More People Want To Sell Than Want To Buy
The Napa Valley Register reports from California. “As the number of homes in foreclosure rises in Napa County, American Canyon finds itself at the center of the storm. Of the 64 foreclosures recorded in Napa County during the first four months of 2007, 16 were in American Canyon.”
“In 2005, during the same time period, only two foreclosures took place in all of Napa County, and neither was in American Canyon.”
“ReMax agent David Barker is on the foreclosure frontlines in American Canyon. According to Barker, on average, one in every 60 homes in American Canyon is in foreclosure proceedings or has been foreclosed. Statewide, the statistic is closer to one in every 389, and nationwide, one in every 783 homes.”
“‘I think we’ve got a lot of problems,’ said Barker. ‘Clearly the pace is picking up. I don’t know whether this is just the tip of the iceberg.’”
“Barker attributes the increase from 2005 and 2006 to buyers with adjustable rate mortgages, some subprime. ‘(Owners) can no longer make the payments and they can’t refinance because the value of the property has gone down and they owe more on the property than it’s worth.’”
“Even more serious, ‘They may be subject to negative amortization, where the loan amount actually grows each month if they are only making minimum payment options.’”
“Barker said American Canyon home values are down approximately 12 percent since the market peak of July and August 2005. ‘What’s happened now is there are more homes for sale now. It’s supply and demand,’ said Barker. ‘You have more people that want to sell than people who want to buy.’”
“‘We’re not done with foreclosures,’ said American Canyon broker Anne Schabacker. ‘People bought houses that they shouldn’t have because they had brokers that let them do it.’”
“‘Even last year we were selling 12 to 15 a month,’ said Barker. ‘It’s half the pace from 2005. Anything with more than six-month supply is a buyers market,’ he said. ‘We (have) a 16-month supply, this is a serious buyers market.’”
“Barker’s advice for would-be sellers is direct: ‘If you don’t have to sell your house, don’t.’ However, some people have no choice.”
The LA Times. “For Los Angeles newlyweds Joseph and Jamie Horton, the deal looked too good to pass up: a mortgage with an initial 1.75% interest rate and payments that wouldn’t adjust for five years.”
“The Hortons figured that with all the money they would save on interest payments, they would be able to pay down a significant chunk of the principal on their loan. But after a month, the actual interest rate on their ‘option’ ARM shot above 8%.”
“They blithely made the minimum payment each month, not realizing, they say, that the low rate they had secured was so fleeting. Within months, thousands of dollars in unpaid interest was added to their loan balance. Ready to bail out, they discovered a second catch: a prepayment penalty that would cost them $18,000 if they refinanced.”
“‘They held a carrot in front of us and told us that this was a great deal,’ said Joseph, who has since refinanced into a fixed-rate loan. ‘In one year, it cost us $83,000. It was excruciating.’”
The Union Tribune. “Hindsight, they say, is 20-20. And with the benefit of two years of hindsight, it’s clear that June 2005 was the height of the wacky season for the San Diego County housing market, which has potentially fearsome implications for home prices this summer.”
“Nearly 83 percent of new home buyers in the county used adjustable rate mortgages in June 2005, an all-time high representing about 4,700 homebuyers. Nearly 63 percent of refinancings used adjustable rates.”
“‘An 80 percent rate for adjustable mortgages was so far out of the market that it should have raised red flags for lenders,’ says Raphael Bostic, associate director of the Lusk Center for Real Estate at the University of Southern California. ‘But because of the continuing appreciation of home prices, lenders by and large felt that they were somewhat insulated from any particular hardship.’”
“‘People are not looking at what they are going to have to pay over the long term,’ warned Nicolas Retsinas, director of Harvard’s Joint Center for Housing Studies, in an article that ran in this newspaper that June.”
“Retsinas warned that if the economy hit a soft spot, housing could suffer a ‘painful’ downturn. Which is exactly what is happening.”
“‘Particularly for the subprime market, borrowers took out mortgages that were fixed for two years and then adjusted pretty abruptly,’ said Andrew LePage, analyst with DataQuick. ‘People were already stretching to make their monthly payments, but it increasingly looks like some folks can’t handle the reset.’”
“This summer will see a major wave of adjustable-rate mortgages ratcheting upward. Not just from June 2005, but from following months as well. According to DataQuick, adjustable rates constituted between 76 percent and 80 percent of all new home mortgages between July and September, representing 21,400 purchases.”
“Many of those borrowers will end up in default. Or foreclosure. Between January and April, there were an average of 427 foreclosures per month in San Diego County, and 1,319 notices of defaults, potentially signaling future foreclosures.”
“‘A lot of households will be facing stress in a fairly short time period,’ Knowles said. ‘A lot of tough choices will need to be made. We could see some significant price fluctuations, with a lot of product being put on the market.’”
“Since the beginning of the year, an average of 3,073 homes have sold in San Diego each month. If you add 427 homes into that mix each month, priced for a rapid resale, the supply of cheap homes will inevitably push competing prices lower.”
“Rising foreclosures and declining prices are not unique to San Diego. Even though we led the nation during the housing boom from 2001 through 2005 and the decline of 2006, other spots have superseded us.”
“In California, the worst foreclosure rates are clustered around the Sacramento area, including Stockton, Modesto, Vallejo and Fairfield, according to RealtyTrac.”
“Some areas in Florida, Georgia, Michigan, Tennessee, Indiana, Illinois, Missouri, Texas and Ohio have seen foreclosure rates much worse than San Diego’s.”
“In short, it’s a nationwide phenomenon. The Grubb & Ellis real estate firm warns that there may be more than 1 million foreclosures throughout the country in the next year or two.”
The Daily Breeze. “As chairman of the Assembly Committee on Banking and Finance, Ted Lieu offered a bill to create a pot of funds to bail out borrowers who have defaulted on subprime loans.”
“Lieu’s bill was among the most aggressive in the nation in addressing the subprime loan issue, but it was a tough sell in a tight budget year. Lieu suggested at one point that voter-approved housing bonds could be used to finance the bailout, which many legislators objected to.”
“‘People thought it would be enormously expensive,’ Lieu said.”
“‘People thought it would be enormously expensive,’ Lieu said.”
And what did Mr. Lieu think?
The key here is its expensive for “people”. Mr Lieu is clearly not human.
83% were ARM’s and they are now resetting into 7.5+ percent rates from thier sub 4% rates. and negative equity.
They could make a movie about this and it would seem implausible, call it “The Foreclosure Bomb”.
‘The difference between reality and fiction is that a novel has to make sense.’ - Mark Twain
I prefer “The Day of Reckoning”
Check the best rate around today and it is 6.75% on at least 700 score for jumbo loan, 30 years, 20% down. lot of people are hurting big time. for the sellers holding out for more, please go on holding out for more because I can buy cheaper in a few months. haha.
Doesn’t look like a interest rate cut any time soon. The FED is happy to leave things alone. Good.
Heck I’ll trade CalPERS anyday for a bailout. whot say guvner’?
“Bernanke, Get to the Chopppaaa!, Awwwgggerrenennennnjunh”
In case you’re wondering what the hell I’m rambling about… From YouTube
Actually I was wondering what ‘ Not Mssing It’ was talking about…..
The Gov. does not control CalPERS….. Just ask Pete Wilson. He and the tax payers are still smarting from his money grab attempt back in the 90’s.
Not to worry Mr. Lieu when the ol Hildabeast gets in the White House she’s going to take all of the money from you rick folks and give it to all us poor folks so we can pay our bills and the problem will be solved. It’s just that simple and it’s never been tried before…. What an idiot.
I’m really happy about how that turned out. I wrote my Assemblyman to say I was against it, and I guess he listened! Or at least, there was nothing in it for him. Either way, the bill isn’t getting passed and I’m happy.
And the other shoe drops…
Bail-outs may result in MBS down-grades.
This is a very loud shot, and it is sure to cause problems.
http://www.ft.com/cms/s/be02d474-12e2-11dc-a475-000b5df10621.html
“borrowers with modified loans often fall behind again”
Certainly the converse is true. Everyone whose property I repossessed had already tried some work-out … I should say, I tried some work-out. However, there were lots of other work-outs that actually worked out. Most work-outs went for years with no need for further work-out. Most work-outs have since paid off in full, but most often by sale of property — which doesn’t bode well for current FB types in the real world.
Glad that in the end, everything has apparently……worked out.
The problem is, in normal times, most mortgage problems are often caused by some one time event: illness, etc. Workouts stand a chance of succeeding if nothing else happens. The current wave is being caused by the fact that people have simply paid more than they can concievably afford for a house. Unless one were to forgive principal (extreemly unlikely IMHO) nothing will help most of these people.
This is a really good article. Thanks.
And they say 29.99% credit cards are bad!
>>>“‘They held a carrot in front of us and told us that this was a great deal,’ said Joseph, who has since refinanced into a fixed-rate loan. ‘In one year, it cost us $83,000. It was excruciating.’”
“Nearly 83 percent of new home buyers in the county used adjustable rate mortgages in June 2005, an all-time high representing about 4,700 homebuyers. Nearly 63 percent of refinancings used adjustable rates.”
Oof!
This has to hit the SD RE market sooner or later. There is no way the prices will not decline a good amount.
Isn’t is already hitting them?
Hey, they were just following the advice of the Fed Chairman.
The 2006 mortgages must be equally interesting.
to put it bluntly they really didn’t have any other choice. I wonder how many underwriters were waking up in the middle of the night sweating and chanting “this isn’t going to work, this isn’t going to work”
Only those that actually planned on keeping the loans in their portfolio.
Quite a few seem to have done just that. How else to explain 76 imploded lenders, when we have been told all along that they were lending so freely because they securitize the mortgages and sell them to Wall Street, hence bearing none of the risk themselves?
I don’t think that they ever INTENDED to keep loans in their portfolio. The chain of events goes something like this: 1.) they started having to take loans back per their agreements due to Early Payment Default. 2.)They couldn’t sell new loans at a profitable price. 3.)Investemnt abandoned them like rats leaving a sinking ship.
Does anyone know the recent share of adjustable rate mortgages in SD County? (I believe it is currently in the low 20s nationally…)
“Nearly 83 percent of new home buyers in the county used adjustable rate mortgages in June 2005.”
And it’s not just Napa County that has this problem. For the entire Bay Area, the ARM figure is around 65% for all loans and refinances in 2005. That’s a whole lot of homeowners who are gonna be in trouble.
Question for you mortgage experts,
If someone is able to get approved for a short sale, will the forgiven dollar amount be placed on their credit report as a charge off with a 0 balance?
Someone from another board is looking at this avenue as the builder he was dealing with never completed his house and now he has liens placed against it from numerous sub contractors. He is considering a short sale to get out of this thing but is worried about his credit report.
I know in credit card debts, a settlement done before 180 days will have the forgiven amount charged off to 0 balance and placed onto the credit report. I was wondering if it is the same with a mortgage settlement.
I don’t know about the credit implications, but what has been said on this board many times is that the borrower will be given a 1099 for the “forgiven” balance and taxed on it by the IRS as income.
Hope someone with more experience can fill in the credit part.
I’m curious, has he talked with the bank about this? Will they even let people do a short sale, with an unfinished house that has liens against it? I’ve never heard of anyone trying to do that before. In most of the articles I’ve seen here, people often try to sue.
Your friend really needs to seek out a competent r.e. attorney and cpa. The bank has options in temrs of how it can report. As well, the whole IRS issue is not that cut and dried either. They really need an attorney to assist with the negotiation as well, because some of these things may be included in the agreement with bank.
‘People bought houses that they shouldn’t have because they had brokers that let them do it.’”
Someone had to point this out. It’s never the FB.
Yep, that big ol’ cookie jar of greed. And it looks like Mama just grabbed a switch.
‘Clearly the pace is picking up. I don’t know whether this is just the tip of the iceberg.’”
Sure you do and so does everyone else that has an IQ over 50.
“‘They held a carrot in front of us and told us that this was a great deal,’ said Joseph
It wasn’t a carrot Joeseph, it was a turd in the shape of a carrot, but you overlooked the smell! It was all in the paper work.
These borrowers never computed the real cost of money because it was just a investment in real estate going up with no money down . The adjustable loans for sub-prime borrowers were so bad as far as a long term loan goes it’s discusting .Did these borrowers really think that lenders were going to give them a low/no down loan with their lower credit scores and not sock it to them ? Even people that deserved a better loan were slapped into these junk loans . This sub-prime lending was not about putting people into homes but rather it was mania party that took advantage of dumb people . The real cost of money is something that people didn’t think about during the housing mania and they never considered that money might not be available if they wanted to refinance or the equity might not be in the house . 5 million extra houses because of this bogus run-up .
“Did these borrowers really think that lenders were going to give them a low/no down loan with their lower credit scores and not sock it to them?”
With $0 down, and you already have suck-but credit, who cares what the terms are. If prices keep going up, you make way more than the fees. If they stop going up, you walk away.
Gambling with other peoples’ money, what a beautiful thing.
And if your sob story gets you a government bailout you’re on the gravy train, again, with no real risk to yourself.
And if you an illegal, you just buy another identity or SS #.
I guess the FB’s get the last laugh.
Noticed in the “immigration” segment of Lehrer report that in their “pathway to citizenship” illegals get some extra credit for being “homeowners” (homedebtors). Some lobbyist doesn’t want the homes of deportees to be added to the inventory.
“5 million extra houses because of this bogus run-up .”
That is the elephant under the rug the Fed and the federal government thus far have not addressed. I guess they are hoping this “excess inventory” will somehow magically vanish if they can only convince everyone to start adding to their investment portfolio of multiple houses once again?
FHA + illegal immigrants + welfare + HUD = 5 million houses needed
GREAT ANSWER………. But no one can take the ignorance out of society. That is why we have some laws that protect people but the mortgage business is worse that handling whale $hit!!!
OT, there are two interesting articles on the front page of the Tucson daily star, one on scams at condo’s in Rocky Point, Mexico, and the second on the Biosphere being bought by developers.
http://www.azstarnet.com/ss/2007/06/05/frontpage.pdf
HTML links to both articles:
1. Rocky Point
2. Biosphere
I predict the Biosphere development will be a flop. It’s in the middle of really nowhere. (Where else could you do a Biosphere.) Can understand the Univ maybe wanting to lease the actual facility. Do doubt the retirees will want to live in Oracle, even though Tucson has drawn quite a few in recent years.
The property now changes hands from one group of misguided dreamers to another. It may be interesting to see what becomes of that place.
…the Biosphere being bought by developers.
That is truly sad. I lived in Tucson for 20 years, 1984-2005, and the desert around there (the Biosphere) is rich and verdant. Now it’s all going to be bulldozed for ever more stucco shit-boxes.
When does it stop?
…the Biosphere being bought by developers.
That is truly sad. I lived in Tucson for 20 years, 1984-2005, and the desert around there (the Biosphere) is rich and verdant. Now it’s all going to be bulldozed for ever more stucco shit-boxes.
When does it stop?
Why not 2,000 to 3,000 foot tall solar panels to keep them cool. Shade the verdant inhabited desert. Catch the early daylight’s energy to cool the afternoon and warm the evening meal -
“Some areas in Florida, Georgia, Michigan, Tennessee, Indiana, Illinois, Missouri, Texas and Ohio have seen foreclosure rates much worse than San Diego’s.”
“In short, it’s a nationwide phenomenon. The Grubb & Ellis real estate firm warns that there may be more than 1 million foreclosures throughout the country in the next year or two.”
No, no, no, no, no… All real estate is local. The (former) NAR Shill-in-Chief told me so.
I love the title of the first review of the book: “Another swing…another miss.”
Another reviewer is Robert Authier. Wasn’t he a poster here for awhile?
“Some areas in Florida, Georgia, Michigan, Tennessee, Indiana, Illinois, Missouri, Texas and Ohio have seen foreclosure rates much worse than San Diego’s.”
Just wait until the option arms come home to roost about the same time values drop 30%. California foreclosures will exceed these states. FB’s in SD had a way out for a while with rising prices. They’re just treading water now and will soon go under.
What I love is the discount price of Lereah’s book, now offered at $14.93. Subliminally suggesting that RE hacks got going right after Columbus arrived.
Poor David. Not only did his Florida condo investments tank, but his book price is off by 33%, even after considering the use of incentives to move copies…
“All Real Estate Is Local: What You Need to Know to Profit in Real Estate - in a Buyer’s and a Seller’s Market (Hardcover)
by David Lereah (Author)
(3 customer reviews)
List Price: $21.95
Price: $14.93 & eligible for FREE Super Saver Shipping on orders over $25.“
This is starting to get good… Neil- do you have any kettle corn?
I agree. The stories are coming in greater frequency and in more grave terms every day.
Ever get the hair on your arms to stand up when you see (and faintly hear) the rumble of a storm approaching in the distance?
talked to an FB today who is crying that his house is a money pit, and he feels like his life is his own bad movie. He has a boring tract home financed to the hilt and he said his alligator is holding him up for $4500 a month. He is trying to unload a house that maybe should be selling for near $300k for $800k… because you know everyone’s house in Sonoma is worth more than $500k.
The pain is starting to set in. But people are still keeping pretty mum. The rental lists keep growing on craig’s list… my 20 unit apartment complex has 5 empty units and has had no less than 4 at any given time since March. When I moved in February there was only one other unit and mine. I took over a lease and they had no downtime. By the next month there were 3 more open, now 4 more.
There are 4 rent signs ALL over the place. A lot of EastSide Queens of Denial are renting out their granite laden albatross’ trying to get their mortgages paid… the list keeps growing.
The realtwhores are trying not to let anyone smell the panic but their language grows more outlandish every day.
They are now touting “instant equity” “buy without fear” “buy for less than the appraised price, you can’t lose, its like money in your pocket!”
Looks like one FB bought 4 houses in one overpriced $hitboxes with uglya$$ paint crammed into a parking lot sort of neighborhood and he is drowning and has all of them listed. (amadeo ct. Sonoma, CA) His is the first advertised sign of panic I have seen. But his ugly a$$ properties still need a 50% haircut for them to be tolerable.
Apropos of rentals. One of the sillier listings in Morro Bay is a 1250-sqft 3BR house (wish price = $442K) advertised as a perfect “student rental.” I do doubt that. Several 3BR rentals in MB listed at $1300/mo. Here we go again, wish price = 30x annual rent. Not likely to “pencil out.” Of course, the smaller 2BR places at similar prices are even sillier, but without that silly “student rental” angle.
yep… we have 2 bedroom condo’s next door, and down the street and around the corner selling for above 400k some above 500k claiming they can be rented out… um… I pay $1000 a month for an apartment with front yard, + a big back yard patio area, + 2 car garage, + fireplace, not on a busy street (so the cats can play in the yard) and my landlords let me paint whatever I want, plant up the garden, stain the cupboards and do whatever makes me happy and stay.
Or I could be paying double and then some for a smaller crappier place? It is rare to get units with the 2 car garage, yard space + fireplace/ etc… so space wise everyone in my complex has one of the best sized deals in town. + our landlords let us all do nice things that make us feel at home and stay. Why in the world would someone buy someone’s craphole with outdated everything for two and three times as much???
Sonoma has some of the $hittiest housing. I hear realtwhores joke about it. I look at the pics on zip and it is unreal what people are trying to unload. It will be a fine day when the reality sets in for these people.
“The pain is starting to set in. But people are still keeping pretty mum.”
Athena,
I think I mentioned this on your Sonoma blog, but I think the crash will be somewhat quiet. Everyone loved broadcasting what financial geniuses they were when values were going up. But how many people are likely to stand up and admit they are financially f***** for decades? That they let greed overcome any notion of common sense? That they have nothing to show for it but a huge mountain of debt and a POS house that nobody wants?
yes, I agree Lisa. We are a gossipy cliquey kind of community. People only talk to their own and if anyone points out the emperor has no clothes in public the collective denials will ensue. However, in the backroom, or in the grocery store 1:1 they will tell the truth, but it will unfold very slowly. Only when people start to have multiple conversations in a day and it is happening to people they know will the psychology reach the tipping point. We are not there, though by all the empty houses and for rent, for sale, foreclosures, and “we buy crappy houses for cash” signs you would think we would understand the signs of the times. Not yet… but soon… soon…
Think Neil is still on his honeymoon, yes?
Wonder if the new wife minds him eating popcorn in bed?
Hortons problem on their loan… resetting and prepayment of $18,000 .Lender/broker got “higher” fees for this type of loan as he/she has bills and life style to maintain and borrower was naive in
making this choice. Perfect combine repeated thousands of time with the same results. I bet there was along the way a couple of Algebra,Geometry classrooms attended but they do not teach common sense. Wise parents if you are lucky. If not reality will teach you the hard lessons of life.
“Experience keeps a dear school, but fools will learn in no other.” Benjamin Franklin
The housing BUST is just bearly beginning and the Scammers are crying and biting their pillows.
The whining FBs, Flippers and the “I’ve been wronged and duped” Crowd are sure raising Hell and spinning their Tales of Woe is me to anyone that will listen.
RE Agents, Mortgage Brokers, REIC and the rest of the Wall Street Gang are eating each other Alive.
I wonder if they’ll all unite and demand a refund from Carleton Sheets ?
Should be a very interesting winter for sure, reset city and mass panic, by those selling and then those who just bought. Then the retail numbers hit, with the ATMs not giving cash out anymore…ouch.
This guy may not go on the foreclosure list, but even in “bullet proof” Silicon Valley, he is leaking money –fast:
“Aha!”
http://www.viewfromsiliconvalley.com/id334.html
Sorry, I know this is off topic, but hasn’t another driver of the the most recent stock run up been constantly rising “productivity” numbers? So the rising productivity is usually because of automation - people doing more work because the computers help them crank it out faster. Is there any way to figure out how much of the productivity gains are attributable to automating the loan decision making process - putting it all on the FICO score and no human assesment of borrower’s risk at all? Will productivity drop if banks have to document salaries and job stability? Productivity is supposed to be the great protector against inflation. Will the fed finally have to raise rates if productivity goes down? Or will lending get so tight that it won’t matter much in the overall productivity numbers but will only effect profits in the industry?
Just wondering..
Productivity seldom goes down in government reports. If they start having people actually do that work they will adjust the value of the work as it is higher “quality” than the automated work was, and therefore, the productivity just went up.
You saw this with computers. As the cost of computers went down the government added in the “extra” processing power as imuted “value” so the $$ they reported as being spend on computers way substantially higher than the cash that traded hands. The GDP was increased by this imaginary money. So, cheaper computers increased GDP even though less money was spent. See how this works?
Productivity is a nice way of saying they need less Americans to do the work. I imagine when the entire nation is unemployed because their jobs went to China, productivity will soar - and the media will call it a wonderful thing.
“For Los Angeles newlyweds Joseph and Jamie Horton, the deal looked too good to pass up: a mortgage with an initial 1.75% interest rate and payments that wouldn’t adjust for five years.”
“‘They held a carrot in front of us and told us that this was a great deal,’ said Joseph, who has since refinanced into a fixed-rate loan. ‘In one year, it cost us $83,000. It was excruciating.’”
Sounds like they got “Hortoned”
Hortoned: in financial difficulty because of real estate, be it a builder or a buyer…
“…they held a carrot in front of us…”. These people are as stupid as a retarded rabbit being lured into a trap. And they’re newlyweds. Just think how dumb their kids are going to be. Is it not against the law for retarded people to marry one another?
This is a good one! Got a flyer in the mail, with 2 pages of local NOD’s listed, from a realtor in LA. Apparently using fear on buyers (buy now or be priced out forever!) isn’t working. Time to try it on the sellers. (sell now or lose your equity!) Here’s the text:
Recent peaks in Westside real estate have occurred in 1973, 1979, 1989 and 2006. These peaks in the past have occurred one or two years prior to the start of a recession.
At the present time Westside values are holding compared to other areas of Los Angeles, but caution is in the air as defaults increase.
If you have considered selling to preserve your present equity, now may be the best time before we enter this new 5 to 10 year down cycle.
For a no obligation evaluation of your property.
CALL TODAY (realtor name)
Oh… BTW, this is coming from Coldwell Banker on the Sunset Strip. hehe
Interesting marketing technique… They are starting to crack… I wonder how many bites he received on that ad.
I dunno… but the area this went out to… well, let’s just say a million $$$ *might* buy you a mailbox…
so if you got it in your mail, your telling us your rich….. or at least leasin’ large…..
I wish… not my mailbox. A friend gave it to me. Knows how I feel about housing, and wanted to know if I was working for CB now…
I don’t get it. If inventory is skyrocketing, what’s the point of this mail campaign. Are they hoping to add more inventory? Do they believe that by getting the homeowner (sic) to sell they can later sell another place to that homeowner. Truly, I don’t get it. Help me out here (if this thread is still alive).
IAT
Wow, that sounds exactly like the stuff I get regularly from my (all-but-former) realtor who works at CB on Sunset, but down in the Palisades.
They probably mail flyers to apartment renters still that if they do not buy now, they will be renters forever and priced out. This way they can scare sellers to selling and buyers to buying. Clever, eh?
yes, fear is a good motivator for many
Yep Bill I have a RE agent friend (newbie) who is now marketing to people who rent. His broker is a RE agent and a mortgage broker too. He is sending out post cards but his lead in is his brokers “special” loan program. The sales pitch is the old “cost to own is equal to renting with our loan program - check us out”. Dumb, dumb, and dumb.
Oh and he spends / volunteeers his weekends at open houses with very little traffic. Sounds like fun ey?
“He is sending out post cards”
this is where those pesky postal increases become increasingly painful to the realtor crowd
I hear you on the postcard thing. I used to rely on them a lot in my business. (And, no, I’m not in the REIC.)
But one of the printers I use is now offering half the amount of cards for the price they charged back in 1998. That’s a 100% price increase. And postage? For the postcard rate, that’s gone up about 25% in the same time period.
So, I’m using other, cheaper, forms of promotion.
I get flyers telling me to stop throwing my money away on rent.
Flip, Flop!!
I’ve been hearing Countrywide commercials with “news of declining prices” in the background, urging people to be smart and tap their equity essentially while they still can. Sheat oh dear…
My count of Countrywide REOs in Palmdale has now reached 21, up from 15 at the beginning of the year. I don’t see any of the properties dropping off the list.
And they won’t anytime soon, Palmdale is a pit…
Take away subprime and you kill the Palmdale/Lancaster market.
St Joesph thought a carrot was worth $83,000.00…
“‘They held a carrot in front of us and told us that this was a great deal,’ said Joseph, who has since refinanced into a fixed-rate loan. ‘In one year, it cost us $83,000. It was excruciating.’”
Off topic - but I wonder if a few of you could weigh in on a recent RE transaction a friend participated in.
After 10 months, he finally sold his house for $1.1M
The buyer demanded that he ‘kick back’ 5% of the closing price in cash since he didn’t use a broker
The buyer also demanded an additional 4-5% in cash to cover some ’state transfer tax’ that the buyer had to pay (this was in Nevada)
Net, net my friend ended up cutting a check for $100k to the buyer to get out of the house
Is this all legal?
uh, NO!
Why didn’t he just lower the selling price $100K ?
My question exactly. The bottom line was that this is how the buyer wanted to do it, and my friend was desperate to get out after 10 months on the market.
Sounds like the buyer was credit rich (?) and cash short, I hope your freind wasn’t the one carrying the note as my guess is the buyer will try and HELOC against the $100K cash back not being reported.
The buyer will probably pocket the $100K, never make a payment, and never be heard from again.
Fraud? Probably. Are they going to sift through the hundreds of thousands of these “cash-back-at-closing” deals done over the last few years and come after your friend…. probably not. Not enough prison space for everyone that needs to go to jail!!!
Because they are selling an item (house) whereby the selling price has ramifications to others: comps, valuations, commissions, fees, etc., I really do think that is fraud to obscure the REAL selling price like that with kickbacks, etc. Minimally it is immoral - not that anyone seems to care about that anymore.
Tell your friend to file a report to the IRS about the buyer receiving $100K of unreported income. Ouch!
Sales incentives are not income. When you buy a TV and mail in a coupon to get a rebate, that’s not income either.
The seller is not giving you anything, it’s just an adjustment to the sales price, no different from selling at 10% off or whatever.
To answer NB Bear’s question: sure. Snowflake and countless other mortgage fraud cases documented in the media time and time again have proven that a law that is never enforced is no law at all. So, while unreported kick-backs are *technically* illegal, as long as “everyone’s doing it” and the government continues to turn a blind eye (also see “immigration reform bill”), it’s de facto legal. Or as Snowflake likes to say, “it’sallgood(tm)”.
To answer Mo Money’s question: because (a) the buyer would not get that fraudulent cash-back money to spend on “necessities” right now, and (b) it would ‘hurt’ the neighborhood comps and anger the realtwhores and hit-the-number lenders, who are all depending upon continuing mortgage fraud for future income.
“a law that is never enforced is no law at all.”
kinda like immigration?
Could be another fine way to steal $100K from the lenders (e.g. seller-rebated mortgage fraud). It will be interesting to see if the house goes into foreclosure without any payments made.
p.s. I believe that whether or not it is legal depends on whether the 100K in cash to the buyer is disclosed in the closing statements or not. If it is hidden from the lender, then it would be illegal.
Who would be breaking the law? The borrower for not disclosing material fact to the lender? Or is the seller making some sort of misrepresentation as well?
In any event, upon default, I would hope that the IRS views this cash back as income (even if they don’t enforce the debt forgiveness income issue)?
I’d love for the Feds to avoid going the expensive (to taxpayer) route and putting these guys behind bars and go after them for tax evasion for underreported income–let’s start garnishing some wages!
Cash Back At Close….casey serin dance mix
I wonder how long it will take him to reappear.
It’s BS because the tranfer tax could of been paid out of escrow and he should of lowered the price rather than give a 5% cash back for a not going with a broker . It just tells you what the crooks are saying to get cash-back money .
Another ploy for cash-back money is for the buyer to say they need the appraisal raised for cash for fix-up costs .In this market the crook doesn’t even need the appraisal raised to get cash back and run if they find a seller with alot of equity on a higher priced house . On this deal discribed above the seller could get in trouble also for the cash back and want to bet it wasn’t disclosed to the lender .
Right on Wiz… right on the money.
“The Hortons figured that with all the money they would save on interest payments, they would be able to pay down a significant chunk of the principal on their loan. But after a month, the actual interest rate on their ‘option’ ARM shot above 8%.”
“They blithely made the minimum payment each month, not realizing, they say, that the low rate they had secured was so fleeting. Within months, thousands of dollars in unpaid interest was added to their loan balance. Ready to bail out, they discovered a second catch: a prepayment penalty that would cost them $18,000 if they refinanced.”
Can it really be true that people sign long complicated legal documents without actually reading and understanding them? (don’t answer)
I swear, with a few less scruples it would be so easy to make money off non-readers. “Just sign here, I’ll take care of the rest”.
Did the Horton’s have high school diplomas? If so, they should sue the school district for giving them passing grades in math and English - because they obviously didn’t actually master or retain those subjects.
Horton Hoses Himself!
Horton Fears a House
On jury duty while deliberating a case I brought up the woman just blindly signing papers and shouldnt she have read them if she had some doubt? Everyone in the room said signing papers doesnt really matter and raise your hands if you read a contract before you sign it. Guess who was the only one raising their hand? I felt sorry for the lawyers who got sued for malpractice and let this stupid lady actually win. So if any of these mortgage fraud cases were tried in a court with a jury I am pretty sure the FB will always win.
Did anyone else notice in this article that it says they took the low interest to pay the principal down faster and then were only paying the minimum each month. Who writes this awful news???? That doesn’t even make sense.
“‘We’re not done with foreclosures,’ said American Canyon broker Anne Schabacker. ‘People bought houses that they shouldn’t have because they had brokers that let them do it.’”
Buyers need brokers permission to buy a house?
Loan brokers, yes.
Loan broker (actually underwriter), yes
Chuck
“‘Even last year we were selling 12 to 15 a month,’ said Barker. ‘It’s half the pace from 2005. Anything with more than six-month supply is a buyers market,’ he said. ‘We (have) a 16-month supply, this is a serious buyers market.’”
“Barker’s advice for would-be sellers is direct: ‘If you don’t have to sell your house, don’t.’ However, some people have no choice.”
What, he thinks prices will rise if the sellers just wait long enough?
His advice boils down to “lose more money by selling it later when it is worth even less.”
Or maybe it is really “please don’t sell while I’m still trying to unload my half-a-dozen alligators!”
Please don’t list your house too, because we’re having a hard enough time convincing buyers to buy with 16 months’ supply of houses on the market. If everyone tries to sell, NO ONE will buy.
Inflation normally makes this bogus advise look at least somewhat palatable. Most people are aware of inflation, but don’t really “get” it. It’s the whole exponential function thing.
No kidding. Time and again, failures due to human error occur due to the human mind evolving in a world in which the perception to the hunter-gatherer time scale is that of a linear function, when in reality it is an exponential function. For the hunter-gatherer, assuming a linear relationship is good enough.*
Inflation is one of those pesky little exponential functions that appears on a day-to-day basis to be linear. Assume it is linear and you’ll be fine for the short term, it is the long term where your error will be magnified.
* Yes, right before hitting “add comment” I realized that this is probably still true for the average FB who lives paycheck to paycheck. Funny how 10,000 years of technological advancement have resulted in no real change to daily life. “Crog need food. Must hunt wolly mamoth. Need to impress woman. Need sparkly things.” vs. “Skyler needs food, need to become mortgage broker, needs to impress woman, needs BMW.”
Hey, would someone let Jeff know that he can move into his house in Salt Lake. The Taco Bell’s there are hanging out posters saying that they need to hire managers. I believe he is well qualified. If he doesn’t like SLC, there are plenty of Taco Bell openings here in Albuquerque.
I just got back from SLC. Lost in Utah asked for my observations. Nothing but BIG McMansions all over SLC, and going north for 100 miles and I am wondering who is going to buy these. Certainly not the average working family there. The for sale signs all had ‘price reduced’ on it. Fri evening, SL Tribune posted that Utah was #1 for appreiciation (sure sign it is at the top and down the crapper from there). Plenty of inventory for Jeff.
Now, now, no need to speak ill of the dead.
Did he kill himself? If so, link please!
I was posting more in financial terms than literal.
Maybe they do need those big houses - don’t they have 8+ kids each on avg.? Someone mentioned something about a ‘clown car’ here before, as I recall…
…McMansions all over SLC, and going north for 100 miles and I am wondering who is going to buy these.
Maybe in 10-15 years everyone will have own a home? If in 2015 the starter home is $50k and the McMansion is $100k, would this all turn out to have been a Good Thing?
http://www.utahrealestate.com/692083
This is what 650k will get you in the neighborhood right above mine. It’s high on a hill, 10 minutes from downtown Salt Lake and surrounded by a sea of McMansions.
Compare this to what that same amount will be you in California and you will see why Salt Lake is a tempting place for equity locusts.
The problem is these family’s sell their 1200 square foot POS somewhere in California and buy one of these thinking they are getting a sweet deal. Very low crime, nice neighborhood, no bars on the windows etc. only to find that the cost of keeping the heat and lights on will bury them.
“In 2005, during the same time period, only two foreclosures took place in all of Napa County, and neither was in American Canyon.
ReMax agent David Barker is on the foreclosure frontlines in American Canyon. According to Barker, on average, one in every 60 homes in American Canyon is in foreclosure proceedings or has been foreclosed.”
I could have predicted this would be an area with high foreclosures. Unlike the Napa that most people imagine as a land of wealth and vinyards, American Canyon is the recently-developed McMansion fringe.
It would be quite interesting to see what percentage of homes in American Canyon were built since the bubble began inflating (say 1998); I am guessing it is a very large percentage.
American Canyon median household income is about the same as the city of Napa ($53K), but Napa has more rich types than AC which bills itself as the “gateway to Napa.”
I drive through AC all the time. Just another small, lower middle to middle class town. Zero charm and trashy in the sense of people trying to live “up.” I view AC as the “doormat to Napa” because it’s where you wipe your feet to get the Vallejo off before you come in.
(If you drive through AC to Napa, you’ll pass through an industrial patch which includes a junkyard car parts place which has an old camaro sitting on a platform about 30 feet in the air. Classy.)
With a median household income of just $53K though, both Napa and AC are expensive for the median family when you consider the cost of living here. Napa’s median housing price is a good chunk higher than AC though. One of the reasons that AC has grown so much is a net outflow of people from Napa.
So, yes, you’re right about the % of homes that are relatively new in AC and a lot of the houses are pretty huge given the economics of the population. AC is going to have a lot of defaults just like Solano County is experiencing because the house to available cash flow ratio doesn’t work in a big way.
Meanwhile, up north a ways, Scottie Pippen sells his house for a big loss -
http://blog.oregonlive.com/breakingnews/2007/06/pippen_reportedly_sells_portla.html
It’d take another mil just to furnish that puppy!
Ben, are there some server issues? Over 1/2 hr before posts show etc……
“Barker said American Canyon home values are down approximately 12 percent since the market peak of July and August 2005. ‘What’s happened now is there are more homes for sale now. It’s supply and demand,’ said Barker. ‘You have more people that want to sell than people who want to buy.’”
It’s about more than supply and demand. The Econ 100 model of a static supply curve and demand curve crossing in a big X which identifies the price and quantity of a good sold does not hold up very well for a market where, thanks to a flood of easy money, buyers are chasing up record-high home equity appreciation rates and builders are chasing after them to build as many homes as possible before prices return to earth. With low wage gains, it was fairly predictible that demand would hit the brick wall first, when prices finally reached a point where not even highly leveraged buyers could afford to push prices still higher. Unfortunately, builders continued (and continue) to build at a pace near the mania peak after the buyers left the game. Further, purchase prices that made great sense when home equity gains were running over 10 percent annually suddenly no longer seemed sensible with flat to negative appreciation.
Which brings us to the current supply and demand picture. If you draw your supply curve vertically to represent the current glutted supply level and draw your demand curve so it runs down to the right (like economists generally assume they do), then finally draw the seller’s list prices about 30% above where the supply and demand curve cross, you get a picture of the disequilibrium state the U.S. housing market currently faces.
It’s really a shame that our educational system in this country is not good enough to teach people like the Hortons that there are no special deals when it comes to borrowing money. Any apparent discount from the prevailing fixed rate comes with a hitch, especially when the rate curves are inverted.
I clicked on one of those annoying Leading Tree banner ads today to read the disclosures on their $1997/month Option-ARM. Teaser of 1.25% for 30 whopping days and then an APR 8.375% If basic economic education was mandatory in high school, these kinds of toxic loans would not exist because nobody would take them.
A men!! I have been saying that my whole life and I am in my 60’s. Our education system is lax and the banking and mortgage business does not want us to know all of their dirty little secrets.
Yes, however borrowers can either refinance after 30 days and have an additional 15 days until higher payment due date at APR 8.375 becomes late giving them 45 days to remodel, find a buyer and enter into escrow.
If that construction company was able to fix that collapsed overpass in San Francisco in only 16 days. A lending tree teaser loan should be a no brainer. And I do mean no brainer!
“‘They held a carrot in front of us and told us that this was a great deal,’ said Joseph, who has since refinanced into a fixed-rate loan. ‘In one year, it cost us $83,000. It was excruciating.’”
I know I know, “and now the carrot is up my ass”. Well buddy, take it like a man and quit whinin’. It’s only halfway in so far.
To anyone reading this blog that is even remotely contemplating purchasing a home today, ask yourself this question:
If our real estate market had this much fraud and funny money fueling it, and now that prop is being eliminated on all fronts, where do you really think prices are going?
And don’t forget, Boomers are retiring in droves. You know, the people that didn’t know how to save a friggin dime their whole life.
Real estate prices only have one direction to go. And for a long time.
Agree 100%
American Canyon
What kind of stupid name for a town is that?
I bet I know what kind of SUV they all drive:
http://youtube.com/watch?v=pgV9Kp8QzOA
The Hortons figured that with all the money they would save on interest payments, they would be able to pay down a significant chunk of the principal on their loan.
isn’t exactly consistent with
They blithely made the minimum payment each month
No sympathy here.
“Some areas in Florida, Georgia, Michigan, Tennessee, Indiana, Illinois, Missouri, Texas and Ohio have seen foreclosure rates much worse than San Diego’s.”
That’s pretty sad when the best that can be said about America’s supposedly “finest city” is that at least it’s not doing as badly as the Rust Belt!
MSM is catching on
http://biz.yahoo.com/fool/070518/117951154741.html?.v=1&.pf=real-estate
Wow, that’s a great read. Every wannabe “real estate investor” should be forced to read that three or four times in a row, assuming they can read, of course.
Where oh where is Leslie Appleton-Young when the press needs a good spin person. I would like to think the CAR would have some soothing words to say in order to keep the panic to a minimum. Did she disappear like our friend David Lereah?
Here in California where a Bay Area home is nearly 3 times the national median we need to here the good news it’s different here. We need to hear that a family of 4 making about $70,000 a year will actually have the opportunity of owning a home without spending 4 hours a day in a car commuting. Where is the CAR when you need them?
I think I just figured it out….they’re hiding and keeping their heads low because they have finally realized people figured out they were full of shit the whole time and mislead people into making poor financial decisions based on a pyramid scheme they touted and sold to unsuspecting fools.