $30K when I bought my first (and so far only) house for $98K. Interest rates were at 7%, so I had to go ARM at 5%. I got dumb lucky, and price was up 20% and rates were down to 6% by the time I needed to refi.
I bought in ‘93 as rates were headed down in prices were at teh bottom and headed up. Still, I consider myself lucky that conditions continued.
It was the perfect time to buy… Oddly, conditions right now are exact opposite, but the realtors keep saying now is the perfect time to buy…. SAY what?
Oh, where was I going? Oh yeah. $100K loan at 5%, and we had a half furnished house with sheets on the windows, junk cars, and no vacations for a large number of years until my salary went up.
$300K on $60K? Ouch.
No, not ouch at all. This was in 2003. Interest rate I had was a 7 year ARM at 4.5%. I put 15K down and borrowed $285K. Total PITI was $1900ish. It was a brand new home so no maintenance or repair costs to worry about. I had $0 other debt and had no trouble making the payments at all.
I made two correct assumptions in purchasing.
1. My income would rise and as a % of income my mortgage woudl get smaller and smaller. I was right as now I make almost twice what I made in 2003.
2. Appreciation would be positive. Again I was right as I sold the house recently for $451K.
I sold because I think in a year from now it will be back to $350Kland, but I have absolutely no regrets and would do it over again.
Ed you are probably brighter than most people, but probably 99% of the population isn’t going to profit from an ARM loan nor will these same people have material wage growth. Most people will make the same that they do now, ten years from now (with minor COLA’s).
Yeah. You timed it right but if you had purchased a 300K home and were now underwater where would you be?
Everyone made that same calculation in 2004 about prices going up. Now the water is pretty much up to their nose.
Congrats on your financial genius.
You might have made out well, but what people are debating is if someone on a $60K salary could afford a $285K mortgage with “no problem.”
So far your answers to these questions seem to be:
1) “I got an ARM to reduce the upfront payments”
2) “I got hefty pay raises in the meanwhile”
3) “I sold my home in an up market and avoided the adjustment”
4) “I sold my home before I had to worry about maintenance costs, getting sick, etc.”
If I randomly pick 100 people who make $60K and put them in a $285K ARM at any random point in time over the last say 40 years, what is the likelihood that these people will do just “ok”?
I know how they’re doing now.
I’m not from AZ. So, AZonians will need to help me out here. What does $60K get in terms of take home pay after taking into account the tax deduction of the house payment
$4500 per month?
-$1900 PITI
= $2600 for all other living costs?
Never mind saving, retirement planning, etc.
Or am I missing something?
“‘It’s a knee jerk reaction
Here’s arrogance.
Liar loans and underwriter’s threatened with baseball bats by L/O’s for 4 years.
Knee jerk reaction my azz.
Hold On; This is the same Kimberly Blanto of the Boston Globe that used a 25 yr/old economist (Whose goal in life was to meet and eskimo) to predict the bottom of the bubble and house prices would start rising in Q4 of 2007. So who cares what kind of a loan they take Kimberly. They can flip it in 2008 for a nice profit.
Excuse me while I go laugh.
Next week Kimberly will tell us that now is the time to buy. She has to comply with the realtors to get the papers advertising revenue.
And since it is the Globe, there will be a story forthcoming about how children are suffering and they need a bailout.
so,is she buying ?
why doesn’y every talking head ask that simple question ?
Not Catching:
You stole my thunder.
I would add the following:
“The meltdown in the subprime mortgage sector is making it harder for first-time and other home buyers with little down payment money to get even conventional loans, adding more troubles to a slumping real estate market. These are typically buyers who once easily got 90 to 100 percent financing for a home, but now either have trouble getting loans or are paying more for them.”
My question is why would they want to? With property prices plumetting, why would they want to get that kind of financing only to put themselves further in the hole when the value of their property declines.
I’m shaking my head…
If you listen to CNBC, larry fairy tale Kuntlow, maria bartaloco, bob pisani and rick santelli they are saying this housing slow down is just a blip in a Global market.
I sure would like to see that SEG wiped off Larry’s face.
E for eating and G for grin you can guess S.
Todays news:
U.S. stocks lower amid bleak retail sales:
April slide in retail sales is worse than expected:
Wal-Mart’s April sales disappoint, led lower by apparel:
Looks like the HELOC ATM is a down for repairs
HELOC ATM message to Homeowner:
You no longer have any credit in your account. Get a second job and live within your means.
It’s the bizaro world! As George would say “up is down - down is up”
Marketwatch reports ” . . . April worst retail sales numbers in three decades . . . retail stock up”
My God what do we do with all this money?
http://www.marketwatch.com/news/story/retail-shares-hold-up-after/story.aspx?guid=%7BD03DE3B8%2D7D6B%2D42DD%2D8733%2D20DFE807A649%7D
it was all global warming related
also sub prime is now an excuse for all ills
It’s all Punxsutawny Phils fault! Winter was supposed to end early this year and consumer expectations for an early spring were dashed with a bitter blast of winter during April.
I have dreams of consumers choking on credit cards, forced down their throats by their own hands.
“‘They are largely trade-up purchases,’ Otteau said. ‘The buyer of the $300,000 house enables the seller of that home to buy a $450,000 house, and up the line until you get to a luxury home. None of that can happen unless the first-time buyer makes the purchase.’”
I’m sorry but if you can’t afford to pay for a $1+million house up front, you shouldn’t be asking for it in the first place.
Cinch
“‘Something’s got to give. The economy can’t sustain itself with this number of homes on the market,’ he said.”
Ah yes…the demise of voodoo financing. It’s what enabled prices to get so completely disconnected from income. Take that away, and no one can afford these houses. And without that first time buyer, the rest of the chain freezes up.
This housing market is going to MELTDOWN like an igloo in in DEATH VALLEY. Regardless how BIG it is , it will just takes some more time in the sun and a few warm nights
Interesting… good to see that the housing ATM is grinding to a halt. Revolving credit card debt is spiking upwards as well. So, this means the average soon-to-be-poor American is resorting to putting basic things like gas and food on the credit card (and not paying it off) and is losing the ability to shop at upscale places like… Wal-mart. The fallout from this collapsing system of debt has the potential to be staggering. It is important to realize that the subprime game only fell apart a few months ago, and this is the first month with a real spike upwards in the number of toxic loans that are reseting or recasting, and yet we are already seeing serious weakness. Don’t get in the way of the crumbling Tower of Debt!
In response to a previous poster who mentioned why we should need 2 incomes to buy a starter home, I agree completely. It is idiotic - single people should not be stuck in apartments forever, and it is foolish to assume that one will always have 2 incomes to buy a big, overpriced house. But I guess we are all failing to be good Americans: get married, buy a McMansion and a sports car, have 1 kid, buy a bigger McMansion and a Hummer, have a second kid, get divorced and lose half your stuff, be eaten alive by debt, and end up living one’s remaining years in a run-down apartment while dodging debt collectors. That IS the new American Dream, right? Argh!
That sounds like many of my fellow Scottsdaleians. LMAO
Why must it be one or the other extreme? The way some people think you’d think everyone in the US has 2 hummers in the garage. For every Hummer sold there are 20 Honda Civics sold.
The real dream is get education. Rent. Get married, but nice house, buy nice cars. Have a kid. Buy bigger house. Make more money along the way. Have another kid. Buy bigger house. Buy sports car/boat if you can afford it. Enjoy life along the way.
The American dream is not, and should never be, get married. Save every penny you make for 30 years while living in an apartment just so you can buy a house with cash and feel smug about being debt free. Thanks but not thanks on that lifestyle.
UPSCALE places like Wal-Mart? LMAO
Interesting reading about other areas of the country, particularly New York City. Living here in a resort, coastal area the bubble bursting elsewhere stops us dead in our tracks…lower cost/sf, lower taxes, no traffic & great weather…doesn’t overcome the current obstacles. How long will this go on?
Becca
Charleston South Carolina Real Estate
Becca, if things are so great in Charleston, why are you trolling for customers on this site? Actually, though, this is a good place to troll, because these bloggers have money saved and can actually afford a house. Happy hunting!
Ahh, the Lehigh Valley. Grew up there (Bethlehem). Amazing how much of their price appreciation was from NY/NJ evacuees.
‘The buyer of the $300,000 house enables the seller of that home to buy a $450,000 house, and up the line until you get to a luxury home. None of that can happen unless the first-time buyer makes the purchase.’
——————-
Pyramid scheme?