The Problem Has Been Building For Years In Colorado
The Gazette reports from Colorado. “Front lawns, driveways and foreclosures. These days, they’re a part of every Colorado Springs-area neighborhood. Against a backdrop of escalating numbers in Colorado and the nation, the Springs and El Paso County were on pace through May to approach a nearly 20-year-old record for most foreclosures in a single year.”
“For the five years ending in 2006, the area saw more than double the number of foreclosures of the previous five years combined. In some parts of the city, one in five homes is in foreclosure.”
“Rising foreclosure numbers, said Fred Crowley, a local economist,’certainly can’t increase prices, and probably will decrease values.’”
“The problem has been building for years and won’t go away overnight, local experts say. El Paso County tallied 1,433 foreclosures through May. That puts the county on pace to approach the 1988 record of 3,476.”
“The Gazette analysis shows foreclosures can be found in almost every area, from ritzy Cedar Heights to middle-class Fountain, from rooftop-packed Briargate to sprawling eastern El Paso County.”
“Among single-family neighborhoods, the highest foreclosure rate was found in an area in southeastern El Paso County. There, 20.9 percent of homes, or a little more than one in five, was in foreclosure at one time from 2002-2006.”
“A separate Gazette analysis of lending practices shows subprime mortgage loans are linked to the rise in El Paso County foreclosures. Of all new mortgages in the county in 2005, only 13 percent were subprime loans, according to First American LoanPerformance.”
“Yet, holders of subprime loans accounted for nearly half of all foreclosures in March, the most recent month for which there was data.”
“Kathi Williams, director of the Colorado Division of Housing,…said some pockets of the state are seeing falling property values now. The end of the state’s foreclosure woes is nowhere in sight, and holders of subprime loans remain candidates for foreclosure, Williams said.”
“Many homeowners with subprime loans and rising interest rates don’t have enough equity in their homes to refinance their mortgages and move into a fixed-rate loan, Williams said.”
“In other cases, some subprime lenders allowed borrowers to exaggerate incomes or provide phony Social Security numbers, Williams said. When those homeowners try to refinance, they’re finding tougher borrowing regulations and can’t get a new loan, she said.”
“‘It will take us a while,’ Williams said, ‘to get all this mess cleaned up.’”
“El Paso County’s mounting foreclosure problem has its roots in the national meltdown of mortgages: unscrupulous lenders making loans to borrowers with shaky credit history using loans that had little chance but to go bad.”
“In El Paso County, subprime mortgages have ended up in foreclosure at more than 15 times the rate of loans to borrowers with good credit. Nearly 4 percent of subprime mortgages in the county were in foreclosure in February, compared with just 0.25 percent of loans to prime borrowers, according to LoanPerformance.”
“‘What happened is that we allowed people who had made little mistakes with their credit to make much larger mistakes with a mortgage,’ said Wayne Bland, a board member of the Colorado Mortgage Lenders Association.”
“Early in the decade, mortgage bankers began aggressively marketing subprime mortgages as a way to get people into homes, and as a way for investors who fund mortgages to get higher returns.”
“Investor ‘appetite for risk kept increasing,’ said Bland, a longtime local mortgage banker. ‘They thought they could mitigate risk by charging a higher rate, but they guessed wrong about how many would go into default.’”
“Many subprime loans made locally were marketed primarily to low- to moderate-income homeowners as a way to reduce their monthly payment by refinancing the mortgages they already had. Other borrowers used subprime loans to buy their first homes.”
“At the same time, lenders loosened their borrowing requirements for these subprime loans. And in many cases, borrowers may not have understood all the terms and conditions of the loans, experts say.”
“‘We took loan counseling out of the equation and borrowers were shopping for mortgages just like they do for car loans; by the monthly payment,’ said Robert Hutchinson, a longtime local mortgage banker.”
“‘There are mortgage products out there that can be a financial trap if the borrower doesn’t understand what they are getting into,’ Hutchinson said.”
“The median period, or midpoint, between mortgage origination and foreclosure for county loans that went into foreclosure from 2002-2006 was less than 2½ years, a period that declined during all but one of the five years in the analysis.”
“Subprime borrowers ‘were very clearly put into loans they couldn’t afford by the time they ended up in foreclosure,’ said economist Fred Crowley. ‘They were convinced to get into a mortgage they couldn’t afford, and couldn’t get out of later because they would have owed a penalty to refinance.’”
“Most subprime loans were intended to be a bridge to traditional mortgages once the borrower demonstrated a solid payment history, said Victor Pelster, owner of Springs-based Anchor Mortgage Inc., which makes subprime and traditional loans.”
“‘The plan was that the borrower would eventually be able to refinance into a fixed-rate prime mortgage,’ Pelster said. ‘Those in foreclosure probably weren’t able to refinance because their circumstances didn’t improve enough’ to qualify from a prime loan.”
“The subprime lending industry’s problems were compounded by a weakening housing market that made it more difficult for borrowers with delinquent loans to sell their homes, said Pat Libbey, owner of CitiLine Mortgage Co., which makes subprime and prime mortgages.”
“‘Once the market started cooling off, the weaknesses of these borrowers started to be exposed,’ Libbey said. ‘When you have a 100 percent loan, you have no vested interest if you can’t afford to make the payments. That’s especially true if you haven’t built any equity because the market is declining.’”
“Much of the blame for the subprime lending crisis belongs to mortgage brokers who put borrowers ‘into loans that were not in the best interest of the client,’ said Kevin Guttman, a former subprime broker who now owns Springs-based My Mortgage Co.”
“‘Does the borrower have the ability to repay this loan, or is it just a transaction to me and I know I’m going to get paid’ whether or not the loan defaults, Guttman said.”
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If anyone has a view from the ground in Boulder County (esp Longmont), please share!
Looking for Golden updates too!
Durango update would be great as well!
The Longmont townhome neighborhood I’ve been watching is still in full “I’m not giving it away” mode. Check this out…I’m betting it’s an attempt by an FB to actually make enough on rent to pay the mortgage, to the tune of at LEAST $500/mo over market rent, and probably closer to $1k.
http://boulder.craigslist.org/apa/354687778.html
Fully furnished…whatever. The For Sales there appear to be in a standoff and nothing is moving, including prices.
The neighborhood I rent in in Boulder right now has been soft for a while but there has been no capitulation. Not sure if there will be when there are always students to rent to.
Boulder is about 1 year behind Silicon Valley. Lots of people claiming “it’s different here” because of Boulder being a wealthy area (didn’t protect SV), not too much run up (again, not true.)
Meanwhile, the median price is down about 12% from peak.
Former FB,
2200$ rent for that townhome is about 800$ over market.
I would pay 1400$ max.
Same here. I’m paying $1275 right now for a similar size place that’s not as new, but in a MUCH better location. I initially started watching that location when I thought I might start working up in that area.
“‘What happened is that we allowed people who had made little mistakes with their credit to make much larger mistakes with a mortgage,’ said Wayne Bland, a board member of the Colorado Mortgage Lenders Association.”
“‘We took loan counseling out of the equation and borrowers were shopping for mortgages just like they do for car loans; by the monthly payment,’ said Robert Hutchinson, a longtime local mortgage banker.”
The American way is let ‘Bygone’s be Bygone’s’. If someones credit got a little rumbled - so be it. We simply wipe the slate clean and grubstake them to a new start.
People have managed to extract so much wealth from their homes that there is no way they can make the payments.
Choose a mortgage by payments by the month.
Look at http://www.calculatedrisk.blogspot.com
Look for the pie charts on mortgage status on 2/28’s. While old news, I’m dumbfounded that ~75% of all 2/28’s due in 2006 were refied (or the own sold and cashed out).
The Credit Suisse report shows a doozy of a rate resets starting this month… and the MBS market is hurting… Anyone else betting that 2H07 mortgage refi’s are a fraction of 1H07?
2008 is when down payment requirments overshoot normal and “over-react”, excluding FHA, to higher levels.
Got popcorn?
Neil
What I thought was interesting is that the chart on the right was for the year ending March 07 (before the subprime meltdown) and represented a year where lending standards were still very loose yet the amount of loans that were refi’d was significantly lower. Either lending standards were tightening before the subprime blowup (ya right) or a lot less people were qualifying for refinancing even with loose standards. Next year’s chart should be very interesting but I think don’t think many people will be surprised by then. It’s going to get real ugly by the end of the year.
“People have managed to extract so much wealth from their homes that there is no way they can make the payments.”
What really irks me is the recent mindset that it is normal, and even prudent, to tap into, and spend away, ones equity. This gluttonous, ruinous behavior will be the downfall of tens, possibly hundreds of thousands of people. What ever happened to paying off the house?
> What ever happened to paying off the house?
Politicians spoke positively about the “ownership society” but supported taking out equity (interest reduction even for HELOCs), making debtors instead of owners. Deeds are louder than words.
I cannot consider anyone a “homeowner” who has not at least a 20% equity cushion.
“Politicians spoke positively about the “ownership society” but supported taking out equity (interest reduction even for HELOCs), making debtors instead of owners. Deeds are louder than words.”
So true. That is because their deeds are driven by the bankers whose back pocket they’re in.
(Boy that was really bad English).
Bankers have no interest in you paying off your house. To coin a phrase perhaps - The banker’s interest is not your principal.
Or in the words of Traffic -
The percentage you’re paying is too high priced
While you’re living beyond all your means
And the man in the suit has just bought a new car
From the profit he’s made on your dreams
>What ever happened to paying off the house?
People have managed to extract so much wealth from their homes that there is no way they can make the payments.
People haven’t extracted any wealth from their homes, which is the whole problem. You extract wealth from an appreciated asset by… drum roll… selling it. Like in the stock market, you know?
They were just borrowing money and spending it. Period.
one reason it’s different this time
the peaks and crashes of the 80’s & 90’s were staggered
this time it’s all in, in 07 , yo
That puts the county on pace to approach the 1988 record of 3,476.”
87 for oil patch
92 ? NE
94 mid atlantic
Do you mean the panic of 1907?
This guy sounds like he’s gotten religion:
“Much of the blame for the subprime lending crisis belongs to mortgage brokers who put borrowers ‘into loans that were not in the best interest of the client,’ said Kevin Guttman, a former subprime broker who now owns Springs-based My Mortgage Co.”
“‘Does the borrower have the ability to repay this loan, or is it just a transaction to me and I know I’m going to get paid’ whether or not the loan defaults, Guttman said.”
I dunno about you, but I still don’t trust him!
Bubbles in a larger context
Well here is one update from Castle Rock, there are a couple of areas that the wife and I have been looking at and one house that we like that had been built for a flipper (ie built and put up for sale with nobody ever living there) has gone from for sale to for rent. I would expect to see it in forclosure with the next 3-6 months. Also seeing more open house signs around and more “price reduced” here and there. I was hoping to see more by this point but many still are holding out for “the house next door got” prices. If anyone else has news for the Castle Rock or Littleton areas please share.
love that golf course - walk the hood and hand out flyers- it works
net deal ,no realwhore
I’ve honestly quit looking. I was shopping Littleton, even made an offer in Morrison(a low one, thus the name). There just is no panic in the market right now here. Comps are going down, but slowly. Things are on the market a LONG time, but owners must not care. I will re-surface about mid-football season to check anxiety levels. Just one man’s voice, but I recommmend not buying anywhere in Colorado right now.
“Things are on the market a LONG time, but owners must not care.”
Amazing, isn’t it? I know of houses on the market which will be coming up on their 3 year listing anniversary. 3 years! There are a lot of long time owners fishing right now. The old “this is the amount it’ll take to get me out of my house” syndrome. Not all of todays sellers are serious, motivated, or realistic. I love it though. It contributes to the sky high inventory, putting more pressure on FB’s and their prices.
The offer I made on the Morrison house has been on th emaret AND empty for 3 years! Not sure what the owner does, but I will not fund his retirement with my own. (Repeating until exhaustion sets in…..)
3 years = slow-learners club.
You know, 3 years does not really surprise me. My wife had a cousing out there that was trying to sell a house in Broomfield in 2002/2003. I can’t remember exactly, but I believe it was on the market for between a year and a half, to two years. They had also already moved into another McMansion, also in Broomfield. Places sitting on the market for an eternity seems to be nothing new to those in Colorado.
Here’s a point I want to make while we’re on the subject of Colorado: We always talk about housing prices being disconnected from rents, etc. Has anyone besides me ever considered a rent bubble? In high priced areas, such as Summit and Eagle counties, rents are really high - completely disconnected from incomes. Part of the reason for this seems to be that multiple people shack up in a small place to live in the mountains, and split the rent. This is how a 1 bedroom, 600 sf condo renting for $1,200 + was “affordable”, with mountain employees making a couple bucks above minimum wage. No new cars, no new clothes, Ramen noodles, beer, and weed (you’ve got to have the essentials, right?, LOL). And the thing that sucks for landlords is, they can’t even come close to making the mortgage, let alone the HOA, taxes (though low in CO), and insurance with that kind of rent. They’d have to double it unless they bought in Dillon Valley. My big question is, with most of these properties “investment, second, third, vacation”, etc, will some owners be more likely to have these properties foreclosed, or will they hold on to these and let their primary get foreclosed? I would bet that the mountain homes / condos get foreclosed, not all of the people that bought them actually have money. A lot of HELOC in them thar mountains! Sorry for the long post.
cousin, not cousing.
1201 Via Descanso, Palos Verdes Estates, 90274
Status: ACT MLS#: P944849 $1,895,000*
List Dt: 04/09/2007 PType: SFR-A Orig Price: $2,285,000
Can you say 400K price reduction? Not good if someone, not me would have paid full price a few weeks ago. 400k is not chump change to most people.
Hell, 400K is the price of an unaffordable house that we bitch about.
Long-time lurker, first time poster, here. My husband and I moved to Argentina earlier this year and sold our home in Monument, Colorado within two months of our departure. We priced it to sell quickly (had the darn thing nearly paid off) and initially had about 20 showings in the first 2-3 weeks of listing it. Our Realtor told us that was good considering the market conditions. After a month of “it’s too small” (a cute, modest house nestled in amongst houses wth kitchens big enough to land a plane), we dropped the price (pigs get fat, hogs get slaughtered) once and had two offers — one cash and both no contingency (guess who won out?) and closed a month later. Other houses in our old neighborhood are still sitting there catching the proverbial falling knife. They priced too high at the onset and made itty-bitty price concessions instead of realistically evaluating what the home is worth in this market.
Jealousy! How did you decide on Argentina? If I could just get my spousal unit to agree, I’d be flying south asap.
No kidding. I would love to be down there.
As someone who lived 12 years in Latin America, let me assure you that it has its downsides as well. Most major cities are unsafe. So unsafe that people live in constant fear of muggings, carjackings and being kidnapped for ransom.
Then there is the issue of corruption. Every gov’t employees tries to stick his hand into your pocketbook. Need a drivers license, pay a bribe. Ran a red light, pay a bribe. Need a business permit, pay a bribe.
Then there is the issue of 3rd world lifestyles: constant power blackouts, unsafe tap water (in tropical regions), month or even year long waits for a land line phone.
I’m not saying that its unliveable (quite the contrary, in some places it can be quite OK), but that as a 1st worlder you get used to things being a certain way. If you can adapt then you might do just fine. Just bring lots of money, especially if you plan to continue living a first world life style. Basics can be cheap but so are wages, and anything that is shipped from Asia will cost the same (if not more) down there. Keep in mind that “middle class” has a very different definition in Latin America: you live in a small flat and might not even have a car. Only the wealthy live in large houses with yards and new cars in the garage. A Ford Taurus or Chevy Impala is considered a luxury car.
Catherine,
We chose Argentina because the government does not have the resources to be a real threat to the common person’s daily life. At least not yet. In the face of bureaucratic folly, most Argentines appear to choose the path of being practical, and they can because the “rules” are about 50 years out of date here. If you want to build a house on your property and paint it pink, you just do it. You don’t need a permit to build it or a driver’s license to prove you are old enough to handle paint.
Argentina’s natural resources, especially water, were also attractive. While the peso/dollar exchange rate, cost of living and property prices were considerations and pluses, they are but an upfront pop and not likely to last for the duration of our stay here. And life is slower and simpler, though Argentime can get on one’s nerves. So far, we think we’ve made an excellent choice.
You’ve also got the ‘07 US Open Champion in Argentina.
What are you doing in Argentina? What is the culture like there? Do you feel safe? How much are houses going for there right now?
Thanks, sorry for all the questiosns… just interested.
Add me to the list of folks who’d like to know more about your life in Argentina.
Shaun,
We are here as wanna-be farmers. We purchased a finca (farm) with some fine-wine grape vines and fruit trees (primarily plum and apricot) in Mendoza Province, the wine-producing region of Argentina that is sometimes referred to as the Napa Valley of South America. The same property in California would go for millions. Here in our area, good vine land goes for about $2K to $4K per acre, depending on location, production, age, water rights, etc. Cost-of-living expenses are very low compared to the U.S., and that includes taxes. As wanna-bes we’re not silly enough to think that we’ll make any real money at it (it’s a life-style choice for us), though we hope to make enough eventually to pay to live here. In the meantime, we have a home-based business that we work. We were telecommuters in the U.S., so there was nothing to stop us from continuing to do that from south of the Equator. To live here, one must either have a stash of cash from which to live (and manage it well) or a source of income. People come and go from this area because they do not have enough cash flow or assets to make it. They come and think that because life is so much cheaper than the U.S. that they spend, spend and spend. Oops, all out of money, so they leave and return from whence they came. Some, of course, can’t leave because they are running from something, though that’s another topic.
The culture is mostly European. Like the U.S., or anywhere for that matter, there are good Argentines and not-so-good Argentines. The same applies to some of the ex-pats who come down here. There are Argentines that I like better than my fellow countrymen/women, and compadres that I like better than some Argentines. Try communicating with your neighbor when you don’t speak the same language. (I exclude those of you who live in bilingual areas of the U.S.) My Spanish is terrible, but my husband’s is coming along. I’m getting pretty good at pantomiming.
We actually feel much safer and, more importantly to us, freer here. Contrary to popular perception, not all of South America is infested with drug cartels and Nazis (though I hope most of those are now in a really safe underground bunker…a casket). In the area that we live, it is very family oriented and strikes me as more so than the U.S. Crime is mostly the petty kind, drunkenness is abhorred, and school shootings are unheard of as are focus-factor prescription drugs for tykes. There are a lot of children, everywhere, running loose. I’ve particularly noticed how much the kids laugh here. Ice cream shops are very popular here. They eat ice cream cones with a spoon. That’s crazy to an American. These are local, anecdotal observations, so I don’t presuppose to speak for all of Argentina. For us the good far outweighs the bad, and there is bad.
The cost of housing is relative. If you wish to purchase a house for $300K in the U.S., then you spend $300K in dollars. If you bought the same house in with Argentine pesos, you would spend $100K (USD), but that’s providing you could find an equivalent house in Argentina. The Argentines have weathered three financial crises in the last three decades, so many houses/properties in our area have not been kept in good condition. Some are real dumps. We managed to find a nice house, though it had problems (the roof leaked and the electrical wiring could not handle our office equipment when we first moved here).
It really is a small world. We moved from Colorado to live in a rural area in South America and, lo, we have an American neighbor that lives less than a mile from us who is from Colorado. Unbelievable.
Wow, that’s fascinating. I think you will do quite well with your farm (mostly from a lifestyle perspective). I am considering making a similar move eventually.
You could end up doing well financially too, Marc Faber recommended buying farm land in Argentina.
Good luck!
If you bought the same house in with Argentine pesos, you would spend $100K (USD), but that’s providing you could find an equivalent house in Argentina.
A very good pointy. Houses are built very differently down there. Few will have ammenities that we take for granted here in the US: HVAC, attached garages, dual glazed windows, etc. You get used to your house being REALLY cold in the winter. Some houses do have radiators, but most people rely on space heaters to get by. Also, kitchens can be very rudimentary (unlike in the US, you do NOT entertain your guests in the kitchen).
To Earlier posters who asked about Boulder/Longmont area:
I am renting currently (for last 4 years) in Boulder-Longmont area.
(SW Longmont to be specific)
We will start looking in late 2008 and won’t be buying anything before end of 2009 early 2010. Recently signed rental contract for 1 year @1350 per month for 4BR 2300 SQ FT home.
People know its a soft market but there is hardly any panic. Too much “old money” in Boulder that does NOT care.
Lot of homes were put on market in SW Longmont with un-realistic
price (25 to 50K more than what builders are asking for) and eventually pulled off and now are “For rent”. Even there they are asking for too much (1700/1800$)
I have to agree that there is no panic yet. I know one of co-worker who purchased home last week in South West part of Boulder. He saw really wide variations in asking prices and sellers are willing to negotiate to some extent. But we simply are not there (in terms of desperation).
If you have to buy sooner than 2009, try REO’s.
Forgot to add this to my earlier post:
There is real estate show every Saturday by Sean Healey local realtor from noon to 1PM on local AM station in Denver area.
Lastweek host had invited a mortgate dude (Phil Maher, President of Denver based Professional Mortgage Alliance) who said he expects fixed rate mortgage to touch 8% by end of this year.
That will seize the market good at least in this area.
Too much “old money” in Boulder that does NOT care.
And don’t forget that boom/bust is a way of life in Colorado. I really think that a lot of people here have not forgotten that. When the Colorado economy “diversified” into tech and telecom there were a lot of people saying that the boom/bust cycle would end. 2001 proved them wrong (and we still haven’t really recovered).
I have to say, after watching the Colorado economy self destruct in 2001 I was genuinely surprised to see as little real estate fall out as there was, especially when compred to mid 90’s San Diego where I knew plenty of people who mailed their keys to the bank.
If you look at the banner ad at the top of this page, you can see that there are still 0%/no PMI loans for “good to excellent” credit.
http://homes.realtor.com/search/searchresults.aspx?poe=realtor&ridagt=19978163%2c19978163&sid=849a50bc246e47cf8aa125cb64dc89c7&pg=2
Ben, when I look at these prices, I am shocked. 450K for 1500 square feet. I wonder if Sedona will ever get real.
All I can say is sold prices tell a totally different story than listing prices-at least in WA. It’s like night and day.
Noticing that in my hood near Portland as well. We get e-mails that update on sold/closings and the past month we’ve seen a big difference between asked/sold prices in many of them.
‘When you have a 100 percent loan, you have no vested interest if you can’t afford to make the payments. That’s especially true if you haven’t built any equity because the market is declining.’
That is exactly why these “save our homes” bailout proposals are so misguided. Better to just let the FBs walk and let the GF lender who handed them the money to purchase an unaffordable home take the hit.