A Natural Progression In California
The San Francisco Chronicle reports from California. “The U.S. subprime mortgage mess escalated into a full-blown global financial crisis Thursday - making credit harder to get from Paris to San Francisco. ‘What you’re seeing is a classic credit crunch,’ said Christopher Thornberg, a Los Angeles economist. ‘Consumers have been running on fumes, using their homes to finance extravagant lifestyles.’”
“Kurt Herrenbruck, a mortgage planner in Berkeley, saw one client’s financing evaporate in the space of three days last week.”
“‘The client is well-heeled, with (a high credit score), and $500,000 in the bank, making an owner-occupied purchase with a 25 percent down payment,’ Herrenbruck said. ‘He needs a no-doc loan (meaning he cannot provide documents to prove his income) because of an employment hiccup.’”
“Herrenbruck said Wednesday he found two lenders willing to make a no-document loan. But by Thursday it was down to one. And Friday, when his client’s offer was accepted, there was none. ‘He can’t buy even though he had the strongest profile of any no-doc: superlative credit, money in the bank and a whopping down payment.’”
The Contra Costa Times. “Mortgage agents in the East Bay scrambled on Thursday to find alternative home loan programs for consumers who have been squeezed by a worsening credit crunch unleashed by the housing meltdown.”
“‘I’ve been in this business for a quarter-century and I’ve never seen it this bad,’ said Christopher George, president of San Ramon-based CMG Financial Services, a vendor of home loans. ‘This is huge.”
“‘We’re dealing with drastic change on a daily basis,’ said Scott Doruff, a certified mortgage planner (in) Fremont. ‘Lenders are pulling their programs off the shelf. If they still offer a program, they increase the cost the loan, charge more points, demand a higher interest rate.’”
“Some banks still offer jumbo loans. But they charge such a high rate that the loan effectively disappears, said Guy Schwartz, manager of CMG’s Walnut Creek office.”
“‘The bank prices it so high that they’re sending a signal: They don’t want to do the loan at all,’ Schwartz said.”
The Sacramento Bee. “‘There’s a lot of product this week that’s been taken off the shelf,’ said Brent Wilson, mortgage strategist with Sacramento-based Comstock Mortgage.”
“One Folsom-based mortgage official says that in the long run, tougher credit standards may be better for many buyers and U.S. savings accounts.”
“‘I think it’s great for the client,” said mortgage strategist Angela Talent. ‘It’s a little bit harder to qualify, yet you’re probably going to see first-time homebuyers seeing a need for money down. The national savings rate will start to go up. They’re starting to require more documentation and increasing (the buyer’s) reserves. It’s a natural progression.’”
The Santa Maria Times. “Rarely do you see a sale on brand-new homes with prices marked down as much as $30,000. Yet that’s what’s happening this weekend and next as Centex Homes conducts what it calls its Golden Opportunity Sale at the Gardens at Briar Creek in Lompoc.”
“‘We don’t build homes so they can sit there; we build homes to sell,’ said Andrea Bradford, director of marketing for Centex Homes. ‘If we can help someone get into a home who didn’t think they ever could, that’s good. And, of course, it’s good for us, too.’”
The Camarillo Acorn. “A soft housing market forced Taft Corporation, a real estate development firm, to reconsider its plan to build a mixed-use building on the corner of Oak Street and Ventura Boulevard in Old Town.”
“Kamyar Lashgari, president of the Malibu-based real estate firm, confirmed earlier this week that a downturn in Southern California’s housing prices means the property will remain vacant a while longer- perhaps for another two years.”
“To make the development profitable, Lashgari said, the two-bedroom townhouses would have to sell for $575,000 to $650,000.’
“Without the housing portion of it, we’d be overburdened with the housing expense,’ said Lashgari, who bought the land two years ago for an undisclosed amount.”
From KGET.com. “Brian Meares thought he had signed a lease-to-own contract with Crisp & Cole. Two weeks ago, the Meares learned their house is in default, and now they’re holding off on making any more payments. ‘They’re not paying the mortgage, or not paying enough. We’re paying them, so they should be paying the mortgage,’ he said.”
“Valeri Gusman worried about the value of her home, purchased for $335,000 a year ago. ‘I just got on Zillow.com last night, and it was down to $310,000,’ Gusman said. ‘There’s so many empty houses and so many people coming and going…one house was vandalized…we don’t know who’s living there. Are they coming after my house next?’”
The Orange County Register. “July’s home-selling stats from DataQuick showtThe median selling price for the 22 business days ended July 25 is $1,000 above a record set in June. Still, sales are off nearly 19% from a year ago and July will likely be the 22nd straight month where the buying pace failed to meet the previous year’s activity levels.”
The Daily Bulletin. “The new housing market may not be strong, but what there is of it in San Bernardino County is concentrated in the High Desert (according to)a study by MarketPointe Realty Advisors.” “In fact, 66 percent of proposed single-family detached homes in the county in the second quarter of 2007 were in the Apple Valley/Victorville area.”
“A slowdown in sales of homes already built has resulted in increased inventory in the county. MarketPointe reports that 2,334 units - about a five-month supply - are currently being offered for sale and are unsold.”
“Part of that is a tightening in the credit market. Last week’s new guidelines for lenders have made it much tougher, particularly for first-time buyers, to get mortgages. ‘These guidelines will add at least a year to the current slowdown,’ said Steve Johnson, director of MetroStudy. ‘They’ll keep a lot of people from buying homes.’”
“The total number of both types of units currently in the planning process in the county is 145,830 spread among 1,214 projects. More than three-quarters, 76 percent, of those are single-family units.”
“All over the capital region, home builders are trying smaller lots and shaving extras to bring down prices. But some El Dorado Hills architects are unveiling the ultimate, a return to something not seen here in years. It’s the $150,000 house.”
“This is not as far-fetched as you might think. Prices for new small-lot houses already are dipping to $230,000 in parts of the region.”
“Credit the housing slowdown for giving an architect time to think. ‘Based on what we know to be true on sales of homes now, $150,000 is very achievable,’ says Kerrin West (a) partner in charge of Iowa-based BSB Design’s Sacramento division.”
“West believes ‘the market for this is huge.’ ‘We’ve got so many folks priced out of the market,’ she says. ‘Also, on the flip side, people are making too much money to qualify for low-income housing.’”
From CNN Money. “The number of homes for sale around the nation jumped over the past year, according to figures from ZipRealty. In Los Angeles, inventory has soared since Zip started tracking it two years ago.”
“The number of homes on the market has risen from about 30,000 to more than 106,000. One must consider the population of the area it covers, however, which is nearly 13 million people.”
“In a press release Wednesday, NAR’s senior economist, Lawrence Yun, said, ‘Mortgage disruptions will hold back sales over the short term, but long-term fundamentals are favorable. A modest upturn is projected for existing-home sales toward the end of the year with broader improvement to include the new-home market by the middle of 2008.’”
“Before that happens, motivated sellers may have to slash prices to move properties. Already, in Sacramento, 48 percent of sellers have discounted from their original listing price. Some 47 percent of Orange County, California sellers have dropped their price and more than 45 percent of sellers in both Boston and Phoenix have done the same.”
undocumented income?
obviously crooks. or dealers.
Not neccessarily…
OK, but more than 50% for sure.
No, 50% would still be too high, crooks and dealers don’t really deal with banks. Way too much daylight for them. It’s been my experience that they prefer to deal with private equity lenders. Folks like az_lender but on a bigger scale.
An “employment hiccup.” What is that supposed to mean? Employer couldn’t provide documentation? IRS refused tax return information? What?
One would think if it were just a “hiccup” then he could spend a little time sorting out the issues and provide documentation. For a rather large difference in the interest rate he’d pay, you would think it was worth it.
But Noooo - he needs a “no-doc” loan. Whatever.
Employment hiccup - he could be a contract engineer. Or some high paid doctor. The more your income, the more unstable your job is. I knew contract engineers who were without a job for several months several years ago. But they tend to have high incomes.
I guess that means if you do not have a stable income, you have to buy your house with cash. It’s no biggie for me, I’d keep renting instead. This new requirement is obviously going to further pressure existing home prices to fall.
Five years at Soledad ? A hic up you say. Freddie and Fannie will take anything here below $417k. Sellers, get ready to lower your prices. Buyers step up to the plate.Owner carrybacks over conforming. Regulator did the right thing by not increasing. They still haven’t cleaned up Raines’s mess.Come back when they do.
Methinks it’s undocumented because if they actually documented it, they wouldn’t have enough to make the loan payments. Seems to me anyone with an employment history should be able to document some income via previous tax returns, “hiccup” or not.
Or am I missing something here?
or he cheats on his taxes.
Or am I missing something here?
No, you are correct. If he had income, they would loan him money, especially from the bank where he currently has the supposedly $500,000 deposited….
LOL
From the original post:
“…[M]otivated sellers may have to slash prices to move properties. Already, in Sacramento, 48 percent of sellers have discounted from their original listing price. Some 47 percent of Orange County, California sellers have dropped their price and more than 45 percent of sellers in both Boston and Phoenix have done the same.”
Last year, a computer programmer created a website to track price reductions as reported in the Tucson MLS.
Needless to say, the local Realtor[TM] cartel was not amused. The programmer got a nice lawyer letter saying, in effect, take the site down. Or else.
He took the site down.
I thought, at the time, that such a website was performing a valuable public service. But the local REIC had a different opinion. And our local MSM is still waking up to the fact that Something Is Not Right on the real estate front.
TOTAL OBSTRUCTION OF YOUR FIRST AMENDMENT RIGHTS!!!!!!!
I’d sue the livin’ sh!t out of them!
I don’t think so…pulease.
yeah.. although i don’t know what they are, there’s gotta be restrictions on the use of MLS info.. it being proprietary and all.
It is there data, and you only get access if you play by their rules and use it for what they say you can use it for.
This is why we need to take the information OUT of the hands of the Realt-hos.
“This is why we need to take the information OUT of the hands of the Realt-hos.”
This is nonsense, how do you propose doing that. What part did you play in collecting it. How much have paid for it’s use on a continual basis?
If you want it go collect it. It’s all out there for you to collect.
BAH, enough of this there are bigger things to discuss and I’d rather read your posts which are pretty good then to debate over nonsense.
By throwing their weight around, Realtors have a constructed a virtual monopoly on RE market sales as well as the info..
Because of their deliberate misuse of the info, and the way this misuse helped pump up the bubble, i think this situation is coming to an end and will be corrected.
Oh… be serious. I mean really. Look at it like this take Ben’s blog for example. Let’s assume that Ben is a reasonably intelligent individual (snicker). He has invested time energy and money into developing this blog into something quite a few of us, myself included enjoy and profit from. I mean Txchicks posts alone if you’re paying attention should have made quite a few folks a tidy bit of change, smart woman…but I digress.
Anyway, one day I get the bright idea that a very good book can be made out of this or for more clarity, that I can make a reasonably good deal of profit from a venture if I could obtain all the information from this blog.
So instead of developing my own blog, harvesting my own batch of intelligent and loyal readers, I catch a plane walk up to his front door at dinner time and tell him to give me all his information, all his stats, contacts etc etc. So that I solely may profit from it. Because he has all this information and I don’t think he should because I’m to lazy or stupid to garner the information my self and he shouldn’t be the only one to profit from it because I don’t think it’s a good idea, because he by his actions has in your words constructed a virtual monoply on profitable ventures from this blog as well as the info ie: cornered the market.
Do you think Ben is going to kick open his door, sit me down in his favorite easy chair, run grab me a beer out the fridge because I look thirsty, unhook his servers, box them up and Fed-Ex them to an address of my convience and pay for my plane ticket home?
How do you really think that’s going to go???
Be serious if you want the information go find it yourself and quit worrying about the MLS and Realtors all the info is out there you just have to spend the time, energy and money researching it.
Be serious if you want the information go find it yourself and quit worrying about the MLS
By your logic, why should information on share prices as traded on exchanges be available to the public?
Maybe NYSE should conceal and “massage” the numbers, to change market participants perceptions, in order to benefit from keeping the sheeple in the dark.
There’s a reason stockbrokers are heavily regulated. Since real estate for many people is the biggest investment of their lives, I don’t see why “Realtors” should not be regulated just as heavily, and with similar level of scrutiny and punishment for defrauding the public.
You’re kidding right… All sale information is pubically available at any county recorders office.
i do see why ““Realtors” should not be regulated ” up to now..
But i think it crosses the line when Realtors monopolize the trade.. and they now should be regulated, including submitting stats on sales with oversight.. and, imo, sooner or later will be.
“…But i think it crosses the line when Realtors monopolize the trade…”
WTF does that mean?
im not gonna argue the monopoly point.. Anyway, this aint new stuff..
“In 2005, this prompted the Department of Justice to file an antitrust lawsuit against NAR alleging its MLS rules in regard to these types of limitations on the display of data were the product of a conspiracy to restrain trade by excluding brokers who used the internet to operate differently from traditional “brick and mortar” brokers. For a description of the DOJ action, see Antitrust Case filings for US v. National Association of Realtors.[4]. Action is pending.
http://en.wikipedia.org/wiki/Realtors
All sale information is publically available at any county recorders office.
Minus the useful bits, like days on market, incentives for sale, price reductions, etc., etc. That and the MLS data provides inventory numbers, which are otherwise not publicly available, and short of driving around counting for-sale signs, probably can’t obtained anywhere but the MLS.
The sale price and date in isolation don’t really tell you what you need to know about the market. And I understand from comments on this blog that even the sale price isn’t publicly recorded in some states.
I agree that MLS data should be subject to disclosure and oversight the same way that stock exchanges are.
joeyincalif-
You need to spend more time reading that lawsuit then quoting it. It’s not the Holy Grail you think it is for the average consumer. Actually if they are successfull which I doubt they will be it will do more harm than good to the average consumer. Look at the defendants in the case and then look at each business model and maybe you’ll get a little more understanding. While I agree that more oversight is needed which I think the federalization of a real estate licenses is the only cure. The MLS in it’s current form probably shouldn’t be tampered with for the benefit of the consumer. The fight from the defendants has nothing to do with keeping information from the consumer. A couple of calls to your local real estate agent whether you buy or not will more than likely get you what you need. It has more to do with saving their companies.
Seattleguy-
All one has to do is look at the tax bill, whether the sales price is recorded or not to figure out price.
seattleguy.. im not much interested in the details.. the the point of posting the link was about antitrust .. monopolies.. and evidently, i’m not the first to suggest NAR is one.
As far as the specifics of that particular case, it’s coincidental that it happens to refer to MLS info, which was the original topic of this thread.
evidently we do agree that oversight is needed.
NAR’s misinformation campaign played a huge part in bubblemania.. the pain for which will be felt nationwide and perhaps worldwide, and although i’m not qualified to say exactly how they should be changed, imho, things will change.
Well let’s not get confused greed played a big part in running this bubble and all involved are equally guilty. No one party played a huger part than the other.
This DOJ lawsuit is one of those things that one has to say be careful what you wish for. Actually you should be hoping they don’t win.
The internet is a good thing and everyone is looking at it as their savior. In the event these companies don’t get their way in this lawsuit all it’s going to cause is fractionalization of relevant data that you so covet. It’s not going to effect pricing why because the buyer doesn’t control the commission.
For instance if a broker doesn’t like the results of the lawsuit he simply disconnects from the MLS there’s no law holding him to it. He simply creates his own database for his agents and puts up a website. Zillow gets nothing, Redfin gets nothing, Zip Realty gets nothing, tell me how does it help you. The consumer becomes worse off then he was before. Because then he gets no information or information that’s totally controlled and manipulated by that individual broker.
As real estate gets harder to sell and becomes more expensive the discount rebate guys are going to float away into the sunset. They always do. You can’t give it all away and still stay in business it doesn’t work that way.
I have the capability now to take a deal from the cradle to the grave with no outside vendors if I chose. That doesn’t mean less money for me that means more money per deal because now I can collect all the fee’s. the loan fees, the escrow fees, and the commission. You want a rebate screw you I wait for the next guy to come along. Do you see how that becomes a bad thing if DOJ wins. If I want information I pick up the phone and exchange information with the broker down the street. Consumer gets nada. Or if I don’t like the Broker he gets nada tell him to bring me an offer and let the appraiser sort it out. Is the picture clearer now. Me personally if I was still active in the buy/sell I would love it. Would cheer the DOJ on.
Sure you killed a monoply but in the end does it work for you. Everybody whined about Microsoft, still king of the hill and going strong, making even more money. Same thing will happen here.
I know because it was tried before but wasn’t successful because the technology really wasn’t there, like it is today.
Zip, Redfin, Zillow are just auditioning for the Realtors desktop.
The only way the DOJ’s lawsuit is helpful to the consumer is if they de-regulate the entire industry. Not going to happen.
Income stream, why do you say this?
Comment by mrincomestream
2007-08-10 13:50:47
“Look at it like this take Ben’s blog for example. Let’s assume that Ben is a reasonably intelligent individual (snicker).”
I guess I don’t understand your comment.
sarcasm, I have much respect for Mr. Ben Jones.
I propose a First Time Buyers Guild (all rights reserved) whereby a small fee will allow you access to this kind of information collected by the Guild. This Guild will use guide and consult with eachother on how to effectly bring the housing market back to fundamentals and keep it there. Appreciation should be paid for by hard earned cash not by the mere acquistion of property.
good idea. very good.
The NYTimes, the Chronicle and the LATimes are all screaming their heads off about the credit crunch. People are finally panicking and the real navel-gazing is about to begin. Now we are seeing all these articles explaining how the mortgage market works, and what its vulnerabilities are. Yeah, thanks for the education, guys… after the nation has already flunked the test.
“A modest upturn is projected for existing-home sales toward the end of the year with broader improvement to include the new-home market by the middle of 2008.”
ROTFLMAO! Not after a day like today.
Perhaps it should read:
“… broader improvement to include the new-home market by the middle of 2015.”
Oh my! Miss Manner approves of a modest upturn…so much more presentable than a full-on out of control boom that reminds one of an overpainted skanky ho.
But Mr. Yun failed to take the following into consideration:
“Some banks still offer jumbo loans. But they charge such a high rate that the loan effectively disappears, said Guy Schwartz, manager of CMG’s Walnut Creek office.”
“‘The bank prices it so high that they’re sending a signal: They don’t want to do the loan at all,’ Schwartz said.”
So sorry, Lawrence, no modest upturn in 2008. Too bad for you.
I have to chuckle when the realtors neglect the credit market. There is no appetite for CMBS! Yes, the fed bought $38 billion today. All that did was bail out the rich from a bad investment; its not going to free up funds for jumbo mortgages.
I’ve posted on other blogs that I think conforming limits will be raised. But for jumbo? ROTFL. Time to walk in with a BIG down payment.
I stand by my assertion that a 25% down payment will be required in the darkest depths of this downturn. Well… I should have noted, I’m in California. There *everything* is jumbo. Bwaaa haaa ha!
Got popcorn?
Neil
Neil,
25%, no problem - Bank of America has reported more and more Californians are signing up for their “keep the change” program. I’m sure they will be accumulating massive amounts of cash from the change they would have otherwise received when ordering their non fat half caff tripple grande quarter sweet sugar free vanilla non fat lactaid extra hot extra foamy caramel macchiato at Starbucks. That’s how financially ignorant the average American has become - they feel good about spending as long as they are also “saving”.
This is
That keep the change program is only if you use your debit card……..I expect most are using their credit cards at Starbucks!
use the debit card 70 times and get $35 of your own money put into savings. use the debit one time when there are no funds in your account (maybe because of a new unannounced fee) and get a $35 NSF charge. yeah great way to save.
After we were ‘Volkered’ in ‘79 the long term residental interest rates went to the moon , ie 17%. In Pismo Beach over two years, only two houses sold with bank (S&L) financing, all the others, appx 99% were seller carrybacks. The ave. price of product was less than 100k. You bloggers might get what you want as sellers LOWER their prices. OK
Hey, Whats that money wiz Marie Barcelona got to say about all of this?
Have you seen the pie-hole on that wind-bag? She could suck down a softball with room to spare.
I’m not sure her mouth is really that big… She just has a micro-tiny head… So her eyes and mouth look HUGE in comparson to her tiny skull.
Oh Yeah… I also watched her on some question and answer show once. Holy smokes, she really is clueless. Did not know what the symbols Au & Ag stood for, but she can read.
Man, I hated chemistry in high school (I’m more of a math/physics person) but how can an adult who is an alleged expert on anything not know the chemical symbols for gold and silver.
Plumbum still makes me smile.
In the 1964 Presidential election campaign
Senator Barry Goldwater ran with the following slogan
AuH2O 4 64
Every good republican should know the symbol for gold.
Aurum est potestas.
Remember she is asking questions on part of an ignorant public, not on part for her self.
I wouldn’t fault her for not knowing Ag (Au is another story). But Mark Haines revealed this morning that he didn’t know how open market operations worked. The only guy who seemed to grasp it at all was Liesman, and he seems to be learning on the fly. They ought to pull one of the high-school educated guys from Queens who works on the repo desk at one of the broker-dealers to come on and ’splain it to ‘em. Those guys are the nuts and bolts of Wall Street.
BTW, there are 21 Fed primary dealers who deal directly with the Fed in open-market operations. (When I worked on WS way back when there were 30-some-odd.) Here is the list:
BNP Paribas Securities Corp.
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co., Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Countrywide Securities Corporation
Credit Suisse Securities (USA) LLC
Daiwa Securities America Inc.
Deutsche Bank Securities Inc.
Dresdner Kleinwort Wasserstein Securities LLC.
Goldman, Sachs & Co.
Greenwich Capital Markets, Inc.
HSBC Securities (USA) Inc.
J. P. Morgan Securities Inc.
Lehman Brothers Inc.
Merrill Lynch Government Securities Inc.
Mizuho Securities USA Inc.
Morgan Stanley & Co. Incorporated
Nomura Securities International, Inc.
UBS Securities LLC.
Now, would someone please list the names of the member of the PPT?
Watching the MSM talking heads throw around financial jargon while the market numbers spin up and down in the background — priceless.
Whenever I see Ms. B, I’m thinking Sheri Oteri in her cheerleader outfit.
If someone has $500K in savings, 25% to put down, and an “employment hiccup” why can’t they at least provide documentation of current employment to get the loan? Or is it, perhaps, that the hiccup happening right now? In which case, would it really be wise to loan money to someone presently unemployed?
That plus the fact that prices in the Berkeley area are just stupid. It’s not rocket science that a major correction is in its future because of the jumbo rate.
If his employment situation is unstable enough to require no-doc, why would the guy funnel $500k into an extremely non-liquid (not to mention depreciating) asset? Geez, you’d think a guy with that much money on hand would, I dunno, read the newspaper occasionally or something. The housing crash isn’t exactly hidden anymore.
I doubt the $500K is from savings. More like the parents passed away and some middle-aged dead head burnout who occasionally “works” as a chakra masseur has inherited the money to buy a house.
LOL that sounds like the more reasonable scenario to me… that or something very close too it.
LOL. I was thinking maybe a life coach or feng shui expert.
Chick, you are truly EVIL. Why? Because you took the words right off of my keyboard.
“…provide documentation of current employment to get the loan?”
It will depend largely on your employment history. The self-employed and form-1099 folks are at the bottom of the economic food-chain; no more loans for these folks! The downturn in labor employment will also hit these folks badly. Thank God there’s Bull’s-Eye to add some flavor to the Alpo.
Oh the irony! That pretty much takes the realtors out of the game, don’t it??
The self employed just don’t know how to make it look like they aren’t self employed. Set up a company for themselves, which that should have already and then pay themselves a “wage”. Take the pay-stub or W2 to the bank. When they ask for your employer give them your company name.
Now… that is a REALLY good way to get yourself in a bad position if your company fails, but it would still let you get a loan (even with full dock).
The self employed just don’t know how to make it look like they aren’t self employed. Set up a company for themselves, which that should have already and then pay themselves a “wage”. Take the pay-stub or W2 to the bank. When they ask for your employer give them your company name.
Now… that is a REALLY good way to get yourself in a bad position if your company fails, but it would still let you get a loan (even with full dock).
‘He can’t buy even though he had the strongest profile of any no-doc: superlative credit, money in the bank and a whopping down payment.’”
Above and beyond his (apparent) lack of employment, he can’t get a loan because he’s trying to buy a depreciating asset.. i think that’s the key..
Someone changed the locks and the old keys don’t work anymore.
So… since the Fed injected cash today when the DJIA was down 2%, and now it’s back to even, looks like we got a 2% inflation in a DAY.
Real life experience :
I just heard a coworker on the phone with his realtor talking about how the hell he’s going to get a mortgage. He’s got 10% down and a decent job, but is hoping to get a second for 10% to get up to 20% down and get the original loan under $417k so Frannie can buy it, and thus get funded.
I’m thinking his offer might fall out of escrow.
I think you’re right.
I think you’ll see a lot of houses priced at $417K now.
Maybe with an additional request for “any cars, jewelry, clothing, furniture, or sporting goods the buyer has with an equvalent value of $50k”.
That’s what I said a week ago. Sooner or later, all houses will be priced at the local FHA maximum +10%.
That’s funny, I have family that inherited a house in Fallbrook CA.
Total windfall, no mortgage. Priced at $417K + 10% downpayment.
Pretty smart if you ask me.
Anyone know what it means to the economy or real-estate sector by the Feds infusion the market with $35 billion….. a day after teh European bank pumped in $124b? is $35b significant? Are there long-term or medium term concerns?
Check the “this is not normal” thread, down one post on the main page. I did my best to explain my take on this.
Fed lending money to banks to let them meet their margin calls, in hopes that the banks will have enough money left when it all unwinds to pay back the Fed.
I posted this link yesterday, but it is worth posting again. A terrific explanation of the causes of liquidity vs. credit crises from Roubini:
http://www.rgemonitor.com/blog/roubini/
In a nutshell, fundamentally we have a credit crisis meaning that many players are actually insolvent (assets are worth less than debts). But the fed and ECB are lending money as if this is just a liquidity squeeze, a situation in which financial institutions are solvent but unable to liquidate assets fast enough to meet margin calls.
The Fed will have to inject huge lumps of cash daily for the next several years to keep insolvent financial institutions from failing… giving a junkie dope every day as treatment for withdrawal symptoms.
The Fed infusions yesterday and today was by “repos”, this got any worried bank off the hook of any MBS for “3 day repo money”. The Federal reserve accepted this agency paper at “par”. In three days the Federal Reserve can buy back with paper in kind, US Treasury Bonds. This temporarily solves the financial crisis looming for the banks, was any bank solvent?
I posted links to this below.
From Norris at the NYT:
Banks that are worried about their own liquidity decided this week to increase their reserves, which they can do by borrowing from other banks. Loans on such rates rose as a result of the added demand. Both the federal funds rate — the rate on loans of reserves between American banks — and the London Interbank Offered Rate leaped sharply yesterday.
The Fed — which conducts monetary policy by focusing on the fed funds rate — was forced to inject money into the system to bring the rate back down to its targeted level. And the E.C.B. lent almost 100 billion euros ($130 billion), to European banks.
http://www.nytimes.com/2007/08/10/business/10liquidity.html?_r=1&adxnnl=1&oref=slogin&ref=business&pagewanted=print&adxnnlx=1186776160-23t7S/D2EMaiDCTGbZLJLA
now, if i was a bank and wanted to increase reserves, why not just raise savings/checking account interest to something more than a freakin 0.0000025%???
now, why would you do that, when the taxpayers can be “gently persuaded” to put money into your bank at no cost to you?
I have savings and checking at Washington Mutual…. is my money safe sitting in the bank?
If WaMu needs to tap some Fed fund source… but may not be able to later when this spirals, if it spirals, will I still have access to my funds? really… I mean, should I start thinking of cancelling my direct deposit and cashing my pay checks?
just keep it under 99K per FDIC bank (i believe 250K is possible if you’ve got benificiaries) and it’ll be alright. WaMu is beyond huge and will be one of the last to go.
FDIC has had to come to the rescue a ton of times and has never failed to reimburse an account due to bank failure.
that said, buying a few Treasuries is not a bad move, imo.
When in doubt consult the source. You may or may not need to restructure your accounts. Here is the link:
http://www.fdic.gov/deposit/deposits/insuringdeposits/index.html
You can also call the toll free number and ask questions.
It depends on how long you want to wait for your money from FDIC. If thousands and thousands of people are requesting reimbursement from FDIC, how fast do you think fed govt bureaucrats are going to move?
Very, very fast indeed, since the entire purpose of FDIC insurance is to make people feel safe in leaving their money in the bank. If it hits the headlines that banks are going under and people are not getting reimbursed watch the masses head to the banks in a stampede to withdraw all of their money, precipitating the very crisis that FDIC insurance is supposed to prevent.
Hmm….but I remember how quickly (not!) FEMA and the federal govt helped New Orleans folks after Katrina, so color me suspicious.
When I was finishing up my PhD a new grad student came to talk to me about my advisor, whether he was a good person to work for and all that. He asked me if my advisor was trustworthy. I laughed and said, “Trustworthy? He’s better than trustworthy, he’s predictable.”
I trust TPTB to always act in their best interests and the banking system is the foundation of their power and wealth. They’re not going to let it go under. Not if all they need to do to fulfil the FDIC promises is run the printing presses.
i would be worried tWaMu will invent some new fee and charge me $35 multiple times.
Some of the posters with a better econ background can answer this, but i believe they have now taken the federal funds rate down below 5.25% effectively. A stealth cut, if you will.
agreed
Funds were reportedly trading at 5% this afternoon. Of course if the Fed doesn’t roll over all the repos there should be a net drain of reserves Monday.
Ben - good reporting on the tightening credit.
Things moving fast.
“A modest upturn is projected for existing-home sales toward the end of the year with broader improvement to include the new-home market by the middle of 2008.’”
So the reporter’s next question should have been:
“And your projections are based on what data Mr. Yun?”
“Why, it’s based on
hystericalhistorical data, of course.”“Valeri Gusman worried about the value of her home, purchased for $335,000 a year ago. ‘I just got on Zillow.com last night, and it was down to $310,000,’ Gusman said. ‘There’s so many empty houses and so many people coming and going…one house was vandalized…we don’t know who’s living there. Are they coming after my house next?’”
What’s Valeri going to think when she realizes that Zillow is usually 20% above current comps? And - using it to figure out your home worth is about as sensible as using an abacus to do advanced calculus.
She probably got a “no fee” loan for her property too. These kind of people shouldn’t buy houses.
‘There’s so many empty houses and so many people coming and going…one house was vandalized…we don’t know who’s living there. Are they coming after my house next?’”
They!! No; not them.
off topic, but gotta love it…
http://cosmos.bcst.yahoo.com/up/player/popup/?rn=49750&cl=3618318&ch=334515&src=news
Check out the realtor from Remax while she tries to justify her 6% fees…
can someone tell me if this was a bailout today and my saving and patience is not going to pay off?
Your saving and patience will pay off.
House prices will continue to decline. Too much inventory, and as ex-nnvmtgbrkr pointed out: public sentiment has changed. In some areas more profoundly than others. Don’t misunderestimate the effect of changing buyer sentiment.
Oh, and the banks don’t want to write loans anymore. Small point.
Small point? It’s the ONLY point, pg. This is so over.
technically, not. Fed was lending money to tide the banks over. They owe it back. If they lend it out to tide over hedge funds they’re on the hook. At some point someone has to take the actual losses on the defaulted mortgages, but it isn’t surprising that the CB’s decided to put enough oil into the system that the gears don’t all seize up.
Was it actually a loan? Here’s the language I read in an AP news article:
The New York Fed, which carries out the central bank’s market operation, announced a three-day repurchase agreement of mortgage backed securities and then two more of the so-called “repo” moves to inject liquidity into the market.
Sounds to me like the Fed outright BOUGHT the mortgage backed securities (aka junk bonds) from some of the big lenders. If it was actually a loan, does that mean the lenders have to buy the securities back, or what?
Hey Kev~
You go drink a cold one and thank your lucky stars you’re not caught up in this debacle.
This meltdown is gonna like nothing you’ve seen before.
You should be readin’ some financial survival books at the moment.
The American public may be the bagholder for today’s moneys inflow.
“Banks reaching for the Federal Reserve’s liquidity lifeline Friday offered only “agency” mortgage-backed securities as collateral, reflecting what could be increasing disfavor for these investments.
In its biggest such move by the Fed since the days after Sept. 11, 2001, the central bank on Friday pumped $38 billion in cash into the banking system via three-day loans known as repurchase agreements or repos.
As guarantee for repayment, banks could have also offered as collateral U.S. Treasuries or corporate agency debt of thegovernment-chartered housing finance companies Fannie Mae and Freddie Mac.
But they nixed those options, offering just mortgage-backed securities issued by Freddie Mac, Fannie Mae and government-owned Ginnie Mae….
….The Fed, which has the option to exclude certain collateral, opened the repos for all three security types for “operational simplicity.”
“My impression is that there are some liquidity issues in (agency MBS) and that there’s plenty of that collateral hanging around,” said Ward McCarthy, a founder of financial research firm Stone & McCarthy Research Associates.
Reuters
http://tinyurl.com/26rlc2
’ Gusman said. ‘There’s so many empty houses and so many people coming and going…one house was vandalized…we don’t know who’s living there. Are they coming after my house next?’”
Mrs Gusman you might want to watch the last 10 minutes of the 1980’s move “The Day After”
LMAO…
Simply qualifying for a mortgage is the least of anybody’s worries today.
That’s simply the first hurdle.
Getting a camel thru the eye of a needle would be easier than getting an appraisal thru an underwriting dept. in this environment.
Good-bye to HS educated newbie hacks and their 2nd grade grammar and average box checking.
“Dis gooz be kooked”.
LOL awww come’on hd74man…ya think.
“…Golden Opportunity Sale at the Gardens at Briar Creek in Lompoc.”
Oxymoron of the day.
I hate to say it, but this thing is going to be ugly, and we are a good 2-3 years from even thinking about the bottom. We finally started reaching critical mass with ’subprime’ foreclosures, but we haven’t even begun to hit the alt-a and a-paper sham loans. They are starting to pop up, but they will take longer. Most alt-a and a-paper borrowers were doing 5, 7, and even 10 year ARM loans. 5 years seemed like an eternity when things were good. Appreciation was guaranteed! Well, I know several people with 5 year ARMs and all of a sudden 2-3 years doesn’t seem so far away…especially the way things are headed. Sadly, I think many people are going to be in for a nasty surprise when their 5 year interest-only ARM starts to adjust, and they realize that their property is worth the same or less than it was 5 years ago, and their mortgage balance hasn’t changed one bit! Tell me how it felt to RENT from the bank and the guvment (you do have to pay property taxes when you own)…instead of a landlord.
Got a new post up!
SoCalMtgGuy
www . housingbubblecasualty . com
You bet it’s going to be ugly. For the past few years, us “doom and gloomers” strolled the decks of the Titanic having to listen to the incessant droning on about how unsinkable the ship was. We expressed concern at the goosing of the mortgage industry, which added fuel to the fire just like the Titanic’s Captain trying to break the transatlantic record by hauling a$$ through an ice field.
After the events of this past week or so, I am fully convinced that USS Titanic has now actually hit the iceberg. Hammerin’ Hank and W and Uncle Ben are going around telling everyone that there will be no contagion, i.e. the ship CANNOT sink.
What is still a little ways off is that “magic moment” when everyone realizes that the ship is indeed sinking, AND there are only so many lifeboats available.
The rich will get richer, the newly rich will drown, and those in steerage won’t even get a chance to make a swim for it.
It’s the HBB’s, the Fleckenstein’s and Schiff’s, the Murphy’s and Butler’s of the world that I must give a shout out back to for opening my eyes to the need to jump off the Titanic and swim for that little fishing boat that happened to be crossing by. That little fishing boat that everyone thought was a “barbarous relic” is what will at least keep me from having to beg and grovel in the food lines in order to provide for my family.
If you know what I’m referring to, then you know what I’m talking about.
The lending subsidiary of our credit union is still offering 0, 3 and 5% down loans for up to 50% gross income… at least for high FICO scores, fully documented and less than $417k. I told the broker to call me when 20% down and 28% of gross documented salary are required.
How many houses are under $417k, and how many people can do full-doc with less than a 50% DTI to make that happen?
Who knows what the rates are all well. A lot of those programs are still ‘advertised’ to get people in the door, but actually getting qualified people to close is becoming harder and harder.
SoCalMtgGuy
Actually, in Pullman, WA all but a handful of homes are under $417 so that doesn’t impact us much. As to whether they can actually fund those 0, 3, 5% down loans and what the mortgage insurance rate are like…? I did find it strange that they quite pointedly do NOT offer 80/20 loans anymore.
Can someone in the know explain why they are offering 0% down loans but not 80/20?
80/20 doesn’t require mortgage insurance.
No one will fund the 20’s since they will be wiped out in a default, too much risk. A security based on 100% financing will at least be worth something even if the borrower defaults.
Some of my friends here in SoCal just don’t get it. Good earners, educated etc. Negam / int. only arms with looming bullets and they think ‘Ill just lever up or refi’ when the bullet / adjustment comes. I told them leverage works both ways but I don’t think they will truely understand until they see that the cupboard is bare. They may not go under but they will most likely be paying the 2nd tier payment they saw when they signed but never thought they would actually pay.
Any FB trying to sell thier house right now = the fools who got locked in the steerage section on the Titanic.
try yelling “Seller will carry second!” at the top of your lungs FB. it might work.
lol
http://www.bloomberg.com/apps/news?pid=20601103&sid=ay5phLgwezYw&refer=us
This has been discussed here before, but the bad news from the housing sector is reaching avalache proportions these days:
“West Nile Threat Rises in California as Pools Lure Mosquitoes
Aug. 10 (Bloomberg) — The 9,000 unsold houses sitting empty in Northern California’s Sacramento and Yolo counties aren’t just a headache for owners: They’re a threat to public health.
The danger is in their yards, where deserted swimming pools, spas and ponds provide prime breeding grounds for mosquitoes. That heightens the risk of West Nile virus, which mosquitoes get from birds and pass to people, said David Brown, general manager of the Sacramento-Yolo Mosquito and Vector Control District. ”
And with bad news, I also mean: look who’s going to be the knight on the white horse:
” Real-estate agents are being drafted to help combat the spread of the sometimes fatal virus. Health officials asked agents to report vacant residences with standing water, in what the National Association of Realtors says is an effort unique to the Sacramento area.
“We have a big role to play,” said Stan Read of Keller Williams Realty in Roseville. “It makes total sense to me because we are involved in so many properties.”
Reports Roll In
More than 1,000 homes have been reported since the program began in May, Brown said. The average time a single-family home sits on the market in Sacramento was 52 days at the end of June, according to the Sacramento Association of Realtors. The selling time tripled in the past three years.”
Now that Realtors have to pursue careers as pool-boys, there a risk of having less than on Realter per house for sale. Century 21 is coming to the rescue. Check out this ad in the San Diego Reader:
“Discover your compatibility with a career in Real Estate in 8 minutes or less at: http://www.century21award.com
Let us license you!
96% first-time pass rate. Full program includes……”
So 96% of the population is smart enough to pass the RE license exam in the first try?
At
http://c21award.agenttype.com/
you can evaluate your real estate potential. It’s endorsed by Theodore Roosevelt, or at least it’s quoting him (I wonder if he was thinking of realtors when he said this):
“Far and away the best prize that life offers is the chance to work hard at work worth doing.”
LOL my ass…
“We have a big role to play,’’ said Stan Read of Keller Williams Realty in Roseville. “It makes total sense to me because we are involved in so many properties.’’
Oh, now they’re health heroes.
Yeah, kind of like the mailman reporting when there’s mail in the box for a couple days.
Don’t worry people! All is well! Here’s the current headline on Marketwatch:
Dow ends week in the black
Even with wide swings in trading, index is up 0.4% for the period
See? Even with all that nasty “credit crunch” talk, the market is STILL up for the week!
It’s all good!
IF IF IF this turns out to be mostly a hedge fund margin call rather than widespread credit crunch then it could be good news. Never underestimate the long-term ‘irrationality’ of the stock market…
“Never underestimate the long-term ‘irrationality’ of the stock market… ”
I agree….but *irrationality* works both ends of the market.
From CNN (sorry if posted earlier):
“who can’t get a mortgage now”
http://money.cnn.com/2007/08/10/real_estate/mortgage_rates/index.htm?postversion=2007081016
“Another was a young lawyer, making nearly $200,000 in the city but who didn’t have the money saved for the down payment on a $800,000 Manhattan condo.”
If you can’t save up a downpayment you have NO business buying an $0.8 million condo.
If you can’t save making 200k a year you have no business buying anything
Isn’t that starting salary in NYC? He must just be out of school.
Cocaine and meth habits are expensive.
The “city” is expensive, but $200k is a decent wage even there.
OT….
We are all true believers in the Theology of Capitalism. But just in case this capitalism thing doesn’t work out, the Bank of Japan, the Bank of Canada, the European Central Bank and the Fed all joined to say that they would put some additional liquidity into the system. The ECB, for example, announced that it would make “unlimited” amounts of money available at 4% interest. The idea is to protect the financial system from a serious mishap. In a truly capitalist world, of course, there are no protections. People get neither what they want nor what they expect. Instead, they get what they’ve got coming. But the world’s banking cartels have stepped in to fix the credit system and make sure real capitalism doesn’t happen.
Bill Bonner has a knack for using fewer words to say more. He explains that we don’t operate on a true capitalistic system. Society is conditioned to expect protection in all their financial endeavors, even when they take foolish risks and lose.
look up 1921 our last capitalist year
down then up- no big gov
“‘We’re dealing with drastic change on a daily basis,’ said Scott Doruff, a certified mortgage planner”
There really is no problem dude. The full-doc loan with 20% down with a 30 yr fixed rate loan is just as easy to qualify for now as it ever was.
This is what anyone should have and use when purchasing their most important asset in their lives.
“No-doc loan” - a haven for tax evaders.
A very popular scheme in some parts of Queens or Brooklyn: own a cash-based business, pay very little tax, get a no-doc loan and buy a house or a condo, with huge downpayment. The money for a downpayment is explained to IRS as a series of $10,000 “gifts” from friends and family…
Personally, as a heavily taxed employee, I find this scheme - including the “no doc loans” which made it possible - disgusting. Why should there be any “no doc loans” in principle? The only reason NOT to have a verifiable explanation/verification of ones’ assets and income is tax evasion. JMHO.
We used to do no doc resident alien jumbos through Citibank in San Marino CA. Heavily asian with many slum lords who literally paid off the loans once the pre-payment was done. Its much easier to get your cash in here via Citibank then via Western Union.
Before you jump all over me I pointed out ‘heavily asian’ because the area was full of non-resident aliens who were cash heavy ‘land’ lords from asian countries… aka slum lords with enough bread to buy a 2 MM SFR in USA with cash back in the early 90’s. Its just how it was then… and probably still is.
I understand you Jona, I live right next to San Marino so I know how it is there.
Another good reason to junk the “income” tax and use a consumption tax instead.
One mans consumption, is another mans income.
Also no reason to have a no down loan .People have to have skin in the game or they walk .
Simple, as Government coffers get empty some enterprising tax agent will get his hands on stated income mortgage applications and cross-reference via SS# to the income tax returns and either get a conviction for lying on a mortgage application or tax evasion.
It simply is one or the other.
This just came out:
“FOR IMMEDIATE RELEASE
August 10, 2007
STATEMENT OF OFHEO DIRECTOR JAMES B. LOCKHART
Fannie Mae and Freddie Mac are important players in the mortgage market as they hold or guarantee 40 percent of all mortgages in the U.S. and about two-thirds of the conventional, conforming (non-jumbo) loans. This year their share of the mortgage market has grown rapidly. For this reason their safety and soundness is of paramount importance. The Enterprises have been very active in meeting their mission by providing significant liquidity and stability to the prime markets that they serve. They have entered into an increasingly large volume of securitization business in the conforming loan market — more than $500 billion dollars in the first half of the year — and that market is liquid and actively trading. We are encouraging them to increase this securitization activity.
The problems in the mortgage markets are concentrated in product areas outside the authorized normal business of the Enterprises. These markets are adjusting to tightened underwriting standards aimed at reducing losses and protecting borrowers. However, we are exploring with each Enterprise ways for them to enhance their support for affordable housing, both multi-family and single-family.
The portfolio caps were put in place last year because of their serious safety and soundness issues in response to Fannie Mae’s request to increase the portfolio caps, we issued a letter today to Fannie Mae. We also issued a response to Senator Schumer’s recent letter on this topic, which is attached. The letters indicate that we will keep under active consideration requests for an increase in the portfolio caps, but we are not authorizing any significant changes at this time. We will continue to reassess that position, especially in the affordable housing area.
The marketplace should have confidence that Enterprise securities are trading efficiently. The Enterprises will remain active market participants and OFHEO will continue to closely monitor both the markets and the Enterprises’ safety and soundness. In addition, we will continue to consider changes as needed to ensure that the current liquidity in Enterprise securities remains. We also recognize the important role played by the Federal Reserve in providing liquidity to the market, as evidenced by its actions today.”
So no increased conforming cap for the time being….
“We will continue to reassess that position, especially in the affordable housing area.” Eehh? Say what? The $417k limit is a problem for affordable housing? With 20% down, that’s a $0.5M house….
Jimmy,
Should you really be concerned about affordable housing, there is only one ultimate solution: home prices have to fall. Providing easy lending for home loans in any price category only inflates home prices.
I second that. I am all for tightening of credit. Home prices have to fall for the few people who could even qualify for a mortgage to afford them.
It was the easy credit that superinflated the housing prices in L.A. and around the country. I’m pretty sure that sellers here in L.A. got that memo this week.
Easy credit and bogus appraisals, surely you didn’t miss the story of the two guys in Beverly Hills juicing an appraisal to the tune of 800k.
“In a filing with the SEC, Countrywide said that while it plans to retain more loans until investor demand improves, it warned that a prolonged period of poor conditions ‘could have an adverse impact on our future earnings and financial condition.’”
Why? Oh yeah, because you won’t make most of these loans if you have to hold the garbage on the books.
Criminals.
Exactely. Poor CFC, they are being made to eat the steaming piles of sh*t that they call underwritten mortgages and they don’t like it.
How telling that they immediately marked down the mortgages that they are being forced to hold by 20%. What does that say about the worth of the paper they produce? Who the hell would by these from them now, except for pennies on the dollar.
““Herrenbruck said Wednesday he found two lenders willing to make a no-document loan. But by Thursday it was down to one. And Friday, when his client’s offer was accepted, there was none. ‘He can’t buy even though he had the strongest profile of any no-doc: superlative credit, money in the bank and a whopping down payment.’””
Can someone please help me understand why ANYONE would need to go no-doc unless they are a cheat (on taxes, criminal, or lying)? If this guy is so good, why can’t he produce his 1996 Federal Taxes?
I often hear brokers say things like “oh they are good for people in sales”. . huh? I am in sales and my federal taxes show how much I make. No need to go no-doc. . .
What am I missing?
What your missing is that the long term fraud market is about to end . Easy money was the name of the game for a number of years now and you didn’t have to put any money down or show your income . Crooks loved the market we are coming out of .
O/T but interesting: Had to get a haircut today. Got to the barbershop 30min after opening and was pisssted off because I had to wait when normally I can just walk in and sit right down. There was a lot of chatter going on with two of the waiting gents saying that they own their own businesses and will only take cash upfront now before doing a job. Another owns a car lot. He said that he just sold a 2001 Chev (?) SUV to a customer who had a great credit score, “you know one of those guys who has three mortgages and such” but he thought he could get a better rate from his bank then the 7% I quoted him. I’m not worried though he said, because he wanted the vehicle so bad I wrote it up and he’s on the hook anyway; if the bank doesn’t give it to him then he has to come back to me.
Dow was down then up, down, then up.
It was down almost 200 points with 30 minutes to go with a final Plunge Protection Team injection manipulating the market.
So what happened? They only lost 30 minutes. They were saved by the bell.
Mortgage agents in the East Bay scrambled on Thursday to find alternative home loan programs for consumers who have been squeezed by a worsening credit crunch unleashed by the housing meltdown.”
OMG!…you mean they will have to finally WORK for the commission!
If this doesn’t finally make prices in the desirable parts of Los Angeles crumble, I’m giving up and moving to Canada.
Come on, jumbo loans are 9% now. Add in $70K min. down, insurance and taxes on a median of at least $700K and that is one helluva mortgage payment!
Canada’s mortgage requirements are more stringent than that…and their housing crash has not really started yet.
Yun is such a moron. How can he call himself an economist, he’s just a dim-witted marketing PR tool.
‘In Los Angeles… the number of homes on the market has risen from about 30,000 to more than 106,000.’
I know we’ve beaten this topic into the ground on these blogs, but I continue to be utterly amazed that virtually everyone I meet in LA expects no significant price decline! Where I live in Ventura County, prices have declined about 10% as inventories have steadily risen and now the foreclosures are hitting the market in noticable numbers. 35 miles away in LA, everyone seems to think prices might decline by a few percent but there is no problem with inventory. The level of denial is frightening, but it’s not the first time since December, 2000 when I feel like I’m living in 1937 Germany.