Bits Bucket And Craigslist Finds For July 15 2007
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
This pictures on the following listing are priceless:
http://tinyurl.com/2apon6
For $335,000, you get all the trash through out the house, the large garbage canister in the living room, and deep green pool.
You’d think this Realtor® could have spent the 10 minutes it would have taken to move the trash out of the way before they snapped the photos.
Wow.
The price on that shows just how bad prices in Florida have gotten. $335 for a 3-bedroom 2200 sq ft place - in a not-so-good area? And trashed foreclosure to boot? With zero yard?
Before the bubble that place would have been worth about $80k in it’s current condition - maybe $120k if it were in good condition. I’d buy it at auction right now for perhaps $130k. Something tells me a bid like that wouldn’t get accepted though.
“in a not-so-good area?”
packman, when I left South Florida in 2000 for West Central Florida, Cooper City was considered a fairly desirable area for middle income earners, families and such. I knew a couple of folks who lived there and were delighted to be able to get a house there. What happened to it?
I think I worked with a customer in Cooper City back in 2002. It seemed like a pretty decent area to me. Would Cooper City be about an hour or an hour and a half outside of Miami?
Yes, NYC, that’s about right. It was a decent area when I left in 2000. But, I have seen some rather shocking, rapid deterioration of a couple of neighborhoods in this area in two years’ time, so that’s why I’m asking about Cooper City. Seems to be happening to formerly decent middle class neighborhoods. And while the neighborhoods are deteriorating, the prices have escalated. Go figure. Part of the war on middle income earners.
I live near Cooper City in Broward County. It is still a good area in SoFl. Very few homes for sale and usually at higher prices. In Broward it seems that Pembroke Pines, Miramar, esp. West Miramar, Weston, Cooper City are some of the more sought after communities.
I’m in Coral Springs and got the following email from a realtor for ziprealty. I’ve included my reply. I just don’t follow why they are still trying these scare tactics. It should be considered an attempt to defraud.
Hi ,
State Legislators passed a two-prong plan which will immediately cut property taxes on Florida real estate and also create a super exemption for homesteads effective in 2008.
>> The savings average is 167.00 and isnt’ even worth mentioning. Any further savings depend on whether the voters in 2008 pass a constitutional amendment by a 60% approval. You forgot to mention that the Mayor of Weston is challenging this whole thing in Court. I suppose its better for you to assume that people are ignorant and uninformed so that you can twist the facts or outright lie.
What does this mean to the real estate market in Florida? It means that more buyers will be getting off the proverbial fence and be BUYING NOW…likely causing an end to the historic buyers market we are currently in.
>>People are not buying. Florida has the highest foreclosure rate and the highest mortgage fraud in the country. This type of scare tactic “buy now or be priced out forever” may have worked in the past, but it cost every single realtor his or her reputation. Even if your right who cares: Its cheaper to rent.
seen increased sales in our ZipRealty office by over 50% in the last few months in anticipation of this property tax cut. The amount of buyers requesting to see homes has doubled in the last 2 weeks.
>>Yeah right, You sold 3 houses this quarter up from 2 houses last quarter.
These are clear signs that the market is really heating up. The media hasn’t reported it yet but as agents we see the first signs of a turn-around. The lenders are the second to see it as they process loan applications. The press generally knows when the “sold” figures come in which won’t be for many months.
>>Give me facts to back up your statements. Don’t expect me to believe you.
If you have been “waiting and seeing†this is your wake up call…NOW is the time to buy…before this historic buyers market shifts back to the seller side. Interest rates are still low, but creeping up, inventories are high but beginning to drop, and sellers are willing to negotiate, but this will change when the market gets flooded with more buyers.
>>Inventories are not dropping, they are getting worse and the REOs haven’t hit the market yet. Your attempt to misrepresent the facts and use scare tactics has only insured that if, and I do mean if, I decide to buy in the next 5 years, I will not call you or anyone from ziprealty.
If you are ready to take advantage of this last great opportunity to buy real estate at rock bottom prices in South Florida…please give me a call or send me an email.
>> Don’t hold your breath.
P.S Hope you don’t mind I’m going to pass your email around on various national blogs I belong to. Should be good for a few laughs.
I got almost an identical letter from Zip-realty a week ago. The million $$ condos and overpriced slums most be selling like hot cake.
I just wrote back that with 30+ month supply on the market I don’t see any urgency to make a move right now.
On the other hand, looking at M3 money supply expanding at 13% anually there are more bubbles in our future. Right now it’s the stock market again. You think people learned their lesson after the .com crash, obviously many have a very short memory. Of course this time it’s different, all risks are under control…just like all the previous times. After that crashes it might be commodities and then back to real estate. All that lose money has to go somewhere. Stocks, (junk) bonds, real estate & commodities are the only outlets for the liquidity craze until consumer inflation heats up.
Until the liquidity spigot gets shut off we will continue to live in bubble land. Fools with borrowed money…
IMHO, this Cooper City neighborhood certainly wouldn’t qualify as a “not-so-great area.” It’s not like this is the ghetto or anything. Most of the homes in this area are SFH with pools on quarter-acre lots. Most have a wishing price around $400k. The schools in the area are the finest Broward County has to offer (although that’s certainly not saying much — Broward schools are generally horrible). Just blocks west of this home are numerous McMansion neighborhoods with homes that start at $1M.
I wonder if Packman is confusing Cooper City with near-by Carol City, a Dade-county ghetto.
$120K? Yeah, only if it were in excellent condition…as it stands, its more like $90K (if I were buying this property for myself to live in). Its going to need quite a bit of work just to clean it up and make it habitable again. Like extensive yard work, pool clean up and repair, and interior work/clean up on the inside of the house (bathroom needs retiling, floors need to be done, yuck looks like they put in the cheapest ceramic tile and linoleum you can buy in as flooring). Damn realtor could have at least cleaned the trash out of the house first before listing it….
I’m pretty sure at this point in time my low ball bid of $90K would not be accepted at auction. Hmm, maybe in a few years though….heh heh heh.
The toilet tank cover sitting on the sink console is a particularly nice touch.
Yep, $130,000 is about right for that place.
The toilet tank cover sitting on the sink console is a particularly nice touch.
Place looks pretty good to me as repo’s go.
The stench might be a different story though. Didn’t see any piles of dog poo though.
However, the photo exhibit DOES demonstrates what a lazy worthless POS the listing RE agent is.
Like it would have taken a whole lot of effort to “put” the tank cover back on the closet or scram the personal possession stuff back into a closet and close the door before snappin’ a pic.
Reminds of the scene in an Seinfeld episode where he’s shakin’ a bottle of milk, sayin’ to Elaine-Yeah a whole lot of effort being expended here.
Realtors-the worst of the worst.
This Realtor bashing seems out of place. Listings and conditions come at least in part from the owner. If the owner is not dealing with any issues and is keeping the asking price too high, then why should the Realtor do anything? What if the owner promised to have the place clean and there just wasn’t any time? Lots of factors can make listings go bad, and the place to point the finger is usually at the owner. It would be really nice if our society would change around or integrate social responsibility with personal decisions better, but the reality is that lots of people are full of themselves and their perceived house value and behave as bad or worse than the most inept sales person.
Maybe someone did an ‘upper decker’ before they left.
Reading this:
‘Bank foreclosure, sold in “as-is” condition, proof of funds/pre-approval letter required with all offers, bank/seller terms are: 5% escrow deposit due upon acceptance, 10 day inspection period, 20 day loan commitment, 30 day or less close….MUST close with Sellers approved closing agent, pays buyers title insurance, needs work, no 95 or 100% financing….’
It does say ‘as is.’ Maybe they are just trying to be honest about the situation.
True, it does say “as-is”. I had a long discussion over a year ago with an agent here in this area who specializes in foreclosures/REO. As I understand it, different levels of service are offered to the banks by these agents, depending on how much the bank wants done. Some just want the property secured so squatters don’t set in. And then it goes up from there: some want the exterior maintained (lawn and landscaping), some want a complete clean out.
Just the same, when you’re asking hundreds of thousands of dollars, why not spend a little to clear out the trash? Strange.
Hi, Kay, you raise an interesting point. It’s sort of like, at the top of the bubble, people were selling homes as-is (we did) with no problem. Now, as the downturn comes, buyers are asking for things to be fixed, upgraded, etc. and getting their requests. As seen in many of the reports on this blog, sellers have to work harder to sell their homes. That will hold true for REO if they’re not willing to drop the price.
I think foreclosures and REO will show up some interesting sociological aspects of the bubble. Unlike the S&L scandal which involved the formation of the Resolution Trust Corporation, people in the financial business don’t seem to be as realistic as they were in the past. IMHO, this is probably a function of education.
Probably many of the realtors who are in REO/foreclosures, at least in Florida, are old enough to remember the S&L scandal of the 1980s. And many might be old enough to have been educated about the Depression and its consequences, or had relatives who lived through it. So they understand the importance of moving real estate, slashing prices, etc. Many are probably old hands at this. But now they have to deal with a bunch of “wet-behind-the-ears” junior bankers and management (the same folks who felt they were operating in a new economic climate where real estate only goes up. Don’t forget, these are the folks who were approving ridiculous loans without any thought of the buyer’s ability to repay) who probably, as a function of their mis-education and upbringing, honestly don’t understand that what goes up and up and up has to come down.
So, these “bankers” have an inflated idea of what the property is worth (having drunk their own kool-aid to begin with), probably think real estate will start to go up again any moment now and they don’t want to spend any more on unloading the property than they don’t have to. This is what the realtor handling REO is up against. If I’m the realtor, I’m not taking a dime out of my own pocket to clean the place out if the bank won’t ante up the money. Because if the bank is not willing to drop the price so I can sell it, I won’t be able to make that money back in a commission. I think that’s the standoff here.
You hit the nail on the head. The realtor knows that she has no chance of getting $335k for that house, however it is her listing and one would think that she would want the house to look nicer. Like an earlier post said I am surprised that she did not take 10 minutes to clean the place up. It would look so different. It makes me think that she is lazy.
Well, I would have at least put the cover back on the toilet tank. Maybe there’s some sort of psychology at work here. Like, if the place looks trashed, maybe the buyers will think they are getting a deal because it is a “fixer-upper”.
REO’s strike me as a silly way to go about buying real estate on the cheap…
You are buying a pig in a poke, and that might be aces, if it’s 2004 and the market is hot and heavy, nobody cares about what the house looks like. A classic “as-is” market~
It’s 2007 now, though.
Things Change
REOs are not so bad, it is the auctions that are a problem, that’s where you buy a pig in a poke. With REOs, you can go on line, find the listing, contact the realtor, have a showing and get an inspection done before you close, just like with a normal listing or FSBO. I wouldn’t hesitate to buy an REO home if the price was right and had a good assessment of the problems. Not all REOs will have problems, either.
When you are in a hole you need to stop digging. Overpriced sales with massively overpriced fees attached are what got us here. Now were are just entering a stage where bag holders go for pricing that works and minimal transactions. Paying as little as possible for services along the way is critical at this point. The kind of bottom feeders that will be going after a property like this will actually be energized by junk, peeling paint, and overly liberated landscaping. What that means to buyers is that they really are getting what they are seeing, and doing a bit of work will help to restore it. I think all of this criticism is unrealistic about the basic facts of sales and bag holding. The bag is unpleasant to hold. The bottom feeders like to see an easily cleaned mess.
In Texas they are getting the junior (ones with no listings) agents to maintain the property. The agent will take care of the lawn, get the electricity/water turned on, clean it up, etc. They are reimbursed for these charges, but they are required to do these things in order to get the listing.
I agree about the pig in a poke comment. The current REO properties are the ones that didn’t manage to get a short sale done. The banks are now listing the properties at the same or higher price that the house didn’t sell for 6-12 months ago.
What the listing agent could’nt go to Home Depot an get a day laborer to clean out that rat hole.
That would have involved her spending money on a depreciating asset.
Because of what I posted above. They’re not going to take a dime out of their own pockets until the bank or whoever is selling the property starts asking more realistic prices. I wouldn’t.
I closed down my housecleaning business just to focus on hauling. Sometimes I can make up to $100/hr just loading my pick-up and dumping trash like that. I also made about $380 yesterday at a yardsale of the good stuff I get.
Most banks have some kind of budget for this type of stuff - even when the home is sold as is.
Lately, I’ve been pulling down about $400 per job for stuff like this house.
That’s great, Paul. What a good idea! And you’re helping the environment by selling stuff instead of just dumping it into a landfill.
While I was away on a trip my wife looked at a house near where we are renting. In Manassas Park, VA there are 239 houses for sale. The Realtor that we are working with told my wife that “Now is our spring sale season”. My mouth hit the floor, and I shook my head in disbelief.
I stumbled upon this site yesterday. I would guess it has already been posted here. This was great to see. http://www.city-data.com/
You can see the changes in median income and median home prices from 2000 to 2005. The median income in my hometown went up 8% over that period. The median home price went up 60%. Don’t worry. Prices won’t come down even though everything I see is ridiculously overpriced.
A guy was flipping in Pasadena last night on Flip This House. Check out Pasadena if you want some idea of the destruction that California will face. The disaster should be breathtaking.
Amazing!
In my hometown the average income had gone up $9,000 between 2000-2005 but the median house value went up by $221,000.
I think we’ll be renting for a while.
Yes, these are very significant statistics, IMHO. Because they show that despite the spin from the financial world, from the government, from the globalistas, from the media, etc., etc., there is such a thing as reality, and reality rules in the end.
NYCB, Great find. Thank you for noting it. This will be very useful.
Income rose 16% where I live, and housing values increased 121%!
reality in the Netherlands over the last 15 years: wages up about 50%, individual home prices up 600-1000%. The national average home price went up by ‘only’ +/- 300% over that time frame, but that is because of a huge change in the mix of homes that were sold (smaller, lower quality etc.). Probably 99% of the Dutch are still convinced that home prices will never go down here; tulipmania all over again.
Very interesting site, NYCityBoy. However, I question the stats, at least for the town I’m currently in, Glenwood springs, CO. They say the estimated median house/condo value in 2005 was $275,200 (it was $235,800 in 2000), and if one does a search through the MLS, there are very few houses/condos/anything here for even close to that price, yet alone the median. Glenwood proper (just the town itself) has 27 listings, out of that 27, only 7 are under 350k.
After thinking about this a bit, maybe they’re right. Their stats are for 2005 and I know that the bubble here has carried on until now, although slowing. If so, their stats give an interesting insight into how rapidly things have continue upwards here.
Good moring, NY City Boy. I hate to bust your “bubble”, but anything to do with averages, median, number of listings, is NOT the tru picture of an economy where the rich and educated are doing very well, and the middle class and uneducated are suffering. The desireable neighborhoods for upper income families with the higher priced homes are selling, not like before,
but the only foreclosures in these neighborhoods are from speculators who couldn’t carry their debts. Homeowners are not losing their homes, yet. And employment amoung the educated is strong. The economists and guru’s that throw these “one sizw fits all numbers” are missing the market, just like they did 2 years ago when Ben’s Blog broke away from the pack. Unless I see employment for higher income individuals shrink, the good neighborhood homes are not falling much in price.
However if one or two of these highly educated folk have to move someplace else who is going to buy their house? Mortgage lending is much tighter than 2 or 3 months ago. Also starting tomorrow new Fannie Mae rules go into affect in over 21 states that will make loans even harder to obtain. I do not think that these houses will go into foreclosure, however if they want to sell they will have to drop the price. Which then causes more drops in price as others who have to sell price their homes even lower.
So maybe no foreclosures but falling prices are probably a reality.
And it the prices in the less desirable neighborhoods does matter. A great house in a great nabe might make sense at $800K-$1M if an ordinary house in a fine but nothing special area is $400-$500. It looks like it is worth double. What if that ordinary house falls back down to $150K? Is the better house worth 5 to 7 times as much? The targets for the better places will still be able to get loans, but when the whole country is looking for a bargain, they will look for a bargain too.
I’m looking to buy real estate and can wait until the cows come home, but…
I’m thinking with the first whiff of hyperinflation (your sign will be that we have “decided” to lower the Dollar by 20%, in order for America to be competitive again, or other economic tripe along the same lines) will come within the year, and once you let the finances out of the Pandoras Box, hyperinflation is the grift that keeps on going…
As i’m not tied to Dollars, every decrease in the value of the $, means i’ll be paying less, as a result.
I’m hoping prices of real estate plunge, around the same time as H-I shows up in earnest…
Same here.
Ditto
I do not look for hyperinflation (I define as 100% over 5 years), but like you I am prepared for it.
I am tied to the dollar in that almost everything I deal is priced in dollars. The prices of the commodities have gone up dramatically over the last 3 years with most of the growth over the last 15 months.
Rare Earth Metals, Cobalt the demand is far greater than the supply.
From 1980 to 2001 while the stock, bond and RE market were flying commodities were in the largest bear market of all time. The CRB adjusted for inflation (CPI) in 1976 the CRB was 1100, in 1980 it was ~820 and currently it holds 423 and change. It makes it difficult to believe that we are in a commodities bubble.
It is worth noting that industrial metals have gone up 300% in the last few years while precious metals have only gone up 80%. This suggests that it is not inflation, but lack of resources.
The increase in industrial metals is all about construction. Which every one on this blog says is going to drop. Have we not heard that the real estate bubble is all over the world? Construction is staring to slow down. Copper and nickel are 30 to 40% lower than 18 months ago. You folks can wish for that hyperinflation all you want but it is not happening here. Deflation will be the problem not inflation.
Waman, I think your figures are a decade and a different universe out of date. In the last 18 months copper and nickel have soared, cobalt has gone from $10/lb to $32/lb, rare earths have gone from $3000/kg to $10K/kg. Iron ore has gone up 40% in the last 18 months and projections are for a 25% price in the next 6 months. The US industry may not need anything, but China has imported 4o% more than last year. China produces 6X as much steel as the US, 95% of the worlds rare earth metals, imports 90% of the cobalt. Is the largest producer of Lithium batteries. Canada, Australia, Brazil, the continent of Africa are Chindia’s resource basket. The US is a drag on the world’s GDP.
We just have not seen the pass through from these commodities yet.
Why are metals like Cobalt, Lanthanum, Lithium extremely valuable for industry? I know - I invest in what I know about. The US formerly the world’s largest consumer of Cobalt has been superseded by China.
All these metals that China is using - they go into products that are sold to whom? Not to their own people making 25 cents an hour.
I think the US is key in the world’s GDP as the “end user” of last resort. If we stop buying (on credit), the whole thing shuts down.
As long as fingers are being pointed, I suggest considering the Fed’s culpability, with its overly-stimulative interest rates in the early 2000s spurring unprecedented levels of home price inflation and rampant speculation by homebuilders and flippers in response.
In subprime meltdown, lots of blame to go around
Fri Jul 13, 2007 4:15PM EDT
By Herbert Lash - Analysis
NEW YORK (Reuters) - A turn for the worse this week in the subprime home loan meltdown has pundits and investors playing the blame game.
http://www.reuters.com/article/gc06/idUSN1340018620070713
“Capital markets are great amphitheaters of human action,” he said. “I admit it’s not very helpful to say that humanity is really at fault in this. But markets test extremes, they test limits. They test limits to the upside or the downside.”
OH, SPARE ME THE RHETORIC!! This guy makes it sound like “da markets” are involved in some sort of epic, noble struggle. Sheesh.
Really, this has GOT to be the height of horse puckey. HUMANITY is to blame for all of this. We don’t have a fraud or idiocy problem, we have a HUMANITY problem. Yeah, that’s the ticket. WE of SOCIETY are to blame.
Well, in a sense, I suppose that’s true. What’s the solution? Just eradicate humanity.
Or it might make a lot of sense. Markets also bring us monopolies. We know this now and have laws we hope will spare us the worst abuses. In the future some of what has gone on might be considered criminal. For example, making loans that cannot possibly be paid back and then reselling them as high quality investments does not appear to serve any constructive purpose while it does have considerable negative impacts.
The answer to this question is a clear and emphatic NO.
Can Wall Street be trusted to value risky CDOs?
Sat Jul 14, 2007 9:33AM EDT
By Neil Shah - Analysis
NEW YORK (Reuters) - The complex models that Wall Street uses to analyze risky investments in subprime mortgages may be as suspect as some of the securities themselves.
http://www.reuters.com/article/gc06/idUSN0929430320070714
What on God’s earth is this gloomster worried about? Didn’t he hear that the DJIA hit records two-straight days in a row last week???
DEAN CALBREATH
The worst isn’t over in mortgage meltdown
July 15, 2007
When the Standard & Poor’s and Moody’s ratings services lowered the boom on mortgage-backed securities last week, the second shoe finally dropped on the real estate market.
The first shoe dropped earlier this year, when a bevy of mortgage firms went bankrupt after helping far too many unqualified borrowers buy homes.
With last week’s action, two of Wall Street’s most respected firms acknowledged that the problems associated with those “subprime” borrowers will be much worse than they previously thought. S&P and Moody’s warned they may cut the credit ratings of more than $12 billion in mortgage-backed bonds issued by such respected names as Citigroup, Lehman Bros. and Merrill Lynch.
http://www.signonsandiego.com/uniontrib/20070715/news_1b15dean.html
“If retail sales continue to fall, adding to the declines in construction and real estate employment, unemployment could start to rise. The Norris Group’s latest real estate market report presents a feasible scenario in which unemployment in California rises above 8 percent, compared with its current level of 5.2 percent”.
If unemployment hits even 7% I cannot see how we will see hyperinflation or even inflation as some suggested on this blog yesterday. If housing prices drop 10% nationally that will be an incredible downward force on all sorts of goods. I can only see a deflationary period that lasts for 5 years or more.
“If unemployment hits even 7% I cannot see how we will see hyperinflation or even inflation as some suggested on this blog yesterday.”
You are right. But the Bernanke Fed is actively standing in the way of a 7% unemployment rate!
“If housing prices drop 10% nationally that will be an incredible downward force on all sorts of goods. I can only see a deflationary period that lasts for 5 years or more.”
I am hoping and praying for this. Hyperinflation is the worse of the two evils. Screw Bernanke anyway. Who made the FED the big mega-mega anyway? It’s time for the FED to go down. It has outlasted its usefulness, if it ever really had any. These bankers aren’t intelligent or ethical enough to handle this sort of power. De-centralization is part of the remedy.
I suspect the prices of some things like food, gas and consumer goods will go up while the prices of other things like real estate will stagnate or go down. This is the worst of both worlds and leads to a place where the rest of the world catches up with America a lot more quickly.
Hyperinflation is still primarily a monetary phenomenon. If they want to print money, they can print money, regardless of employment.
In fact, they can print money and employ people with it.
More like, they can print money to help maintain low unemployment (and drive inflation through the roof in the process).
The fact that main stream economics has pooh-poohed the Phillips curve does not change the relevance of this body of research to the case at hand. In fact, given the Fed’s backstage role in funding and steering the course of academic research, one should not be whatever surprised that Phillips’ rather convincing research showing that low unemployment leads to high inflation has been discredited. The Fed faces the impossible dual mandate of maintaining low unemployment and low inflation, and keeping alive the illusion that this is possible gives them considerable discretion to run a policy of low unemployment / high inflation if they see fit to do so.
I may be wrong, but in 1971 when Tricky Dick imposed price controls weren’t unemployment and inflation both running at 12%?
Or so I recall.
“This year, the number is closer to 40 percent and it seems likely to top the highs of 55 percent seen in 1983, at the tail end of a recession.
The influx of subprime foreclosures will continue to weaken home prices through 2008. S&P now forecasts that by the first quarter of 2008, the typical home price will have declined 8 percent since 2006. That would be the largest drop in postwar history, outstripping the 6.9 percent drop during the recession of the early 1990s.”
He has mentioned the word “recession” TWICE. IMHO, we are in a recession right now.
If you read no other articles posted here today, you must read this one. It is an utterly spectacular snapshot of the housing bubble status quo following the credit rating shifts by S&P and Moody’s. If there was a Housing Bubble journalism award for best article, this one would get my nomination.
I especially loved this quote:
“There’s no doubt that there will be a tremendous increase in foreclosures,” says Bruce Norris, who heads the Norris Group, a real estate investment firm in Riverside. “I’m not being negative, just very realistic. This is a mathematical certainty at this point.”
P.S. The only shortcoming I noticed in Calbreath’s article was a failure to link the various smoking guns (aka “dropping shoes”) to the various assassins who promulgate U.S. economic (and especially housing) policy. But I can’t blame him; I would not stick my neck on the chopping block if I were in his position. Revelation of such ugly truths is a task perhaps best relegated to the nether realm of the blogosphere.
‘San Diego real estate adviser Dan Holbrook has carved a niche for himself by holding seminars to tell real estate agents how they can profit from short sales.’
And there will be seminars about how they can profit from holding seminars about profiting from the coming real estate collapse too!
“If the rise in subprime foreclosures is the third shoe to drop, a fourth may be a rise in foreclosures of prime and Alt-A mortgages.”
Subprime folks are those with the Marlboros rolled up in the t-shirt sleeve and the car parked on the front lawn. Alt-A folks also work 40-hrs/wk, but they are likely hustling along the way counting on breast implants rather than the college degree for additional opportunities. Prime folks are the ones who work 40-hrs/wk and probably have a four year college degree. I see the Alt-A folks simply tossing the keys on the kitchen counter when they realize that they are too far upside down; the Alt-A paper will go bad nearly as fast as subprime. The elephant in the room are the prime HELOC borrowers. They are the voters and the ones who make society function day in, day out. They are not going to lose their middle-class membership without political repercussions. The real losers will be the Asian savers, and the Yankees with reckless 401k account managers.
Katrina death mask
Artist races bulldozers to capture essence of home before it is razed
By Cain Burdeau
ASSOCIATED PRESS
July 15, 2007
NEW ORLEANS – Artist Takashi Horisaki is about the only person left in the Lower 9th Ward trying to keep bulldozers at bay as he labors to create a carbon copy of one of the few homes left in this sad and crushed corner of New Orleans.
http://www.signonsandiego.com/uniontrib/20070715/news_lz1h15artist.html
The ravages of inflation are hitting the Manhattan apartment market. (But this could also perversely be the effect of homeowner “shorts” trying to stand clear of falling knives in the owner-occupied market!)
Manhattan rents climb 4 percent
BLOOMBERG NEWS SERVICE
July 15, 2007
Manhattan landlords raised rents in May for studio and one-bedroom apartments by an average of 4 percent as graduates flocking to the largest U.S. city seeking work boosted demand for housing.
http://www.signonsandiego.com/uniontrib/20070715/news_1h15nycrent.html
Mortgage scams unveiled in new book!
BOOK REVIEW
A lender reveals secrets borrowers need to know
By Robert Bruss
July 15, 2007
If you are a home buyer, homeowner, real estate agent or involved with the mortgage industry, “Mortgage Rip-Offs and Money Savers” by Carolyn Warren will be an eye-opening read. The author knows the residential mortgage business as an insider, having worked in retail and wholesale lending as a bank mortgage loan officer for a direct lender, a mortgage brokerage, a finance company and a nationwide home-loan lender.
http://www.signonsandiego.com/uniontrib/20070715/news_1h15brubook.html
Undue pressure takes its toll on honest appraisers
By Emmet Pierce
STAFF WRITER
July 15, 2007
Tired of being pressured to raise appraised home values to help real estate loans win approval, longtime La Mesa-based appraiser Sara Schwarzentraub is steering her business away from work with mortgage brokers.
http://www.signonsandiego.com/uniontrib/20070715/news_lz1h15apprais.html
I wonder what took her so long..
I posted up the results of a 15 property auction held yesterday in Pensacola, Florida in the Local Observations Thread.
Firefighters battling more brush fires
Additional equipment, staff sent to deal with faster-burning blazes
By David E. Graham
UNION-TRIBUNE STAFF WRITER
July 14, 2007
SAN DIEGO – If it seems the number of brush fires in San Diego is rising, you’re right.
This year, through Wednesday, city firefighters have gone to about 30 percent more brush fires than either of the previous two years: 303 compared with 236 for the same period last year and 232 in 2005, according to San Diego Fire-Rescue Department records.
http://www.signonsandiego.com/news/metro/20070714-9999-1m14brush.html
This is one of the sociological aspects of the blog that I like to consider: the effects of the housing bubble on the environment. We’re seeing it here in FLA, unusually dry weather for this time of year. It’s not that it isn’t hot, in fact it is hotter than I can recall, hotter than last summer at this time, that’s for sure. But the humidity has been lower and there have been fewer rainstorms.
I’ve been accused of being a tree-hugger, but the reality is, you have GOT to have trees and plants. You can have development, but not the willy-nilly build-it-anywhere sort of development that has accompanied the bubble. Trees and plants clean and help create air, moisture, etc. I used to know a couple out in CA who collected various kinds of exotic trees and planted them on their property and created a micro-climate of sorts. Cloud formations and mist would concentrate over their property, to the exclusion of other homes in the neighborhood, providing some moisture in an otherwise dry environment. It also helped keep the house cool.
“…the effects of the housing bubble on the environment.”
A key effect is to push development into outlying areas around urban centers which are not very suitable for residential development due to environmental economic factors, including:
(1) in situ value as wilderness or open space;
(2) contribution to urban sprawl from building there (with environmental consequence of forcing more long commutes, traffic congestion, greenhouse gas emissions, etc);
(3) placing more residential areas into hazard zones (e.g., forested areas prone to wild fires (or arson fires); cougar habitat).
palmie,
You’ve got it the other way around…
What are the effects of the environment on the housing bubble?
A few days ago there was somebody from your neck of the woods, complaining about crummy water pressure in his $500k house…
What do you suppose causes low water pressure?
Could it be a lack of water?
Water=Wealth
I was wondering about that, but Neil mentioned that the guy just needed to make some adjustments to his plumbing system. Also, a buddy of mine had those plastic pipes that burst when the water pressure was increased in his neighborhood.
I now agree with your earlier springtime premise of lack of water in FLA. Unfortunately, your prediction seems to have come true, we have not had the rain we usually have in FLA, at least by my observation. Very, very unusual and spooky.
And, if water = wealth, watch the French. A couple of French corporations are into the water business in a big way.
Too add a little more to this issue, I’m thinking of the failed “experiment” that took place in Florida many years ago, (1950s, I think and actually it started even earlier), where the Army Corps of Engineers created canals to drain parts of the Everglades and divert much needed water to the Atlantic Ocean. That cost the taxpayer a nice piece of change. Well, over the years, it was realized that this was a bad idea. So now, it is costing the taxpayer BILLIONS to restore the Kissimmee River. Of course, it is only a partial restoration, because of the homes and farms that would be inundated under a full restoration. As a taxpayer, I am really tired of first paying for stupidity and then paying for the correction of the stupidity.
Palmy, the entire microclimate of places changes re. the planting or reduction of vegetation (as GetStucco points out). Denver is one such place, it’s become much more humid since all the trees were planted. The early pioneers had a saying that “rain follows the plow,” which was partially wishful thinking, but had a grain of truth to it. In the deserts of SE Utah, we’re seeing climate change (or whatever you want to call it) in a very obvious way with changes in plant (and animal) communities. Archaeologists (of which I’m one) have studied pack-rat middens and found that the region of Arches National Park was once thick with Douglas fir trees, so it’s not the first time the climate has changed in a big way. BTW, if anyone was in W. Colorado during the past week, they would’ve seen what smoky skies do to the weather - the fire in Utah that burned nearly 400,000 acres left us all crying - it became hard to breathe, very hot, very oppressive. I’ve never seen smoke so thick from a fire so distant (300 miles). It blanketed the entire W. part of the state (can’t speak for the E. part).
“Archaeologists (of which I’m one) have studied pack-rat middens and found that the region of Arches National Park was once thick with Douglas fir trees, so it’s not the first time the climate has changed in a big way.”
The value of archaeology has been way underrated, IMHO. People don’t realize that it is not just about history. Far more. You’ve just pointed out the major economic and historical usefulness of the profession. If the stuff really hits the fan, it will be archaeologists who will be telling the population how things were done in the past in order to survive.
Problem is, nobody listens. For example, archaeologists know what happened to the Anasazi, but everyone likes the mystery of the “Missing Anasazi.” We also can talk about what climate change does to populations, but people don’t want to hear it. Everyone that lives in a region where they have to water their landscaping (unless they’ve gone xeric) should read Marc Reisner’s “Cadillac Desert.” John Wesley Powell knew all this, but the powers that be refused to listen, backing the huge water projects that resulted in the cities of Phx and Lost Wages. My dad worked for the Bureau of reclamation on the big dam projects, and even he, conservative as he was, knew we shouldn’t be growing these cities with our limited water.
Well, climate change is what happened to the Greenland settlements, as I understand it. Wiped out by dipping temperatures. Interesting that it seems to be returning to what it once was. People used to say that “Greenland” was a misnomer, but in fact it was probably once a lot warmer and therefore had more “green” land instead of glacier.
“I used to know a couple out in CA who collected various kinds of exotic trees and planted them on their property and created a micro-climate of sorts. Cloud formations and mist would concentrate over their property, to the exclusion of other homes in the neighborhood, providing some moisture in an otherwise dry environment. It also helped keep the house cool”.
Now that is just not true or even possible unless they had hundreds of acres of property. Any clouds or mist that were created would be moved by the winds someplace else. The only way this would could work is if the property was in a canyon and this would only work in the early morning hours. Once convection starts the clouds build up higher and higher and are then moved by winds at various levels in the atmosphere.
This would violate the laws of physics and that does not happen on mother earth!
“The only way this would could work is if the property was in a canyon and this would only work in the early morning hours.”
In fact, it was in the early morning hours and I should have mentioned that. They were on a hillside. Five acres of property in a sort of “dip”. I’m not saying they had a rainforest, you know. Just a little cooler, and mistier. Made sense to me. We have micro climates all over Florida, why not CA?
I wonder how many scandalous tell-all books are going to be forthcoming from those who have lost their place at the trough.
I’m curious if anyone has thoughts about the NYC market? There was an article in the NYTimes recently about how the NYC market is still rising because of wealthy foreigners buying multi-million dollar pied-a-terres here, hedge fund managers, etc. Supposedly the luxury market as well as the entry-level market (i.e., $300k studios) is still strong, but there’s “weakness” in the middle. I’m looking for info about that weakness, and also… NYC can’t buck the national trend forever, can it? Prices here are absolutely insane. People are still trying to flip apts bought in 2005 for twice what they paid.
Another FB bites the dust!!
http://sandiego.craigslist.org/zip/374126455.html
Awesome. I wonder if the squirrel food is made in China?
Got Gerber Baby Food Organic Oatmeal?
I didn’t see any post here but OC Register had it on front page yesterday:
Delinquent Taxpayers owe $160 Million.
3.8% of local property taxes were uncollected as of May, the highest percentage in 11 years. [That's since 1996, the end of last downturn?]
Anyway, it was posted at OCregister in July 12 but printed on 14th edition. Here’s YOY changes
year dollars vs homes (YOY)
06-07 +54.4% +25.7%
05-06 +11.5% -4.2%
04-05 +18.2% +5.0%
03-04 -6.6% -8.1%
02-03 [base line]
Absolutely!
‘You can have development, but not the willy-nilly build-it-anywhere sort of development that has accompanied the bubble.’
I have watched and still am watching the most horrifying, idiotic, short-sighted things happen, all for greed, trying to jam in the houses, many as you can, where ever, no matter what. Builders paving wetlands–which filter water that flows into the Puget Sound, or into wells and aquifers, for Chrissakes, where people get their drinking water out of?! They cover up small streams and other hydrogeological systems–which channel and manage stormwater–you know, stormwater? Rain out of the sky? Lots and lots and lots of it? That stuff that can create a new indoor pool of what used to be your basement? Developers cut down all the trees on a site, razing it to the ground, to jam in more houses. Well, the soils around here are problematic, many areas have very poor drainage, and those large anchoring roots of mature trees were what kept the soil where it was, and the water infiltrating maneagably. 2′ little bald twigs jammed along the sidewalks just don’t help too much, and neither do the colorscaped petunias. Flooding problems in many new subdivisions are becoming horrendous, particularly when all the impacts add up and join with the NEXT subdivision, and so on and on.
Not to mention your earthquake potential.
Yeah! Forgot to add that one, too! Thanks, losty.
And when Mt Ranier blows.
Interesting inside view of the mortgage industry I found on seattle bubble…
http://www.tickerforum.org/cgi-ticker/akcs-www?post=431
I think that’s a very interesting post. The guy’s no rocket scientist, but he has a way with words (some excerpts, copyrighted by the blog):
“I own a mortgage shop, I myself stil orginate loans and have for over 10 years and so I thought I’d chime in here on what’s really going on.
In a down market it’s not at all unusual to eat upwards of 40% of the principal of a loan because of the term quick sale price, ie a house worth 100k in a down market might only command 60k if it’s torn up and the market is weak and investors for various reasons have great incentives to clear these things off as fast as they can, they won’t fix them up, they won’t dress them up they just want them gone.
That’s bad enough but oh it gets much much worse.
I see day to day about 4 applications for loans myself, and upwards of 70 company wide I can look at if I want, that’s pretty small in the scheme of things but being I do it every day you get a feel for this stuff and I can tell you that never in my career have I seen anything like this in fact I’m scared out of my ever loving mind!
I market to Subprime customers who have the 2/28’s all the time and here’s what I’ve found so far.
About 20% or so are can be saved into a better product and made whole, they have income, they have equity and their credit while marginal is good enough to get them out of the death arms, but almost 80% are walking foreclosure zombies.
This is depression sized stuff no doubt in my mind, not one shred of doubt we are headed off the cliff, no one can stop this their aint that much money, only a turn around in the market could save this and……..
I’ve also never seen guidelines ratchet up this fast in my life, 80/20’s are dead, gone annihilated and My Community, also gone for all intents and purposes because the risk premiums comming into the pricing makes buyers go…. WHAT!!! I thought rates were 6%, your saying 7% plus 1% more in PMI? Well I can’t afford squat now…… which is the 2nd shoe dropping.
People with 2nd mortgages can forget refinancing them, people who bought the last 2 years might be toast with perfect credit if improperly placed in an exploding arm just due to being underwater from lack of appreciation, alt a toast, it’s all freaking toast!!!
It’s biblical in scope and if I read what they did with CDO’s and derivatives OMG it’s the end of life as we know it.
You mark my words, this is going down in October in the market, the housing sector will lead down, not lead more like an anchor thrown off the boat that has a chain wrapped around the United States economy.
The MEW’s are done, people are actually paying money at close, those that can to refinance out of these abmoninations of evil, and they dance in to sign again those few that can, there is not cash out, no one has any equity, it’s all baked out, arb’d out if you would.
I have buddies that own bigger shops, one is out of business now due to buybacks, he used to give me a ration of crap for never stepping up to be a mortgage banker, I told him for years that they don’t pay enough more to make it worth holding that bomb for them.
Builders are in all out panic mode which dosen’t bother me too much as I’m not fond of them except to say that it’s never a pretty sight to see true fear in someones face, outright fear.
Realtors, of course think the bottoms just around the corner which of course means it’s the exact opposite, sorry for the brief amount of derision towards them I can’t help myself.
I’ll just say that my industry did fail utterly to police itself, those of us not doing wildly fraudulent lending should have stood up and shouted about it more, done more to protect the industry but we didn’t and it’s done now, I suppose we deserve this but not all of us took adavantage, just not enough said anything to stop it, to be fair though we were vastly outnumbered, after they allowed net branches it was like a plauge of new loan officers piling in completely amazing and it ruined everything.
In October the earnings will hit for 3Q, that’s where all the music will stop IMO, the customers are charging charging charging now but that should tail off by then due to the horror show statements that will start comming through and the realization they can’t pay it off again.
It may last longer than October but we will not get through 2008 without the wall comming, October just is a guess of mine, lot’s of crashes happen then, I think it’s psychological with winter comming on and all.”
“It may last longer than October but we will not get through 2008 without the wall comming, October just is a guess of mine, lot’s of crashes happen then, I think it’s psychological with winter comming on and all.”
October is my guess, too, but I don’t think we’ll see the major fallout until Q1 2008. Happy New Year, everyone!
Agreed, a lot of bad news is getting whitewashed this summer - as should be expected, but by fall the first signs of despair might be in the air. We’ll have to watch those retail sales closely - next on deck: “the back to school” bounce - will it happen?
These guys are too young to know the history of real estate. In previous downturns (in Ca. that would mean the early 80’s and early 90’s) it was the same story. The loan outfits closed shop, the sales slick broker were slackjawed and never thought it could happen. Contractors and spec builders used to go home and puke at night, and there were divorces and BK’s with almost everyone.
The problem is, the people on tickerforum are WAY too young to know this stuff, they were in elementary school when it happened. Changes are they are in their late 20’s or early 30’s. You can look at what is happening to them right now as their “formative years”…hope they learn so they don’t get burned with the next cycle.
Cheers! lol…This Bud’s for you…now go home and puke!
Forgot to also rant about the REtards who cut down all the anchoring trees and move the soil around in order to get a view of the Sound, from a new house built on an unstable steep slope. See, that’s likely to lead to a ‘mass wastage event’. What we may term a ‘landslide’, or else possibly ‘a future visit from local news crews, where they put on sad faces and peer over the edge of that bluff at the mangled wreckage of what used to be your house with all your stuff in it and maybe you as well.’
I wouldn’t care, if it was the REtard who built the thing, but they of course live somewhere else, probably on a stable slope. They merely sold the future sled to some ignorant hopefuls from California and then got out of there.
I dunno what to say, except that I agree wholeheartedly with everything you said. And I wuz tellin’ a buddy of mine about your post on meeting with the developers and asking them for PowerPoint presentations. I about laughed like a hyena.
While standing in line with my son at Legoland yesterday I overheard a couple talking about gas prices. The lady goes “I’ve never heard of anyone not going on vacation because gas was too expensive.” I wanted to say, “yeah, people aren’t going on vacation because the housing ATMs have all dried up.” Just made me chuckle.
Gas yest. in W. Colo jumped 30 cents/gallon at some places, others stayed the same. Weird. $3.16 to $3.49, regular. Some stations within a few blocks of each other. Haven’t checked today to see if everyone’s up (I suspect they are).
KPMG sees pace of M&A cooling
By Lina Saigol, European M&A Correspondent
Published: July 15 2007 22:01 | Last updated: July 15 2007 22:01
The current frenzy of mergers and acquisitions is about to peak as the number of new deals slows, KPMG has warned.
While several large financings for leveraged buyouts have been put on ice due to turmoil in credit markets, KPMG said rising valuations are proving a headwind for other deals.
Stephen Barrett, international chairman of corporate finance at KPMG, drew parallels with the height of the dotcom boom, when the average deal size rose but the number of deals fell.
“Despite conservative balance sheets, appetite for deals appears to be slowing,” Mr Barrett said. “The last time we saw such a disconnect was in 2000.”
http://www.ft.com/cms/s/643b6094-32f6-11dc-a9e8-0000779fd2ac.html
Dragon’s Den
Published: July 15 2007 19:09 | Last updated: July 15 2007 19:12
Blackstone’s strategic investment from the Chinese government looks cannier by the day. It raised an extra $3bn for the private equity group when it went public, which went towards providing a bigger pile of cash for its founders and capital for future growth. It added a long-term strategic investor that has forgone voting rights – let alone board representation – for its 10 per cent stake. It also, potentially, gives Blackstone a new core investor when raising new investment funds.
Will it also help Blackstone do deals in China? The country could throw up serious private equity investment opportunities and Blackstone has been late to the game, opening its Hong Kong office only this year. In the short term, getting rubber-stamped by the government should give Blackstone some competitive edge. And Beijing will presumably want its investment in the buy-out group to do as well as possible.
http://www.ft.com/cms/s/a8319ab0-32fc-11dc-a9e8-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2Fa8319ab0-32fc-11dc-a9e8-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
“….An unprecedented surge in global demand is behind the 23 percent rise in food prices that the International Monetary Fund recorded during the last 18 months. “We haven’t seen anything on this scale before,” says Martin von Lampe, an agricultural economist in Paris at the Organization for Economic Cooperation and Development….
….The U.S. Department of Agriculture’s estimate for global inventories of grain are at the lowest level in 30 years in terms of days of consumption, says Carl Weinberg, chief economist for High Frequency Economics in Valhalla, New York…..
The risk, though, is that inflation could accelerate. Premier Foods Plc, the U.K. maker of Hovis bread, said July 9 it plans to increase prices. German brewers are also raising prices to compensate for the higher cost of barley as farmers switch to crops used for biofuels.
General Mills Inc., the second-largest U.S. cereal maker, plans a “mid-single-digit” percentage increase in Yoplait yogurt prices, Chief Operating Officer Ken Powell said June 28. That follows a smaller increase in cereal prices earlier in the month by the Minneapolis-based company.
Pessimistic Outlook
With prices of many everyday items starting to rise, the danger is that consumers and companies will become more pessimistic about the outlook for inflation.
“Nothing affects consumer inflation expectations more than food,” says Richard Yamarone, chief economist at Argus Research in New York. “Not everybody has to drive to work, but everybody wakes up and has breakfast.” …
….When policy makers from some 50 nations met on June 24 in Basel, Switzerland, he said in an interview in Istanbul, “governor after governor all complained about food prices.”
Bloomberg July 16
http://tinyurl.com/2fzsxr