The Lull Comes After Blockbuster Years
The Free Lance Star reports from Virginia. “Mary Anne Bryant is starting to see a new trend at the Central Virginia Housing Coalition in Fredericksburg. Landlords behind on hefty mortgage payments for houses worth $500,000 and up are seeking Section 8 status at her office. The federal program picks up 70 percent of the tab for qualifying renters.”
“‘They think that getting families in there paying a high amount of rent will save the house for them, but it’s not working,’ said Bryant. ‘Four months later, the families have to move because the house is being foreclosed on.’”
“‘We’re guessing that they were bought by investors looking to flip,’ Bryant said. ‘Now that the market is going south, they’re trying to sell but can’t so they’re renting instead.’”
“Lisa Swidrak, owner of First Savings Financial LLC in Fredericksburg, blames real estate companies and builders who opened their own mortgage companies to capitalize on the recent housing boom.”
“‘If you have a Realtor who says, ‘You need to see my loan officer,’ who do you think that officer works for? Not you,’ she said. ‘They’re just trying to find a way to get you into that house. A responsible lender would have said, ‘Where do you think the money is going to come from for your payments?’”
“‘Actually, I have had quite a few cases where I don’t know how they got approved for the loan in the first place,’ said Tess Harris, a housing counselo in Fredericksburg. ‘One client earned $23,000 a year and was approved for a $254,000 loan.’”
“Harris said the woman’s initial mortgage payments were likely on the interest only, then ballooned to the current $1,695 a month at 12.25 percent interest. Yet she brings home only $541 biweekly plus child support.”
The Times Community from Virginia. “The local trend could be best described as a market correction - not a crash - from the boom of the past four to five years, some local real estate and banking experts say.”
“Berryville attorney J. Michael Hobert said he noticed, when reviewing county court records, that four foreclosures took place in June alone. ‘That’s a large number for a small community,’” Hobert said. ‘I had never seen that many in the last few years.’”
“To find that high a number, Hobert added, ‘You’d have to go back to the early 1990s.’”
“Reminding that real estate is typically a cyclical industry, predicted Traci Shoberg, president of the Blue Ridge Association of Realtors, ‘It could just be the light-switch effect, just like it was going from a seller’s to a buyer’s market.’”
“The good news for buyers, but bad for sellers, is that home prices have gone down. The regional average sales price in June was $279,575 compared with $345,915 in June 2006. MRIS data shows that, in the price range from less than $30,000 to greater than $500,000, the average sales price in Clarke County dropped from $475,264 in 2005 to $431,956 in 2006.”
“‘Sales are extremely down,’ said broker Victor Fath. ‘There’s a lot of investment opportunities right now. There was just a little too much greed in the marketplace two years, three years ago.’”
“Overbuilding contributed to the inventory glut, he added. ‘They overbuilt in Loudoun County,’ Fath said. ‘That sort of affected everything up this way.’”
“George Ballew, mortgage manager in Winchester, said he has also noticed a slowdown in the whole region. ‘I’ve noticed some prices falling as well, especially with the appraisals that we’re getting for homes from $600,000 or $700,000 or more,’ Ballew said.”
The Baltimore Sun from Maryland. “Laurel Tokar made one of the biggest financial steps in her life a few weeks ago when she signed for a mortgage on her first home, a white Colonial in North Baltimore’s Wilson Park.”
“But the next day, her lender, American Home Mortgage Investment Corp., disclosed that it was bailing out. ‘It was terrible,’ said Tokar, 21, who managed to find another lender after a midnight paperwork session with her real estate agent. ‘”I couldn’t really sleep.’”
“‘The bottom line is, we have people who want to buy homes or who want to refinance, and we have to turn them away because of tightening credit standards,’ said Tim Higgins, a loan officer in Ellicott City. ‘They may have qualified for financing as little as a week ago.’”
“‘It’s absolutely going to be a mess. I’ve been in the business 24 years, and I’ve never seen anything like this,’ said Sara Lenes, president of a Columbia brokerage. ‘We’re going to see more foreclosures, fewer people able to buy, and more houses sitting on the market for longer.’”
“William L. Yerman, chief executive officer a Baltimore brokerage, title and mortgage company, said he has been trying to persuade sellers over the past year that the market is not the same as it was in its heyday.”
“‘Sellers really need to have realistic expectations of what their house is worth,’ he said. ‘Can a changing mortgage market affect that? Absolutely.’”
“Home prices flattened in July in metropolitan Baltimore, as unsold houses swelled to a record and buyers faced tightening credit from a distressed mortgage industry.”
“‘Some houses have been on the market for so long that people have lost interest in keeping them up,’ said Tina Marine, an agent with in Annapolis. ‘They’re grungy. The beds get stopped being made. People just give up.’”
“Stacey Wooden and her husband, David Schreiber, have had their Mount Washington home on the market for four months. The couple initially listed their home for $769,000 but eventually dropped the price by almost $70,000.”
“The couple had hoped to move over the summer to enroll their two sons in school in North Carolina by fall. But despite several open houses, they have had just one offer.”
“‘We’re trying to be pragmatic about things,’ Schreiber said. ‘There don’t seem to be a lot of variables we have control over in the housing market.’”
The Bowie Blade from Maryland. “The number of Bowie area homes entering some stage of the foreclosure process has increased along with the national trend.”
“‘Bowie has had a substantial increase in foreclosures and notices of default because of the size and expense of many Bowie homes, combined with the modest, but inadequate, income of those purchasing these homes,’ said John Burns, chairman of the Prince George’s County Bankruptcy Laws Committee. ‘We find a number of folks were put into mortgages that they never should have been put into in the first place.’”
“‘No one discusses how they will pay their mortgage once it jumps up,’ Burns said. ‘You either have to sell your home, try to refinance at an affordable rate, or apply for bankruptcy. Otherwise, you’re stuck as the odd man out in a never ending game of duck, duck, goose.’”
“Selling a house in today’s market isn’t going to be as easy as it was a few years ago during the housing boom. According to local real estate agent Jane Gregory, ‘houses in the 20715, 20716 and 20720 ZIP codes are taking an average of 5.9 months to sell when three years ago they’d sell in less than a week.’”
“Despite the high levels of foreclosures and defaulting loans across the nation, one local real estate agent said that the Bowie area has not been hit nearly as hard as surrounding areas.”
“Broker Boyd Campbell, who has worked in the Maryland, Virginia and D.C. markets for some 30 years, said Bowie is fairing well and is more stable than Northern Virginia and Montgomery County.”
“‘Appraisers have been more conservative in Prince George’s County and investors haven’t invested as much here as in those areas,’ said Campbell. ‘Now those investors are trying to get out of their investments and they’re flooding the market. There’s far more loan defaults, bank foreclosures and houses going to auction in those areas than here.’”
The Morning Call from Pennsylvania. “A Morning Call investigation in July showed that the poor performance of subprime lending is affecting the Lehigh Valley. Federal banking statistics showed that Lehigh and Northampton counties ranked first and second among Pennsylvania’s 67 counties for the growth in subprime loans from 2004-2005.”
“Furthermore, one nationwide study…showed that federal and state legislators were aware of problems with subprime lending in Pennsylvania since at least 2001, but that legislation to respond to the growing problem had stalled.”
“In the past, Weaver of Deutsche Bank said, borrowers with these types of adjustable-rate subprime loans with low initial fixed rates used to keep refinancing when the initial fixed-rate period was over. And as long as home prices kept going up, this was not a problem.”
“But now, ‘the music is over,’ said Karen Weaver, global head of securitization research for Deutsche Bank. Home prices stopped going up.”
“The borrowers who face higher payments for subprime adjustable-rate mortgages with two-year fixed-rate periods are going to be people who took those loans out at ‘exactly the wrong time,’ said Weaver. And they are ‘just going to get hammered’ between the decline in home prices and the clampdown on credit, she said.”
“The number of homes that were sold fell year-over-year for the 14th consecutive month, according to statistics released by the Lehigh Valley Association of Realtors.”
“Other statistics suggest these trends will continue. New listings of available homes rose 9 percent last month to 1,615 units. The number of pending sales contracts, an indication of future sales activity, fell to 554 homes, the lowest level since February.”
“The outsize increases in prices and the fast pace of sales that became common during boom years of 2004 and 2005 are now securely in the past.”
“‘Anyone who just bought a house, hopefully, they are in it for the long haul,’ said independent appraiser James Keim.”
“Keim, who appraises homes in Lehigh and Northampton counties, soon expects to see asking prices for some homes to dip below what similar models sold for earlier this year. It’s likely to happen in suburban areas where many homes have not sold quickly, he said.”
“The lull comes after blockbuster years, in which low interest rates and an influx of people from New York and New Jersey brought new buyers into the market and sent prices soaring.”
“Another development that has limited the number of buyers is a tightening of borrowing regulations. ‘It is eliminating probably 20 percent of the market,’ said Jeff Burnatowski, an agent in Allentown.”
“Burnatowski and other real estate agents say the drop in sales has changed how they deal with their sellers. For example, sellers should consider all offers because, as Burnatowski said, ‘who knows when the next will come by.’”
“‘Sellers remember 2005, when homes were flying off the shelf,’ he said. ‘Sometimes they still expect that. It is not the same market.’”
‘Selling a house in today’s market isn’t going to be as easy as it was a few years ago during the housing boom.’
This from the Bowie Blade.
For the media out there reading this; in story after story, a previous boom is mentioned in almost every case, yet the MSM have not addressed the question of a financial mania in housing and what caused it. This isn’t just a case of reckless lending, IMO.
So true ,so true ,so true Ben…..”This isn’t just a case of reckless lending ,IMO”.
The main stream media doesn’t talk alot about a mania being part of the cause along with excess building and excess speculation purchases . The MSM keep harping on the poor buyer who was just trying to get a little old home to live in . I wish the MSM would talk more about the causes of the prices going up in real estate and the mania and speculation aspect of it . I don’t think alot of people would be in favor of bail outs if they knew about how much of the inflated prices were due to mania speculation, along with faulty lending .
Haven’t you heard of rent to own? Bad credit ok? Owner financing? These people are going to be taking a bath and having their homes ruined by wear and tear.
【本報綜合十一日電訊報導】據中國大陸「證券市場周刊」報導，在美國次級房貸風暴衝擊下，估計中國六家上市銀行今年將面臨49億元人民幣（約6億4665萬美元）的損失。其中，中國銀行損失高達38億5000萬元人民幣（約5億808萬美元），占全年稅前利潤的4.5%。
Translation …according to the China mainland “Bond Market Weekly Report” due to subprime CDO crash in the USA, it is estimated that the 6 publicly traded Chinese banks have losses of ~$647 million US$. Of that amount the Bank of China alone accounts for losses of ~$581 Million US$ which is approimately 4.5% of the bank’s annual profits before taxes.
Hmmm that’s now what I see.
What I see… if I am translating correctly is that “We are so screwed. How can we get rid of the dollars? America has us by the balls. We have to keep buying their debt so they can keep buying our childrens toys with lead and our malamine flavored scooby snacks.”
Meant your translation above : ) NOT what I see.
LOL.
To me, that kinda seems like small change… doesn’t it?
Chinese bank officials immediately denied the truth of the report.
No surprise there. I think the mantra is deny all reports first and answer questions later.
It’s probably 10x that amount but the bank officials don’t want to admit the truth or else they will be executed.
hey, way to go, a creative way to get rid of all those dollars held by China
“…or else they will be executed.”
“Executing a trade” becomes a double entendre in China.
The Chinese are so going to nuke us for this. Anybody know the range of their ICBMs?
whatever the range of ours is, since they stole our technology (or more likely, we sold it to them)
That’s not comforting….
“‘If you have a Realtor who says, ‘You need to see my loan officer,’ who do you think that officer works for? Not you,’ she said. ‘They’re just trying to find a way to get you into that house.
When I was a realtor I would give them the names of the banks and the phone numbers, period. If they wanted to use a mortgage company instead of a bank they had to find another realtor.
Weakest real estate metaphor ever…
“Reminding that real estate is typically a cyclical industry, predicted Traci Shoberg, president of the Blue Ridge Association of Realtors, ‘It could just be the light-switch effect, just like it was going from a seller’s to a buyer’s market.’”
The “light-switch” effect is the sudden, harsh, and long overdue glare of media exposure of the CDO house of cards, which, much like a light being flipped on, is sending the cockroaches - mortgage brokers, realtors, and crooked appraisers - scurrying for cover.
“‘The bottom line is, we have people who want to buy homes or who want to refinance, and we have to turn them away because of tightening credit standards,’ said Tim Higgins, a loan officer in Ellicott City.
Gee Mr. Higgins, I wonder why. Are these the same people that should have been turned away over the last 3 or 4 years, but weren’t, and are now facing foreclosure.
I know it’s like, “Whine whine whine. Where is the house that the world owes me? There’s supposed to be a house ready for me when I turn 21.”
If the world functioned properly, basics like shelter and food should be available to everyone. I am not sure that shelter needs to be a 3000 sf house with a pool though, or that the food needs to be prime rib and lobster.
How much food? What types? Does it have to come in packages? What kind of shelter? Do thatched huts count? Should people who eat grubs and berries in Papua New Guinea be brought into Port Moresby to live in A/C concrete block houses where rape and crime are rampant?
How about in the U.S.? Should people who refuse to work or who have been given chance after chance be given 2000 calories a day? With meat? Should someone change their sheets when they sleep in their clothes and urinate and vomit on their beds?
“Misery increases to meet the means available for its alleviation.” - Theodore Dalrymple
I am not suggesting this means free, but rather affordable. It does raise a good question about what to do with the ever increasing population of homeless in our cities though. Jobs that used to be available to those without education etc, are now handled cheaper by illegal labor. Some are mentally ill, others physically handicapped.
“Affordable” mean subsidies or price controls.
Housing and basic needs used to be affordable in America to the majority of folks willing to work. Today it is not. Offshoring is most likely the biggest culprit. I am not suggesting subsidies or that anything be done at all, only pointing out things are not working, and will get progressively worse as time passes.
None of it mattered when house prices were going up. If the borrower couldn’t pay, so what? The bank inherited an asset of value in excess of the original loan? Who cared?
Now that prices are going down that’s all changed. Prices are going back down to where normal mortgage risk applies and worse (since many lenders are getting and going to get burned).
People. Our economy for the past 10 years has been based upon this false wealth. It’s over. We’re going to give it all up and more. Kiss it all goodbye. If you don’t have a safe place to retreat to with no or small mortgage, you’re history. If you have any wealth, it’s going to be confiscated in the next decade to feed the unemployed masses.
It will be interesting to see what happens when states, cities and towns send out their tax assessments for homes in 2007 and 2008. I don’t imagine they are going to cut the assessment and take a hit on their state or local taxes. The real fun part comes when Washington blows up fiscally in 2008 and cuts off the states.
Shake, the drums are already starting to beat here in Florida for “increased revenue”. I was watching the local PBS Friday evening political punditry show and one of the panelists (with full agreement from the moderator) started talking about how we’re going to need a state income tax (Florida doesn’t currently have one) because of the need for revenue. LMAO! Good luck with that one. The voters would have to approve of it in order to amend the constitution.
The state has to cut a billion dollars from its budget. Boo-fricken-hoo. Of course, the state threatens to take from medicaid, Department of Children and Familes, schools, stuff like that (not threatening law enforcement as yet), just to panic people.
They’ll raise the property tax percentage from 2.3% to something like 4% and beyond. I think they can do that wothout voter approval whenever they feel like it.
legalize prostitution and dog fighting.. may as well throw in cockfighting too.. then there’s weed.
tax ‘em all, of course.
I forgot to mention what an albatross most homes will be even for people that can afford their mortgage payments. Energy costs are rising significantly and imo the only homes that will be worth having in 5 years are those that don’t use the grid for their power consumption (i.e. solar, wind and hydroelectric)
It Amazing all those $500K+ Mc Mansions and NONE of them have r39 walls and r52 ceilings and did KB Bezer Toll etc sell ANY houses with solar panels in the desert?????
You highlighted the biggest problem here. It is not subprime, Alt-A or $25K income people that will get burn the most. It it the prime borrowers who brought $600K houses that should only be worth $325K. Oh yeah, they have the means to pay, but how long are they willing to pay their mortgages, 10, 15 or 20 years?
Eventually, debt will break the strongest of backs!
Cinch
“But the next day, her lender, American Home Mortgage Investment Corp., disclosed that it was bailing out. ‘It was terrible,’ said Tokar, 21, who managed to find another lender after a midnight paperwork session with her real estate agent. ‘”I couldn’t really sleep.’”
Some call me the mortgage cowboy, yeah
Some call me the gangster of loan
Some people call me hard to reach
Cause I speak of the pompitous of loan
I’m a joker
I’m a smoker
She’s a midnight Tokar
21?, they’ll give a loan to anyone…
Sorry Victor. Not too many investment opportunities since all your investors are getting burned. Doubt they will believe you or Wall Street right now. You borrowed from future demand to feed present greed. Now it’s time to feel the pain : )
I think the metro DC area is in for more of a shock than is evident now.
When I lived out in Loudoun, because the neighborhood got so bad, I expected when I moved into Fairfax Co., because it is in such high demand and closer in to DC, that houses would be more maintained and updated. Not so. When I imagine the end-game fallout here I pop in to open houses around Falls Church, Vienna, etc. and I find many homes with original windows (usually 50 years old), flooring and heating and ac systems. Trees are overgrown and are dying back thus creating a danger, fences are old and no special landscaping. These locations are great and most feel they won’t fall as badly as outer-burbs but I’m not so sure.
DC metro has been sticky so far except in the worst of neighborhoods. People do feel that “it’s different here” in the same way that NYC does but boomers (like my old neighbor who just sold) begin retiring in mass beginning with ‘08, alot of people are going to be wanting to get out of DC with their profit. Should be interesting.
any fed workers getting laid off?- until taxpayers grow some balsss ,it will be different in DC especially N VA
No LAY OFFS but………..
Some Federal workers in Iraq are getting killed off
As a fairly recent resident to the DC metro area I have my own “outside” view of the local real estate. Being from a very large progressive Southern city where houses in the suburbs were big, brick, new and half the price of here, I can say that housing is often not only old, but unkempt and lacking in curb appeal. What people in this area consider attractive and acceptable housing astounds me. Have they never lived anywhere else? Do that know that what they consider “nice” housing would be ghetto in other major cities? Add the fact that DC metro housing is more than double what a comparable house costs in Charlotte, Nashville, Atlanta, Raleigh-Durham and I actually can’t imagine anyone buying anything I see here. Even the so-called estate homes pale when compared to other areas. Salaries are better here, but far from double in the areas mentioned.
People often ask me when I intend to buy. I must be honest. I have no intentions of ever buying here unless houses come down to decent prices and a builder builds with better materials. The newer houses here have vinyl siding for goodness sake. Where I am from only Jim Walter homes have vinyl siding. Architecturally the designs don’t appeal to me either.
I am here for career purposes only and will not retire in this area. So I own a house in my home town that I lease to my daughter. I am in a much better position many of the mortgage holders here. (They are mortgage owners, not home owners. One doesn’t own a home until it is paid for.)
Loudon and Fairfax counties are truly ugly counties. It is just bedroom community for DC, but has almost nothing to offer to its inhabitants. It has insufficient infrastructure, which is one the worst in the nation, underdeveloped civil services, and almost no entertainment for people of various ages. There is no place where you can hang out after work, like has Arlington or Alexandria. I can go to Pentagon Row, Kings Street, Shirlington, where you have pedestrian zone and sit with friends. Why would people consider FF Co. as center of the universe, it beats me. It is one of the worst example of overbuilding and overdevelopment in the country, where all the wealth was generated from increasing property values, but it lack in decent life. Everything in these two counties sucks; it is far to DC, not by the miles but time spent in traffic. Even on the weekend day, it takes over 1 hour to drive to DC. Yesterday I took me 1:45 minutes to get into FF Co (distance of 33 miles) from DC. Older areas are poorly maintained as you had mentioned, and anything built before WWII is falling apart. During my house hunting I seen homes built between 1930-1950, which had everything original. The prices were over 550K, but literally these houses where just ruins.
There are times I get the impression that people who want to live close-in to DC think others want to do the same. I don’t want to hang out after work. I and probably 4 million others in the metro area are settled with good lives in the suburbs. People move to Loudoun and Fairfax for very good reasons: excellent schools and recreation programs for young families plus the fact most don’t want an urban life. Both counties are far more family-focused than the areas you mentioned.
I can understand a younger person or couple who work in the District not wanting to live out, but many people could care less about that. People who want an urban lifestyle often will have it at any cost. If you polled most people in America and in Virginia, they don’t want an urban lifestyle. Most Americans cringe at the thought of having to live in downtown environs.
I work in Northern VA. Comparing to the areas where I have lived prior to moving here Arlington is one of the ugliest and dirtiest areas I have ever seen. Alexandria is cute (and horribly expensive) in some areas, but far too crowded and run-down. Ditto for the District.
To presume that everyone wants to live close-in is a fallacy. Sure there are some who would have preferred to live in a run-down area of Arlington, but the prices there are some of the worst in the nation for what one gets. None of my neighbors want to live in Arlington or Alexandria. In fact one neighbor is a refugee from Arlington. She hated it.
Every major city has bedroom communities. Large cities can’t containe all the people required to sustain the businesses in the area. Corporations currently are moving to suburban areas because of taxes and space. I had rather commute (though I don’t now) to work than live in a tiny overpriced dump. Different strokes for different folks.
My prior statements still stand though. People here can keep their vinyl-sided McMansions. Those aren’t worth a dime to me. I will rent for the duration.
If you think Arlington is one of the ugliest and dirtiest areas you’ve ever seen, you’ve obviously never seen Country Club Hills (where Al and Tipper Gore raised their children) or Lee Heights. I grew up in Fairfax and someday would like to live in North Arlington. Anyone with children prefers Fairfax and Loudoun because they have better schools. Alexandria has horrible schools. You have to go private if you live there. South Arlington has horrible schools. North Arlington has great schools, but any decent house (a 3 bdr, 2 bath starter home) now costs over $700k. People move out to Fairfax for bigger lots and good schools, and deal with the commute. If you don’t want a commute, North Arlington is the only option for a Northern Virginian.
“The borrowers who face higher payments for subprime adjustable-rate mortgages with two-year fixed-rate periods are going to be people who took those loans out at ‘exactly the wrong time,’ said Weaver. And they are ‘just going to get hammered’ between the decline in home prices and the clampdown on credit, she said.”
These are the people that purchased homes in the last 4-5 years…
That is a LOT of people…I predict the fed injecting money in to this
turd system every month or so for the next few years to keep it just north of a zombi status…We are going to need a gigantic financial methadone clinic in the future.
the Fed has control over both the accelerator and the brakes, and I’m gonna hope for judicious use of both.
I think they can see that they will be responsible for how this plays out.
Lending should be reigned in while the system is provided with just enough liquidity to stay in operation.. it will cause some discomfort but needn’t be unbearable cold-turkey fetal-position withdrawl convulsions..
There is no soft landing from a gigantic inflation. The ultimate result depends on whether they inflate enough to bail out all the overindebted borrowers. If they don’t, there is a deflationary depression. If they do, there is a hyperinflation.
“‘No one discusses how they will pay their mortgage once it jumps up,’ Burns said. ‘You either have to sell your home, try to refinance at an affordable rate, or apply for bankruptcy. Otherwise, you’re stuck as the odd man out in a never ending game of duck, duck, goose.’”
Duck Duck Goose?
from wiki: Is a traditional children’s game often first learned in pre-school or kindergarten.
Rules?
A group of children sit in a circle, facing inward, while another child, the ‘picker’ (a.k.a. the ‘fox’), walks around tapping or pointing to each player in turn, calling each a ‘duck’ until finally picking one child to be a ‘goose’. The ‘goose’ then rises and chases and tries to tag the ‘picker’, while the ‘picker’ tries to return to and sit where the ‘goose’ had been sitting. If the picker succeeds, the ‘goose’ is now the new picker and the process begins again. If the ‘goose’ succeeds in tagging the picker, the goose may return to sit in the previous spot and the ‘picker’ resumes the process.
In a Credit Crisis, Large Mortgages Grow Costly
“When an investment banker set out to buy a $1.5 million home on Long Island last month, his mortgage broker quoted an interest rate of 8 percent. Three days later, when the buyer said he would take the loan, the mortgage banker had bad news: the new rate was 13 percent.”
Shucks, I nearly ran through half a box of Kleenex when I read that one.
Be strong, Chip. Together we can get through our vicarious grief for these cigar-chopping plutocrats.
Oops, I meant “cigar-chomping plutocrats”
“‘Actually, I have had quite a few cases where I don’t know how they got approved for the loan in the first place,’ said Tess Harris, a housing counselo in Fredericksburg. ‘One client earned $23,000 a year and was approved for a $254,000 loan.’”
“Harris said the woman’s initial mortgage payments were likely on the interest only, then ballooned to the current $1,695 a month at 12.25 percent interest. Yet she brings home only $541 biweekly plus child support.”
Ahh, but she probably had money enough for the leased SUV, cigarettes, cable / satellite tv, plenty o’ consumer goodies purchased on credit, etc. What we’re about to see is probably the cratering of consumer debt, starting with mortgage debt and spreading to all forms of debt, especially those with variable interest rates - like credit card debt.
Got a really big rock to hide under while this blows over?
(long time lurker here; first time poster)
Welcome to the blog, Nudge. This inability to get a mortgage is being felt on Main Street. True story: on Friday, I went into a bank to pay off a credit card that I had recently used for a large purchase. I wanted to get rid of the charge as soon as possible. While I’m making out the check, I’m joking around with the teller. I said I’d heard the banks were having difficulty and I wanted to “inject a little liquidity” into the system. She gave me a blank look and I asked if she had heard what was going on. Another teller was listening and started nodding knowingly. She said “Ah, that’s what’s happening!” and proceeded to tell about how her mother was trying to re-finance her house and a number of major banks weren’t giving any loans, period.
So what was Ms. Karen Weaver, “global head of securitization research for Deutsche Bank” doing two years ago, painting her nails?
Also, I have no respect for the realtors “in this business since 24 years” who are now oohing about ‘not having seen anything like this’. They had their eyes wide shut as well in the runup to this mess.
I’m sure they haven’t seen a real estate boom like this either. What is the saying? We don’t hate booms, we hate the busts after the boom. You cannot expect the pendulum to swing so far in one direction without swinging the other.
Well ladies and gentleman, the party is over. We took the spiked Kool Aid punchbowl away. Time to start paying for that partying with a hangover that is going to last for about 4 years. Got Tylenol?
The older I get, the more a hangover really sucks and Tylenol doesn’t seem to do squat.
I wonder why illegal prescription pain medication drug use is at an all time high. Because the headache must HURRRRRRRRT
Faced with the same problem at 44 yoa [2 beers = drunk, 4 beers = 2 days of pain] I did the unthinkable — I don’t drink anymore!
Meaning, what a lot of people should get out of this is the habit of considering the consequences of their actions.
“The couple had hoped to move over the summer to enroll their two sons in school in North Carolina by fall. But despite several open houses, they have had just one offer.”
THEN THEY SHOULD HAVE TAKEN THE DAMN OFFER THEN AND MOVED FORWARD WITH THEIR LIFE. THEY ARE THE VICTIMS OF THEIR OWN GREED NOTHING MORE. NO SYMPATHY HERE!!!
Interesting how the Carolinas seem to be the destination of choice for many east coasters looking to escape the effects of the bubble on their areas.
EXACTLY my thought when I read that—apparently just one offer isn’t good enough. They’re probably waiting for multiple bids over asking price.
They’re trying to do the same thing as everyone else in the northeast. Find a sucker to overpay for their house, then move to the Carolinas and have no mortgage.
Just in time for the hurricanes to hit this year.
You don’t even know how thrilled the people in the Carolinas are to have all those jerks move into their neighborhood driving prices up over there. I used to live in Raleigh-Durham. I wish they would quit issueing building permits like some municipalities already started with.
“I used to live in Raleigh-Durham. I wish they would quit issueing building permits like some municipalities already started with. ”
That’s odd. Raleigh and Durham aren’t really even next-door neighbors and are in separate counties with much different governments. Durham is a blue-collar Democrat town (think Nifong). Raleigh is pro-growth Republican. Durham is closer to and more like Chapel Hill and Raleigh is closer to and more like Cary. To people who live in the area, Raleigh-Durham is an airport.
“‘The bottom line is, we have people who want to buy homes or who want to refinance, and we have to turn them away because of tightening credit standards…They may have qualified for financing as little as a week ago.’”
This is very true. We closed on my dad’s estate a week ago. The closing had been delayed a week, the couple were trying for 100% financing. After the closing, I had a discussion with the mortgage broker (a real ass who tried to regale everyone during the closing with tales of all his cruises) and he told me they’d had TWO mortgage companies collapse on them, the third barely made it through.
Reading this blog, I’m convinced we got out by the hiar on our teeth (skin on our teeth?? …I have trouble with metaphors, they rarely make sense…LOL)
The biggest issue I had with the whole thing was trying to not feeling guilty, knowing the price of the house the couple just bought will be going down. On the other hand, we uinderpriced it to sell it fast, so maybe they won’t lose too much.
Don’t feel guilty, lost. When the ex and I sold our house at the height of the bubble, we priced it right so it would sell. Consequently, the buyers were happy they bought under appraisal. When word got out (small community) of the pending contract, we had a couple of offers to top the contract price. And don’t think we weren’t tempted. But a deal is a deal and we went through with it and were happy we did.
OK, thanks, Palmy, I feel better. Hmmm…maybe I can sell my daughter’s house and make another killing…LOL
“They may have qualified for financing as little as a week ago”
To me, that is the king of all “Holeeeee crap!” messages of recent weeks. The engine ran out of oil and seized up completely — it didn’t just slow to a crawl. Can’t wait for Wed/Thu this coming week. Bought some fresh Neil’s Ready-Pop.
But despite several open houses, they have had just one offer.”
“‘We’re trying to be pragmatic about things,’ Schreiber said. ‘There don’t seem to be a lot of variables we have control over in the housing market.’”
…. won’t be long until this one offer they turned down becomes the “woulda-coulda-shoulda” look back and sigh. Sellers will come to realize the music has stopped and instead of taking chairs away - there are 9X more now than when the game started.
We sold last month - simply priced it based on purchase (2001) 5% annual appreciation. We asked ourselves would we purchase our own house at the price we were asking. Once we did this - listed and sold in 2 weeks. If sellers want to sell now, they have to answer that honestly. For now, we feel like we dodged a bullet and are renting. the Trade up market we’re looking to is comically overpriced by 40-50%. and the house we’re renting - was one we chose not to buy b/c it was overpriced. So, in meanwhile, we’re renting @ 60% the cost of what our note would have been.
In light of all the major financial meltdowns, I had the spouse drop by our credit union to withdraw a few thousand to replenish the cash on hand we usually have as emergency funds.
I had to again explain that; if I’m wrong about liquidity availability, we will still have our money. I’m right about any of the financial shenanigans & there is a run on the banks or cash limit withdrawals, then .. gosh, we .. still have our cash. Only its not locked up in a sysytem as 0’s & 1’s , unavailable for use by the rightful owners, subject to the whim of bankers. No, it’s right here, in hand, palpable, ready to use if needed.
I told her that I bet the credit union would be reluctant to hand out that much cash without some BS excuses or foot dragging.
Sure enough, we had to go to 2 seperate locations as the the first had limit of $2000 withdrawal. Hmm, never a problem previously with a large cash withdawal, in fact we took out $5000 a few months ago no prob.
Next location gives her the rest but strongly suggests she take a cashiers check or money order instead of cash. AND there were a few other senior citizens arriving right behind her to withdraw large cash amounts.
(memories of depression era)?
In fact, the branch mgnr was in the lobby (on a SATURDAY) to keep on eye on things. Almost wanted to have her ask him if his name was George Bailey!
So anyway, no panic but just some prudent caution in case things turn nasty. You just KNOW if the system locks-up, it will happen in a blink of an eye with no warning to the average JOE 6 pack.
Also dusted off the wheelbarrow in case I need to use it to cart a load of greenbacks to the store for a loaf of bread.
I cant control my world but I can at least be ready to survive & thrive in it.
Anyone watch Property Ladder last night?
Dude quits his boring day job to flip a house. He read books and watched tv and now he is an expert. He actually said, “I’m a winner. And what do winner’s do?”
“CRASH AND BURN!”, is what I was yelling at the TV.
Plan: Bought a house for $83K, is going to spend $15K in 4 weeks, then sell for $180K. 2 tiny bedrooms on main floor, and 2 in converted attic. 1 bath. 1 car garage.
Host/expert shows up and says he can’t do it for 15K. He shows her the budget, checks a few price estimates, and hits him on the head.
He plans to add a bathroom to one of the bedrooms in the attic. Wife and expert both beg him not to do it.
She then mentions that brand new houses across the street, twice the footage, 4 bed, 2.5 bath, 2 car garage, ETC are on the market for $180K, and sitting for months!
Oh, my house is brick, my house has a basement, my house has character…. yeah, it has characer, but all bad.
So, dude barely shows up. The “bath” in the attic bedroom is a tiny sink, toilet right in front of the window, and shower too small for anyone but a “little person”. No walls screening the toilet from the rest of the room.
And by the time the “bath like” facilites are in, there is not even enough space left in that room for a twin bed. So, the 2 room attic becomes one room.
Plumbing inspection fails 3 times. Gas line inspection fails one.
He then PAINTS the beautiful Georgia brick an aweful yellow.
3 weeks into his 4 week flip he finally hires someone to gut the kitchen. Surprise, surprise, the super great deal he has lined up for the kitchen cabnets is no longer available. So, he has to pay twice as much for true crap. Takes out the old appliance, but doesn’t put any new ones back.
His basement is less than 6 feet high and is really just a utiltiy room with a giant furnace and AC unit dominating it.
He is hardly ever there. Nothing is getting done. His solution to suck contractors and nothing getting done because he isn’t there enough is to simply stop going. Some guy shows up to ask if he has work, and he hires the dude to run the whole flip. He quit his job to flip houses and he isn’t even doing ANYTHING. What the????
He ended up going 3 months and $25K. While his wife is irate that she’s paying the mortgages on both houses and they are going into debt.
Realtors came in. I’m thinking they are going to tell him $100K. They tell him $180-190K. Now the brand new homes are going for uner $170K.
Shockingly (or not) the house sat on the market for many, many months while he is still not working. What the heck does he do with his time.
Eventually, they take the house off the market to rent it out while they wait for the sellers market to magically return.
So, is he back to work? Nope. Looking for his next house to flip.
“CRASH AND BURN!”, is what I was yelling at the TV.”
ROTFLMAO!!!
Some guy shows up to ask if he has work, and he hires the dude to run the whole flip.
That guy was his next door neighbor…he hired him because he was spending “too much time” commuting to the jobsite everyday. WTF was he going to do the whole day?? No job…I think he just sat home and watched Oprah all day and congratulated himself and being soo smart!
That was some of out thoughts as well, what the hell was he doing all day? I figured hanging out at Starbucks feeling important.
Well, I’m settling in to a NEW rental house this weekend in Northern Virginia. I “moved up” in my rental, went from a 2/1 to a 3/1.5 with a basement in a very nice neighborhood in Falls Church.
Let’s see, there’s a house a couple streets over that is listed at $599k. Hmmm… let me do some rough math, 10% down… etc. etc.. sweet my monthly nut would be well over $3k… how does it benefit me again to just about DOUBLE what i’m paying for a house?
Everyone can argue about whos’ to blame, why poor borrowers can’t get their I/O loans right now, but this doesn’t get fixed until housing becomes historically affordable… still a ways to go.
geeah:
Do you mind me asking how you found the SFH rental market to be?
By your post it seems you are paying somewhere around 1500 pm. I’m getting mixed messages about ‘rising rents’ from a realtor I know. I’d be interested to know what you found. My lease is up in December and I’m looking for negotiating room.
Thanks.
novasold
You need to have the option of moving in order to make the rent go down. Otherwise, they have you by the cajones.
It should be especially good for you in Dec, any smart LL will realize that the winter is a tougher time to lease a place.
im at 1700pm actually. I was looking for something decent from about 1500-1800 with more space than I currently had. Started looking in earnest in June.
I think there are 2 rental markets right now. The long-time rentals either run by mgmt companies/ll’s and the “new rental” market, which seem to have lots of stainless steel upgrades.
The long-time rentals seem to be holding steady as far as what i know about rents from this area, but they are the hard ones to get.
I would find about 2-3 a month I liked, but by the time I acted they were taken. I found this current house and basically talked a realtor to show it to me on the 4th of July. I put an application in the next morning.
With that said, there are a LOT of “new rentals” that are clearly FBs trying to cover their asses. These tend to be around 2200-2500 I would guess for the same type of house i’m in now.
I think if you’re looking for a rental right now, you can find some very nice places for 1600-2000 you just need to move on them.
Thanks geeah and JP.
I have no problem moving (although I hate it) and will begin to look earnestly in the middle of September. My ll has owned this house since 1994 so if I have a list of comparables to show him I don’t think I’ll have a raise in rent (1850 pm).
I appreciate the info. all.
I rent for $1585 a month. 1983 sq. feet, new condo. 3 bedrooms, 2 full baths and private garage. Designer kitchen and window treatments. The whole shebang. 10 miles from the office. Takes 20 to 25 minutes to get to office. Am I moving? Heck no.
SFH in neighborhood next door has a rental available for $1650.
Unless purchasers have a credit score approaching 700, they can’t get a loan with zero percent down, said Steve Schauer, president of National Lenders Service, a Las Vegas mortgage broker. That has eliminated many people from consideration, and the credit guidelines are going to get even tighter, he said.
What has especially hurt Las Vegas are guideline changes for stated-income loans, which are used by tip earners who don’t declare all of their income. Lenders are now requiring a down payment of 10 percent when no down payment or 5 percent may have been required a year ago, Schauer said.
“That makes a huge difference,” Schauer said. “The qualifications are tightening, and it is getting increasingly difficult every day. Not just anybody can buy a house these days. I see less and less people able to qualify. Is that such a bad thing? They probably shouldn’t have bought that house three to four years ago.”
It seems to me 700 is not that great of a credit score. I believe 720 is a national average. I doubt anyone should be getting zero down, even with a score of 800+.
People keep talking baby boomer this and baby boomer that. What people fail to understand is that these baby boomers have to sell their homes. Many of them just can’t get what they need out of them to retire. 2nd, when they do retire, you think they want to blow it all on some hot humid hurricane ravaged area surrounded by swamps and gators while insurance and high property tax bleeds them dry? I seriously doubt it. Most are going to go where the lowest cost of living is. Well, not to Alaska or Siberia, but somewhere where they can avoid the hustle and bustle. Right now it is South Carolina, Tennessee, rural parts of Georgia. Mississippi. Maybe Idaha. Florida is definitely seeing a migration of not only seniors, but young families that make up the middle class that migrate out of Florida.
People in Virginia, I can imagine, might be going to West Virginia and the Western part of the state. There might be rural parts of PA that people go to.
yep, Tom, they’re still beating the drum about boomers here in South Hillsborough. But when I was out yesterday, I saw plenty of young families with lots of kids. Problem is, I don’t think most of them are US citizens. The children might be. Anyway, the men in these families no longer have construction work. They’ll be looking for more benefits at the expense of the Florida taxpayer. Pretty grim.
Lock your doors. Home invasions and robberies might be up.
Also, because of the ax shortfall, the cops are out in full force writing speeding ticket. I got a ticket for going 6 miles over the limit. Talk about anal. I’m taking it to court. I am not giving them one red cent. Court costs, yes, but that money doesn’t go into the county coffers like a speeding ticket. Still, I’m pissed off.
You can beat that by arguing statistical margin of error on the speed gun. Pennsylvania cops don’t even write tickets unless they’ve got you doing at least 10 mph over.
“Also, because of the ax shortfall, the cops are out in full force writing speeding ticket.”
I’ve been noticing that. Also am noticing more and more totally unmarked cars (central Florida) — Dodge Chargers, Mustangs, etc. Valentine One pays for itself, big time.
Colorado Springs cops are among the worst in the nation at using speed traps as revenue-generators. People are getting pulled over for 4-5 mph over the limit. Meanwhile, three friends of mine have had their cars broken into over the past year, and in every case the cops just shrugged and said, let your insurance take care of it.
A slowdown in the economy will result in more speeding tickets for two reasons:
(1) revenue enhancement needed
(2) less traffic and thus easier to apprehend
This is the next big fad.
Now that Lending is drying up and people are desperate to sell, I see tons of ads promising owner financing. Rent to own. Bankruptices, bad credit ok.
I can just see how painful this is going to get when people think they found someone to buy their home, to find that payments are late to then find the family moved out in the middle of the night to leave stained carpet, smashed walls, and tons of wear and tear. A few busted appliances. The door to the fridge missing…. You get the idea.
Most of these “investment” properties will be harder to sell after being used for the next few years. Then they’ll become used properties.
Might become “handyman specials”.
I have a question about some comments by Robert Kiyosaki on the Cavuto Report (grrr…I know everyone on this board despises both of these guys, but hear me out, please).
Kiyosaki is pretty darn bearish on Real Estate, but he did say that it’s all about cash flow, and so he thinks that if you can buy rental properties at around $65K AND find a renter for them, then things should work out alright.
Ok, so I guess my question is: say you find a deal on a condo for $50K to $60K in someplace like Las Vegas or Florida (or in Kiyosaki’s pick city, Tulsa, Oklahoma)…do you think that would be a pretty compelling opportunity or is even $50K for a condo in a major metro area still paying too much…?
Real estate can work out as an investment if it cash flows positive. The problem in Florida is the additional costs like taxes and skyrocketing insurance. And rabid HOA or condo fees.
I am seeing condos on Craigslist for $50,000 and under occasionally. So far, though, they seem to be 1 BR. And I don’t know the condo fees, or taxes, so it is a little dicey.
Is there a way to get rid of the HOA altogether?
I don’t think you can get rid of a condo association, but depending on the HOA, you might be able to dissolve it, provided the community has detached homes on reasonably sized lots and not much in the way of common property. But I don’t know the law on that, so not sure how it is done.
In Florida, many neighborhoods have (or at least they used to) HOAs that have a “sunset” provision — after a set period (21 years in the ‘hood I owned in), the deed restrictions, lifeblood of HOAs, will dissolve unless, prior to that date, x% of the current owners vote to keep it going.
Hondje,
How ugly is it ? As i have written before my family has multi unit rentals all over Cape Coral. As of yesterday we have had 25% of the rent checks for this month bounce. Ouch.
So here is the question you have to ask your self…Do you start the eviction process now,at a cost of 4-5 weeks and 150.00 or so, or do you try and work with the renters ?? Can you find more renters ?? Do you have the ability to undercut other landlords in price to attract renters ?? In most areas there are way more rentals than renters.
Oh, one other item…Everything we own is paid for and if the situation gets 3-4 times as bad, heck we may end up only covering taxes and insurance next year.
My head hurts just typing this out…
Chris
Wow, 25% of rent checks bounced thi month…? How does that compare with 2005 or 2006 rates…?
Hondje,
I just pulled my records,we had just a few more total for all of 05 and 06. 07 has not been bad up until this month,maybe 1 or 2 each month. I have no idea what changed in the course of 30 days.
I am currently printing the five day notice and gonna hang it on the units Monday…It doesn’t cost anything and sometimes works to get the rent. If not i have to hang it to start eviction anyways.
One good thing about Florida…I can usually get someone out in less than 30 days.
Chris
Wow, Chris, that 25% default rate in one month is astounding. I’ve read your posts, so I know your rents are pretty cheap, too. People must really be hurting down in Cape Coral, big time. But, aside from real estate, what sort of employment is there in Cape Coral anyway? Maybe some retirement related stuff, a little fishing and boating, the usual restaurant and convenience store jobs. Am I forgetting anything?
Just as an aside, am I ever glad my income doesn’t depend on Florida residents or tourists. Ouch! We got empty pockets here.
25% BOUNCED… Man what losers….In all my years of renting i never gave a landlord a bad check…maybe its because my father was a landlord and he always taught us the landlord gets paid FIRST…all others you can stall.
I bought a 50K condo - in 1999. I sold in 2005 for 125K. At the moment there is no such thing as a 50k - 60K condo in Las Vegas.
Maybe in 2010…
You would have to know the condo fees, understand if the association is saving any money large capital expenditures, taxes.
As all the wise folks here often say, if after all expenses it can rent cash flow positive it is a good deal. Otherwise, it is just a pair of cement shoes.
?? question on cap gains and depreciation recovery??- my neighbor wants to sell a rental in MD and move to Italy- what are the chances of the IRS catching him ?
regardless of what the odds are, why would anyone want to live in a perpetual state of wondering?
You know, lost, you bring up a very good issue here. A perpetual state of wondering, a constant state of uncertainty, these are things that actually cause insanity. You’re better off knowing things are going to suck, rather than wondering whether they will or they won’t. Is the food safe, or not? Will the Fed lower or raise? Will the illegals go home, or not? Will things stabilize, or should I be taking my cash out of the bank and stuffing it under the mattress? And even if I do, will it even be worth anything? Will we have a terrorist attack? Can people trust the pharmaceuticals they take? Is my broker telling me the truth? And on, and on. Right now, the only thing that is certain, is uncertainty, which leads to lack of confidence. And since fiat currency is based on confidence, if there is no confidence, how much do you think that dollar is worth?
yup, you’re right, just reading about all that uncertainty is making me question my sanity.
But this is the kind of thing that drives people to try to surround themselves with “security” - such as a nice house they can’t afford and that will eventually bring them even more uncertainty as it’s foreclosed on.
IMO, some of this housing bubble was brought on not just by greed, but by the uncertainty you refer to and people trying to find a safe haven.
Evading tax on the capital gain — how much could that cost him, relative to looking over his shoulder forever? I suppose the IRS would have to notice that he stopped filing the rental income schedule and inquire about that — which to me seems very unlikely given their alleged staffing, workload and priorities. But he’s still evading. BTW, mention to him that there is a big momma IRS office in Rome, at the US Embassy.
I saw my first dead condo complex yesterday in Arlington. Half completed and bricked with the silver liner stuff blowing off in ragged flags where they had stopped. Entrances boarded up with rapidly browning plywood.
” ‘CRASH AND BURN!”, is what I was yelling at the TV.”
Well, yell at the t.v. some more, Darrell! I do it, too. The veins pulse out on my forehead and everything. Sooner or later those little television people will hear our wise screams and roars of outrage and begin to pay attention, and their lives will get better because of it. Maybe we just aren’t yelling quite loud enough. Captain Kirk could never see the Villain with Too Much Eyeliner lurking in the rocks, now matter how I shouted, but did that stop me from trying to warn him? Or when the rerun came back on years later and that bad guy was still there? No way! And now this REtard making midget bathtubs and painting his house yellow on ‘Property Ladder’… it’s just too bad he ignored you. But you did what you could.
Hey, losty, that reminds me, how did your little baby bird restoration project go? A couple months ago you were fiddling around with a baby finch, I think I remember. Did a cat get it, or did it run away, or did it grow up to become a majestic, big, enormous finch?
yup, it grew up - I let it go, mom and dad flew down and took a look and took over - it was a very cool experience, the bird actually came and visited me for the next few days, this was at my dad’s house, and just before we sold it a week ago, I saw the bird around (I named it Eddie, but it turned out to be a girl, so it became Edwina).
but I suffered from empty nest syndrome for a week or so…
“ Landlords behind on hefty mortgage payments for houses worth $500,000 and up are seeking Section 8 status at her office.”
Well over a year and a half ago, someone on this blog predicted this would happen. I remember because I didn’t know what “section 8” was and had to look it up. Amazing, but true!
Got grubs?
I can’t think of anything that would liven up a monthly HOA association meeting than mention of a house in the ‘hood going Section 8.
I’d love to be a fly on the wall at some of the new developments around here, where specuvestors bought multiple properties and are now stuffing them with Section 8 renters. Man, is that EVER a recipe for resentment. Just imagine you’re an underwater FB still trying to at least make a go of the new property you still have some pride in. Now, imagine watching the development turn into some version of “the projects” around you. Most of the Section 8ers around here seem to be halfway decent, but I think their lifestyle is somewhat different from what their FB neighbors expected.
I can’t imagine a more self-defeating flipper strategy than renting to Section 8s. If even individually they are decent and responsible - as if - it’s the proverbial “there goes the neighborhood,” not to mention the likely damage to your house by less-than-desireable tenants or (if it happened in my neighborhood) angry neighbors.
‘It was terrible,’ said Tokar, 21, who managed to find another lender after a midnight paperwork session with her real estate agent. ‘”I couldn’t really sleep.’”
You better plan on losing a lot more sleep, sweetie, once you wake up from your la-la land and realise what you got yourself into.
I just talked to someone in Loudoun who refinanced their home to purchase a 100K piano, yes $100,000. They bought their house for around 300K in 1998 so they feel like they have equity as houses in the neighborhood are “wishing” for 650K to 1M+.
This is on top of just purchasing a new SUV. I was polite and kept my mouth shut.
hey, not to worry, it’s gotta be a grand for that price, and they’re big enough to get outta the rain under
$100K thats cheap look at this one:
http://www.pgtigercat.com/steinmd2.htm
$100K thats cheap look at this one:
http://www.pgtigercat.com/steinmd2.htm
==
I’m astounded. I had no idea of high end piano prices!