Housing Prices Went Up Too Much Too Quickly
The Charlotte Observer reports from North Carolina. “The slowing flow of money for mortgage loans is starting to affect people with good jobs and good credit. Charlotte-area brokers say a much broader swath of people are facing barriers to borrowing. ‘Lenders are looking for reasons why a loan should be turned down,’ said Kyle Kilpatrick, an executive VP at online broker LendingTree.”
“Jeff Kennedy of Southern United Mortgage in Charlotte said a lender recently called to ask for documentation on a borrower’s income for a loan it had approved two weeks earlier. ‘That’s something that’s never been done before,’ Kennedy said.”
“Cantey Tull, of Tull Mortgage in Charlotte, said she heard from a woman who was driving to close on a home when her broker called to say the loan was no longer available. She wanted to make a 5 percent down payment and the lender had decided her credit score was no longer good enough. She needed to make a larger down payment.”
“‘Two weeks ago she could have’ qualified, Tull said. ‘Now she couldn’t.’”
“‘With a rate increase from 6.75 percent to 7.5 percent, the buyer’s buying power just dropped by 10 percent,’ said Frank Borges LLosa, a broker at FranklyRealty.com. ‘That $600,000 buyer will now have to look at buying a $550,000 place or paying 10 percent more per month for the same house versus last week.’”
From WKRN.com in Tennessee. “Gary Cecere and his fiancée Heidi found their dream house in upstate New York. The couple had a mortgage lined up, their homeowner’s insurance and contracts. Then, that all changed.”
“‘We started packing up and getting happy about it and then Monday comes and we get this call and they pulled it,’ said Gary Cecere.”
“The bank suddenly pulled out on the package of two mortgage loans that they needed to buy the $410,000 home. Banks are now tightening their standards, offering fewer loans and for those with mortgages, costly interest rates are forcing homeowners into foreclosure.”
“Marina Peed, the Impact Group president, said, ‘The range of folks that are struggling keeping their mortgages now is unprecedented.’ In one Georgia community, 80 homes are in foreclosure.”
“For the Cecere’s, visiting the home that could have been, brings up pain and anger. ‘You’re just left at the mercy of the banks, basically,’ said Gary Cecere.”
Reuters reports on Florida. “Until two years ago, middle-class retirees vied with property speculators for houses and apartments in Cape Coral, a town near Fort Myers on Florida’s sun-drenched Gulf Coast. Now almost every other house on some of its streets has a for-sale sign outside.”
“With a bloated inventory of unsold homes and a growing number of homeowners forced by mortgage delinquencies to sell — thanks to the subprime crisis and ensuing credit crunch — southwest Florida’s once warm clime for property has turned stone-cold.”
“There was a nearly 27-month supply of existing single-family homes on the Fort Myers market last month compared to a three-month supply at the height of the local boom in housing in August 2005, according to Denny Grimes, a top real estate agent in Fort Myers.”
“At the same time, more than 40 percent of single-family homes were listed at prices below $250,000 versus just 18 percent at the market peak. ‘There’s a lot of blood in the water and there’s a lot more to come,’ Grimes said.”
“Making things worse, Grimes said builders were still churning out new housing units at big discounts in and around Fort Myers, where many investors bought houses during the recent boom market without ever considering the long-term cost of holding properties.”
“Fort Myers ‘is by far the worst housing market that we’re in,’ J. Larry Sorsby, chief financial officer of home builder Hovnanian Enterprises Inc., told Reuters. Hovnanian bought the largest home builder in the Fort Myers in August 2005 just as sales in the city were starting to dry up.”
“‘They were the last one aboard the Titanic,’ Grimes said.”
The Financial Times Deutschland on Florida.”Along with bubble property markets across America, west Florida has seen its luxurious lifestyle shaken. The Sarasota district has experienced the biggest drop in house prices in the country, with foreclosures spiking after a drop of almost 15 per cent in the year to March.”
“Florida is the ‘canary in the cage,’ according to Jan Hatzius, chief economist at Goldman Sachs.”
“‘People were buying places figuring they would put in a new kitchen and then flip them. It was greed. We were all in the same game. We were selling a piece of paradise,’ says Christina Neff, a real estate agent in Siesta Key. ‘Flippers are behind what is happening.’”
“Claude, one of many so-called Canadian ’snowbirds’ who winter in Florida, said he had a good credit rating but opted for a subprime loan because the low initial rate made a short-term investment more profitable. He says he is now ‘trapped’ with an unaffordable mortgage and a depreciating beachfront property.”
“Real estate agent Dorothea Sandland says: “A lot of buyers took out second mortgages, risky loans or even special bonds because they thought they could get rid of the property very quickly.”
“‘I’m looking at condos coming to market that were bought for $259,000 when there are brand new ones next door selling for $180,000,’ says Ms Sandland.”
The Herald Tribune from Florida. “A survey by Attorneys’ Title Insurance Fund suggests that the current Florida real estate market is rather Dickensian.”
“The best of times: 63 percent of the 1,415 Florida homeowners surveyed by the big title insurance underwriter expect that the value of homes in their community will remain the same or rise in the next 12 months. Thirty-six percent think prices will rise, 37 percent that they will fall and 27 that they will stay the same.”
“The worst of times: 80 percent agreed that now is a bad time to be selling a home and worry about their ability to sell their property if they needed to.”
“That lends credence to the notion that prices in the market might not have bottomed out yet, the question that is on the minds of everyone from homeowners to Southwest Florida’s top real estate gurus.”
The Tampa Tribune from Florida. “For every 79 households in the Tampa Bay area, there was one foreclosure filing during the first six months of this year, according to a new report released Tuesday.”
“With 10,173 homes falling into foreclosure in the period, the Tampa-St. Petersburg-Clearwater area ranked 24th among the 100 largest U.S. metro areas tracked by RealtyTrac.”
“Mike Alea, owner of Brandon-based Elite Mortgage Network, a residential lender, said the Tampa Bay area must feel this kind of pain before the market can rebound. ‘The market is just correcting itself right now,’ Alea said. ‘Housing prices went up too much too quickly. If you have cash, it’s a perfect time to buy.’”
The Bradenton Herald. “Less than eight months into the year, Manatee County already has broken its record for most foreclosures, yet a national company ranks the area as the lowest risk large market.”
“From January to July alone, 1,110 foreclosures had been reported in Manatee County, according to the clerk of court’s office. The previous high was in 2002, when the county saw 901 foreclosures recorded for the entire year.”
“While lenders have definitely tightened the purse strings on higher risk loans, the traditional loans are still out there, said Michelle Daniels, broker at Intercoastal Lending Group. Freddie Mac and Fannie Mae loans also are still an option for qualified buyers purchasing homes that cost less than $417,000.”
“‘I think what we’re going to see is going back to the day of people having to get loans on their own merits,’ said Marci Walker, a managing partner at Blue Skye Lending in Lakewood Ranch.”
“Falling property values have left some owners who purchased their home using adjustable rate mortgages in a bind. Many have negative equity in their homes due to their mortgage. ‘It’s sad that rates are still so good and it should be a good refinancing market, but a lot of those people won’t qualify now,’ Walker said.”
“Anthony DiMauro, assistant VP of mortgages for Fifth Third Bank, and other local mortgage professionals say it is a good time to buy, especially for those with decent credit and money to put down.”
“‘The people who have a good job and pay their bills on time and are financially responsible, they are having no problem getting homes,’ DiMauro said.”
‘WCI Communities abruptly halted controversy over a proposed road in one of its communities Monday by withdrawing a request to develop an additional 417 acres at Pelican Preserve. In a letter to residents, the high-end developer cited the lackluster real estate market as a reason for its decision.’
‘Market conditions change. We are in a down cycle,’ Sarasota attorney Christian Van Hise said.’
Just think about what will happen to all those empty / foreclosed houses if a hurricane comes through. Imagine the confusion about who owns the place, who repairs it, coordinates it. Neighborhoods will be destroyed for years.
H.M.S. (Hovnanian made ship) Titanic
“Fort Myers ‘is by far the worst housing market that we’re in,’ J. Larry Sorsby, chief financial officer of home builder Hovnanian Enterprises Inc., told Reuters. Hovnanian bought the largest home builder in the Fort Myers in August 2005 just as sales in the city were starting to dry up.”
“‘They were the last one aboard the Titanic,’ Grimes said.”
I’d put Cape Coral FL as #1 in the universe
“That’s something that’s never been done before,’ Kennedy said.”
NEVER?!?!?!?!?!!?
Right, and that speaks to how people who haven’t seen a down market are clueless, which is one reason we are in this mess.
“…people who haven’t seen a down market are clueless…”
That’s true, but even the blind could see this train wreck. Some just decided to ignore it. I was just chatting about that “totally new economic model” with a friend of mine over the weekend. He reminded me of the tech stock boom and bust when one of the talking heads on the cable channels said we were working off from a totally new economic model then too. We didn’t need to worry about profitability because the potential was so big on the internet.
“the potential was so big on the internet.”
I remember it well…selling dollar bills for 99 cents, but make it up in volume.
I remember one of my few market successes was with Netbank. I bought in at $7.00 per share when the fundamentals were semi-weak. The shares went insane to $180 per share and I sold when the fundamentals were very weak. They finally peaked at just over $300 per share (I was kicking myself). Today the stock is delisted and trades on paper at $.09 per share. Not kicking myself now.
Anyone who says the housing market won’t be that bad only needs to look at that case study.
There is a limit to how high prices can go - there is no limit to how low they can go.
Huh? Sounds backwards to me. The downside limit is zero. The upside limit is???
Actually I wanted to comment about the tech bubble. I started work for a tech company in September 1999, and received some stock options for the usual incentive reasons. Although your options accrued on a monthly basis, you couldn’t exercise and sell any of them until your one-year service anniversary. Throughout the spring and summer of 2000, I watched the P/E climb into the mid 3 digit numbers and sweated bullets that everything would crash before September. I exercised and sold the whole year’s worth on that day in September, and urged my associates to do the same. “Sell now, the stock will NEVER be this high again.” It fell mostly on deaf ears. The most common excuse was they didn’t want the big tax bill! The stock price went up for another couple of months, then turned around and fell steadily. Ten months after the peak, most employee options were under water and the layoffs started. As a latecomer, I didn’t get that many options, but it was still a nice one-time mini-windfall. I checked the company’s stock price today; it’s still at only about 25% of its peak price, even though the NASDAQ is at about 50% of its peak value.
I can remember back to the big crash in RE development in central Virginia which began in late ‘73/early ‘74. In the early 70s RE was considered a hedge against inflation and a weak stock market, but the oil crisis (and its consequent credit crunch and recession) just brought everything to a screeching end. Lots of small builders went bankrupt. Big projects like Wintergreen and Lake Monticello ground to a halt. For 7-8 years the construction economy ranged between stagnant and morgue-like. It wasn’t until around 1982 that development started back up again and these huge projects started to get filled out.
No doubt. Perhaps not in the last 5 years, but in years before that, standard (strict) lending practices pretty much prevailed. If you were not credit worthy that was the end of it.
“If you were not credit worthy that was the end of it.”
But it wasn’t even that. It was requiring you to have “skin in the game” with down payments. It was requiring that you have income by actually documenting it. It was making sure you could make the payments by qualifying you on the real payment of the loan, and not some teaser rate.
“But it wasn’t even that. It was requiring you to have “skin in the game” with down payments. It was requiring that you have income by actually documenting it. It was making sure you could make the payments by qualifying you on the real payment of the loan, and not some teaser rate.”
Amen. I’m starting to think that even if the Fed caves and lowers rates, it won’t saving RE. Banks don’t HAVE to lend, and won’t if they can’t sell off the loans. Loans kept on their books will only go to buyers with stellar credit, documented income and a hefty downpayment. And with the negative savings rate in this country, that eliminates a lot of buyers.
The SF Chronicle ran another story this morning, front page, on how tighter mortgage standards are now impacting “the rich.” People are losing $2.0M deals because the buyer was “only” putting down 10%.
The coast is toast.
I thought banks have to lend to make money, literally, to make money, they lend money, which then gets created and that created money is then used as more collateral. They may not be able to lend money, but at the same time, they can’t afford not to lend, it’s how the bank makes money, as well as money is made.
First they need someone to make a deposit, then a small percentage of that deposit is held as reserves for the fractional reserve lending scam that literally makes money for loans that then then charge interest on (where the money for the interest comes from is another story considering it wasn’t originated with the loan).
Considering all that, this won’t end well. Inflate or die.
“I thought banks have to lend to make money”
What about investors? Hasn’t the glut of cheap money and lose lending standards been an outcome of wall street getting into the game, throwing money at homeowners in the hopes of getting relatively high (relative to treasuries) returns with no perceived risks? They *don’t* have to lend, and as is happening now, can easily invest in something else.
This whole bubble goes way beyond the banks…
Here’s the SFGate link for the story that Lisa mentioned above:
Mortgage Crunch Has Even Wealthy Buyers Scrambling For Credit
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/08/15/MNI3RHTDO.DTL
BayQT~
Banks will make money off the money everyone has depositied there. They can lend to businesses and not to consumers, if they want. When business is borrowing it actually leaves less for banks to lend to consumers.
Now, school me on this because I’ve never been involved with a house purchase, but my question is this;
From what I read here the buyer has to deposit or guarantee some funds to a list of real estate people to get the ball rolling and if they back out later the buyer forfeits some money ….
So, is it possible to re-write the contract to impose the same penalty on the lender? All these stories about lenders not consumating the deal & leaving everyone naked at the table with no financial hit seem to strike me as BS > !!
I can imagine that the lenders would balk at any such terms where THEY would lose money but it seems to me now that buyers have the upper hand, and if they can take their time in the purchase process, not be rushed by the pigs in the trough, is it possible to extract a performance penalty from Mr. Big Bank?
Maybe it’s already in place & I just havent heard it mentioned.
The real estate sales contract is between the buyer and the seller. A separate lending agreement between the lender and buyer covers the mortgage. The lender dictates the terms (golden rule), but it would be interesting if some hungry tort lawyer started looking for victims to represent.
But right now at least, lenders are doing you a favor by refusing to lend against a depreciating asset.
Bill in Carolina
Thanks for that summary. I guess I just find it galling that the golden rule maker has such complete control over the financial part of the process, with little to no penalty for changing terms or cancelling the deal without timely notice.
I suppose if you need the loan that badly you are at the mercy of the lenders but boy howdy I hope to never be that prostrate, and really feel for those that are. Must be the stubborn streak in me I guess . . . have a good one Bill !
Andy: I believe you are correct, sir. Most people have absolutely no idea of this concept. That is why banks are big and shiny.
“Jeff Kennedy of Southern United Mortgage in Charlotte said a lender recently called to ask for documentation on a borrower’s income for a loan it had approved two weeks earlier. ‘That’s something that’s never been done before,’ Kennedy said.”
Yes it has been done before, for like the last century. Back as late as 2000 you couldn’t get a loan without income verification. These crazy lending times over the last several years have never, never been the norm. Not only did they need to see your W2’s, income taxes for several years, & savings and checking statements, but they also called your employer and verified your wage and time with the company. Jeff Kennedy, you’re one of the reasons this country is a total mess.
On another note this morning CNBC sent a guy to a regular bank in Chicago to see about getting a mortgage loan. They told him they would give him a 6.5% 30 year fixed loan if he put 20% down and all his income and other docs could be verified. They would also do jumbo at 6.9% with the same specifications. So maybe regular banks are going to go back to 20% down, not 5 or 10. That’ll keep a lot of people out of the market for a very long time. Mortgage companies that ran through banks won’t be able to do 5 & 10% down either, since they’ll have to follow bank standards.
Of course the lending practices were crazy in the last several years, but I think what Kennedy found especially odd is that the loan had already been approved by the lender.
Yep this was standard not 10 years ago. What the (&*(%(%
I think they mean the practice of doing income verification
-AFTER- the loan has already been approved. It used to come first.
“For the Cecere’s, visiting the home that could have been, brings up pain and anger. ‘You’re just left at the mercy of the banks, basically,’ said Gary Cecere.”
The Ceceres should be thanking their lucky stars. That mean ol’ bank just saved them from years of anguish and misfortune.
I love how they sound so victimized. “…at the mercy of the banks…” Well, yeah - that’s as it should be. We’re talking very large sums of money. Unfortunately, I think people are presently immune to the fact that $400,000 is a lot of money. Even my mother said (while looking through the real estate classifieds), “Oh, look - here’s a nice, little home for only $250,000″. She then paused and said, “Wow - since when did a quarter of a million dollars become ‘only’.” Indeed.
Exactly. That’s why I like to say it out loud like “a 1/4 of a million dollars” instead of “two hundred and fifty thousand dollars”. It always has been a lot of money and will be again, printing presses not withstanding. Supposedly the average middle class person earns a 1 million dollars over their lifetime. Just looking at the context of what a person earns in their lifetime, even in “non-bubble” areas houses are grossly overpriced.
Quarter of a million dollars? Funny you should phrase it that way. Just yesterday, I was talking with a colleague who’s been sitting on the homebuying sidelines for years. Reason? He thinks the prices here in Tucson are too high.
Case in point: We were discussing a new development up the street from his business. A much-touted infill community where the tiny houses are going for (you guessed it) a quarter of a million dollars. Or more.
BTW, I saw quite a number of “for sale” signs in that community. Unoccupied homes, which tells me that they weren’t such hot “investments” after all.
“I like to say it out loud like ‘a 1/4 of a million dollars’”
I do the same. When people flippantly describe government spending, I refer to $3B as three thousand million dollars. My favorite — completely accurate, but offputting to some because they don’t want to think of it that way, is (rather than “public”) “government schools.”
I stopped and ‘ looked ‘ at RV’s yesterday at a parking lot sale here in central Florida.
One pretty nice one , the salesman says, “This one is 250k, but You could buy it for about 190. ”
Less than a ” Quarter Million Dollars” , $190,000 for a ‘ Camper ” , or even that ‘ box of wood ‘ , Condo or small SFH , where avg. income is less then 40k per year is ‘ still a lot of money ‘ .
Add in interest, maintenance , taxes & ins. and soon You’ll be approaching that ‘ One Million Dollar ‘ mark.
I think it has more effect if You say it as a little less than a Million.
Say it with Me.
Nine Hundred Ninety-Nine Thousand, Nine Hundred and Ninety-Nine Dollars and Ninety-Nine Cents.
Wow ! That’s a lot of Money.
“‘You’re just left at the mercy of the banks, basically,’ said Gary Cecere.”
Have they never heard of “He who has the gold, makes the rule?”
“Have they never heard of “He who has the gold, makes the rule?””
That will soon be true in a far more literal sense. Currencies (all currencies) are about to enter a very shaky period — with the dollar looking the most shaky of all. An ounce of gold still buys the same amount of oil that it did 50 years ago. The same can’t be said of any currency.
““For the Cecere’s, visiting the home that could have been, brings up pain and anger. ‘You’re just left at the mercy of the banks, basically,’ said Gary Cecere.””
I was just going to post the same thing. These people just got their behinds saved and they’re too stupid to know it. Besides if they wait a year perhaps the price will be reduced to where they can be approved. Do these people read a newspaper?
I was just driving past a $5 million house in Naples FL a few months ago and got all pissed thinking that if banks would just give me a -10% loan, that baby would be mine! LOL I’m a victim.
The sense of entitlement out there just makes me want to puke.
What ever happened to working hard, saving for a 20% down payment and maintaining good credit to earn the privilege of being a homeowner?
‘The fish stinks from the head down.” They watch the govt., the illegals, and other nefarious sources, and don’t see any consequences. Instant gratification with minimal effort and/or consequences. I am not from that school myself. The Feds catered to the stink free crowd.
in other words, you must “earn” it!
in other words, you must “earn” it!
“left at the mercy of the banks, basically”
this is just too funny… brought tears to my eyes…
its their freaking money you dumbwit, get a clue.
Used to be you had to dress up in your best Sunday outfit and go to the banker hat in hand to ask for the money. Good times are a coming back.
got cash?
The only sense that they’re victimized is that the bank creates fiat money and that’s wrong. But even if we had commodity money, me thinks these people still wouldn’t have two silver dollars to rub together, no less a 50% down payment on a house that costs 100 ounces of gold. LOL
“Used to be you had to dress up in your best Sunday outfit and go to the banker hat in hand to ask for the money.”
I had to do that, for my first two houses. The bankers were just as sanctimonious as in the old story books — they wanted to know why we were buying, if we knew what a serious commitment it was, etc., etc. And that was good — it made a very serious impression on us — that, after marriage, this was the biggest commitment of our lives.
There was a time that they wouldn’t even count the wife’s income. When they started using the wife’s income too they used to ask if you were planning on having children, and if you were going to work after that. Things they can’t get away with now, with discrimination laws. It’s still the smart thing to do to only buy what one income can afford, because if something happens to one of you you’re screwed if you’ve qualified with 2 incomes.
I hear somewhere that when they started counting wife’s income, the house prices correspendingly increased. So, it would have been better if they considered only one spouse’s income, houses would be cheaper!
You got it. Conventional wisdom says women had to enter the workforce in great numbers in the 1970’s because inflation had gotten so bad. The reality is that women entering the workforce, and significantly raising average houshold income, CAUSED THE INFLATION.
I hear ya, Chip. I remember when my Dad worked 2 jobs to save for the down payment for the house he eventually bought a couple of years later (1967, Chicago). AND, the house was smaller than the large apartment that we lived in (family of 4). As a junior in high school at the time, I was miffed that I had to go back to sharing a bedroom with my sister. But, Dad, in all of his wisdom, realized that we would be leaving home in less than 10 years (which I did 5 years later) and he wouldn’t need a huge house.
Btw, the house was (is) 1242 sq. ft. with a full basement (that he remodeled), garage, small back yard, small front yard, plus an in-law unit upstairs which was sometimes rented, sometimes occupied by my sister or my cousin. It was really plenty of room for all of us. House: $26k. He may have had to save $5k (20%). Big money back then.
BayQT~
The Tampa Trib interviews three mortgage wankers and they all have some variation of “it’s a great time to buy”.
I honestly would like someone to bookmark this, and check back in 90 days to see if Elite Mortgage Network, Fifth Third Bank and Intercoastal Lending Group are still in business. I’ll bet you a beer they’re all unemployeed by Thanksgiving.
Make my beer cold — and straight from the tap.
If my investment horizon was 40 years and I could pay cash for a house and still have 10 million in the bank, it would still only be a decent time to buy, not a great time because I’d still be paying too much.
Craven Moorehead
aka Pirate Radio circa 1990’s? I listened to that low wattage station in Temple Terrace while reading about the FCC efforts to quash indie broadcasts in the local free mag Creative Loafing / Weekly Planet.
Ahh good times
“Creative Loafing?” How ironic. A small staff probably worked pretty hard meeting each week’s deadlines.
yeah Bill, the title Creative Loafing was an pun but it really referred to the main content inside which was a list or articles about cheap and fun things to do around the Tampa Bay area.
Kind of the original Craigslist - just in print. Now it’s evolved into more of a muckraker, 60 Minutes, activist, political expose’ type of mag with a thin pretense of current bay area events.
There was a very good piece recently about Hulk Hogan’s callous treatment of a family caregiver, which really blows the lid of his famous contrived public image. Now whenever I watch his Hogans Knows Best show I keep in mind he is actually a load of festering manure to anyone outside the wrestling world. Wonder if his obviously painful back condition was worth the years of abuse?!?
Sure he is rich but now is on bad shape w/chronic pain. His spoiled kids could hardly give a damn what he went through.
Ever notice how Hulk & Dog The Rabbit Hunter start slingin’ around the term ” Brother ” when they want something from someone?!
Hilarious - but since Battlestar Galactica went off I am desperate for anything besides the usual lying CNBC type financial drivel with commericials every 10 seconds.
Ok - side tangent off !
This may be stupid, but does anyone else think Fifth Third Bank is a dumb name.
From Wikipedia:
Name
Fifth Third’s unusual name is the result of the June 1, 1908 merger of two banks, The Fifth National Bank and The Third National Bank, to become The Fifth Third National Bank of Cincinnati.[5] Because the merger took place during a period when prohibitionist ideas were gaining popularity, it was believed that “Fifth Third” was better than “Third Fifth,” which could be construed as a reference to three “fifths” of alcohol.[6] The name went through several changes over the years, until on March 24, 1969, the name was changed to Fifth Third Bank. [5]
Time for the next wave of flippers… short sellers… seriously, isn’t this the cycle? Vultures with cash in hand negotiating with banks at 60% of market value and selling fast a good 20% less than everything else comparable on the market?
That’s what happened with RTC. But instead of 60 cents on the dollar, vultures with the right government contacts got properties for less than ten cents on the dollar.
From the Herald link:
HA HA HA HA. That’s a good one. I wonder what the encore is.
I think FAF is a good short opportunity.
I think they got their “low risk” and “high risk” list backwards.
Honestly, I hope so, because if not, these people may be the stupidiest analyists, EVER.
LMFAO that there’s actually a mortgage firm named “Blue Skye Lending.” The passage below is from Wikipedia’s entry on the blue sky laws:
“A blue sky law is a state law in the United States that regulates the offering and sale of securities to protect the public from fraud. … The name that is given to the law indicates the evil at which it is aimed, that is, to use the language of a cited case, speculative schemes which have no more basis than so many feet of ‘blue sky.”
Blue Sky Lawsuit a coming .
This is one of things that ‘ Irks ‘ Me the most.
For Years I keep hearing from RE professionals, ” A house is Your biggest, best,most important Investment “.
Unless I register my ” Investment Opportunities” with the SEC , I am thrown in PRISON.
Yet the RE people have Sold Trillions of Dollars of overpriced ‘ Investments ‘ without a license and get away with it?
If you have cash, it’s a perfect time to buy.’”
I have the cash and I will not buy in this market. Prices have not bottomed out and according to a local realtor who has been in the business for over 30 years, prices are set to fall 20% by the end of the year. Why would anyone with cash lose $40,000 on a $200,000 purchase? To me, it looks as if Mike Alea is only interested in lining his own pockets at the expense of the purchaser by putting out false information to fool people into believing now is the time to buy.
And also why would a lender put up the cash on a declining asset ,so now we know why lenders don’t want to take that bet either .
We need truthful and accurate appriasals. Not some pie in the sky guess based on what a home might have sold for a year or two ago, but an accurate estimate of the current worth of the home, based on market fundamentals. I don’t see how lenders can be expected to loan on a home which is way over valued and is dropping in value every day either.
Ugh, if we went by typical “fundamental” values down here in S. FL (rent/price ratio, replacement cost, etc) then nobody would be able to get a loan again. Now, not that I am saying that’s a bad thing, but I would suggest that we need to go from where we were “I don’t care if it’s a doghouse, it’s worth 1M dollars, and I will let you HELOC all that cash out” to “market fundamentals” over several steps. If we moved directly to market fundamentals, we would have another bomb go off in the bubble markets!
“…then nobody would be able to get a loan again.”
I don’t see “fundamental” values ever returning to South Florida. We’re going to see a crash ala Cali 1990’s. Even at rock bottom prices, average workers will have to scrape to own. What we will see is a point where it is slightly more advantageous to own than rent on a strict monthly payment basis.
Right now I’m paying around $100 in monthly payment premium after taxes and insurance to own. The benefit to the self employed is the tax write off. I’m sure saving more than $100 in tax burden.
And also why would a lender put up the cash on a declining asset ,so now we know why lenders don’t want to take that bet either .
Excellent comment!!
I believe cash buyers will be well rewarded in the years to come. Not yet though, perhaps another two years?
Indeed. Only if the prime rate hits 10% or more will it really pay off to be a cash buyer.
What are we more likely see in the next few years: mortgage rates at 5% or rates at 10%? Once seller financing becomes commonplace (think 1981), then cash buyers will be rewarded. Until then, sit on the sidelines and wait for the market to finish crashing.
‘That $600,000 buyer will now have to look at buying a $550,000 place or paying 10 percent more per month for the same house versus last week.’
No they will buy the exact same house for $50K less than they would have paid a week ago. In 6 months they will pay even less as credit standards continue to tighten.
The downpayment problem is bigger than the rate. The young haven’t saved, thanks to credit card and student loan debts. The old can’t move up, because they have no one to sell to.
Someone should do a quick study of saving by those in their 20s and early 30s. We scrimped and saved for nine years before buying in the early 1990s. My parents lived downstairs from my grandparents for a decade before buying in the early 1970s.
I agree 100% with you. Downpayment requirement will stop a majority of sales. Among my 15 co-workers who are looking to buy only three (self included) have any significant cash saved.
Even a 50% drop in current house prices is quite possible if banks ask for 20% downpayment.
“Even a 50% drop in current house prices is quite possible if banks ask for 20% downpayment.”
I hope so, though that’s on the far side of my own projection. I think that what will occur initially is a lot of creative tap-dancing in order to come up with a substitute down payment. Piggybacks from a single lender will go away, but second mortgages from sharkish lenders won’t — they’ll just command much higher interest rates. Many sellers will be forced to take back the second, just to get out of the place, but that will put them in a bind for buying the next. PMI will be big business, and 10% down will be more common than we might wish. Regardless, it all will begin to depress prices big-time, in a mirror image of the way decreasing down payment levels and no-problem credit checks juiced the prices in the first place.
We bought land with 20% down and paid on it for 9 years. In the interim we bought a cheap house, fixed it up, lived in it 4 years, sold it, then built on the land. With the profit from the house and the value of the paid for land we had 35% down. But we sure didn’t do it the first year we were married. It took 9 years. Problem is a lot of people want to start out in a house just like their parents have or better. They don’t want a starter home anymore. Just drive through the developments and see the McMansions with swingsets in the back yards. Some of these buyers are really young.
Ghost
Yep, yer housing story was my planned path to home ownership here in CA during the crazy runup from 1999.
After touring the builders models for a few years, and basically gettting treated like some sort of fecal matter on a shoe by the snotty sales agents because we didnt get all worked up right away from their sales pitch, I decided to scout out some raw land, buy it & move a cheap mobile home to it while building a GOOD QUALITY house for the same or less than existing prices.
Death in the family resulted in an inherited fixer, so I never got that plan going. At least the Prop 13 exemption for children made the renovations and long term tax easement worth it. Otherwise, it was a teardown.
You don’t sound like a typical American…
(Just kidding! Actually you are the type of person that the word ‘American’ should represent. It is sad to see a good number of our compatriots keep getting into the debt trap to have everything before they accumulate any savings for even medical emrgencies. Their kids don’t study. They have no idea how our economic future has been mortgaged to other countries, etc. It is a really very sad situation and the housing bubble is one manifestation of our prevalent stupidity.)
LOL. Yeah, they’ll have to look at $550k houses instead of $600k houses. How to do that, walk out of the sample house, go out to you car, sit in your car for 15 minutes and then walk back into the sample house and you’re looking at a $550k property now.
Thats wrong Andy
You drive from the model house to the nearest Starbucks, get a cofee, go online, compare asking prices, and come back to the model house with an offer of $500K
“Marina Peed, the Impact Group president, said, ‘The range of folks that are struggling keeping their mortgages now is unprecedented”
That is quite a last name.
That’s quite a name overall. Kind of like Alotta Fagina in Austin Powers.
Marina Peed? Where’d she pee?
It like that guy Jack Shitz. Jack got tired of people making fun of his name so he changed it to Harold.
I’m already thinking water with Marina, don’t even want to go where the Peed takes me.
Don’t forget Ms. Buggy, in California, the gov’t environmental worker, chasing mosquitoes carrying the West Nile virus.
If rates for jumbo loans go up even more, will prices for homes in america keep coming down?
“If rates for jumbo loans go up even more, will prices for homes in [A]merica keep coming down?”
Yes, IMO, and pretty much proportionally. The monthly nut matters far more than some people like to admit — even for rich people.
County stops taking Countrywide checks
Posted by rroguski August 14, 2007 14:42PM
Categories: Breaking News
The Cuyahoga County Recorder’s Office has stopped taking checks from Countrywide Financial Corp., the nation’s largest mortgage lender, because of the California company’s warning last week of possible financial problems.
Countrywide traditionally would pay the county by check for mortgage filings it makes by mail, but the recorder’s office now will accept only money orders or certified checks for payment of those fees, said Thomas Roche, the recorder’s chief of staff.
Countrywide hasn’t bounced any checks, Roche said. The decision is purely preventative as scores of mortgage lenders have gone out of business or warned of financial woes.
“This is the one that has the major problem right now,” Roche said. “We’re just trying to protect the assets of the county.” The county has refused checks from a company one other time in recent years, he said, in the case of a title company that was going out of business.
Countrywide’s filing payments to the county are modest, perhaps amounting to hundreds of dollars a week. Other companies could be added to the “no checks” list if the county believes they may have trouble covering expenses.
Related content
I wonder how many localities will have trouble collecting property taxes from overwhelmed mortgage bond special servicers who are in no way organized to handle that volume of foreclosures? Will they eat the loss up front, or borrow against the future property taxes that will eventually be paid?
As the REOs pile up, their fate is becomming critical here on many levels. How long will they be held before sale?
Actually you may have hit on what will force banks to sell the REO at reasonable prices. I suspect a lot of localities will start putting innovative liens on abandoned foreclosed properties leading to a hefty bill when they are sold. This will force lenders to either bleed cash maintaining the property or sell since the liens will accrue on their books. Banks are not the only innovative entity out their.
Chuck, WT, Memmel — Interesting news and observations. I learn something new here every single day.
If this is Cuyahoga County in Ohio, this state is heavily mortgaged by Countrywide. Tons of their foreclosures are in our paper every day. I’m in a different county, but trust me, Countrywide has been big in Ohio.
Somewhere, a government worker with sense, forethought, and the ability to cut through bureaucracy. Congrats.
Now is absolutely not a good time to buy, whether you have cash or not. Friend of mine was looking to buy because a realtor told him he could probably get something at 5% off asking in the SF Bay Area. I told him that’s not enough and to wait until next summer if he can when he should have plenty more houses to choose from and at a lower price point as well.
…wait until next summer if he can when he should have plenty more houses to choose from and at a lower price point as well.
This is all relatively speaking. If the pricing were to drop by, say, a hundred thousand, that would mean that a bungalow in Palo Alto would only cost $550K, and not $650K….
Sorry to change topics but anybody checking out whats going on in the stock market today? 7 Billion!!Why is the Fed dumping billions into the market making our money worth less. What a scam!!
It’s a repo–a temporary operation. I believe that it expires tomorrow. Your money is not worth less because of it.
Despite being short term, these injections are still required to be paid back with interest. This interest comes out of the rest of the economy and results in further defaults or an increase in the money supply through more borrowing.
All told the interest the banks have paid the FED for these injections probably totals over $40,000,000 (40 million).
They cannot inflate their way out of this mess unless that start issuing debt free and interest free money.
I keep thinking about the small fib that keeps growing bigger and bigger until it becomes a vast and complex web of lies and deceptions. The more you lie the more lies you need to tell etc. The only way out of this mess is to use the truth (debt free money).
It will be interesting to see how far they get with that strategy. Even more amusing was watching the ECB go to such dramatic lengths and still no get all that much bang for their buck - I mean the fear is still there isn’t it?
They’ll keep doing repos until they’ve put enough time betweeen themselves and their potentially embarrassing statement about inflation being the major concern until they can formally ease, which typically involves driving the Fed funds rate down by buying treasuries for their own account, holding them until maturity, and not presenting them from redemption, thereby creating new reserves (monetary base) in the system. In other words, until approximately next week.
Don’t play their game. Exchange your dollars for something else (hint, hint).
Today is “declare” day for hedge fund bagholders who want to redeem on Sept. 30. Scary as the Grim Reaper for some of these banskters.
Interesting…
Follow the trend-
Aug 15 for Sep 30 redemptions,
Sep 15 for Oct 31 redemptions,
Oct 15 for Nov 30 redemptions,
Nov 15 for Dec 31 redemptions.
This could become a very, very ugly 4Q 2007.
And I thought 3Q 2002 was bad.
If a FB stops making property tax payments for a period of time prior to a default, and the county can’t find that FB or force them to pay up, then doesn’t the lender who aquires the REO have to pay those back taxes to clear title prior to a sale? If this is true, it makes you wonder how much in property taxes a lender like Countrywide really owes.
Property taxes are usually paid by the banks through escrow accounts. Your mortgage payment includes taxes and insurance.
So the bank usually has a couple of thousand of dollars on hand (of your money) to cover taxes. When you stop paying your mortgage they will foreclose on your house before the taxes become a problem.
Not in Ohio. Some houses sit empty 12 to 18 months before the bank actually puts them on the market. That’s a lot of taxes piling up.
I believe that “guy” was talking about the owner stopping payments *before* foreclosure and thus sticking the bank with it.
What the bank does after they have foreclosed is their own problem.
“With a rate increase from 6.75 percent to 7.5 percent, the buyer’s buying power just dropped by 10 percent…paying 10 percent more per month for the same house versus last week.”
Soooooooooo, come on everybody, all together, housing prices should drop 10 percent this week. Remember, everyone was saying that housing prices got so high because of low interest rate (aka “fundamentals”).
Yup. A la yesterday’s discussion, we should start a mantra, something like, “Prices are falling simply because of fundamentals.” Make it very matter of fact. “Don’t worry, fella, you’re going to lose a lot of money in this, but it was meant to be. I mean, it’s not worth having a heart attack over or anything.”
“‘The market is just correcting itself right now,’ Alea said. ‘Housing prices went up too much too quickly. If you have cash, it’s a perfect time to buy.’”
Er, no. It’ll be “perfect” when the correction is complete, and now is NOT that time.
Yep, I woundn’t even bother looking until 2011, unless the open house food & drinks being served was good.
Gee, what a shock. Predicted this about 2.5 years ago:
http://news.yahoo.com/s/nm/20070815/ts_nm/usa_politics_economy_dc
Hillary’s problem will be ’splaining away her support of bankruptcy law reform in ‘05.
I agree, txchick. Her main consituent, however, is Citi (group, bank, etc.), according to someone I know up in her territory. That’s their opinion, but it made sense to me.
What bubble? Real estate sales are up in WY and ND! The end of the credit crunch must be near after all. LOL
“Although home prices are relatively flat, more metro areas are showing price gains with general improvement since bottoming-out in the fourth quarter of 2006,” Lawrence Yun, NAR senior economist, said in a statement. “Recent mortgage disruptions will hold back sales temporarily, but the fundamental momentum clearly suggests stabilizing price trends in many local markets.”
http://preview.tinyurl.com/34s9hp
Actually, here in ND, the bubble hasn’t quite burst yet, although it seems about to. We just lag behind the rest of the nation because there are fewer developers. Part of what’s preventing the bubble from bursting is that 2-3 of the biggest cities in ND are near military bases, so the housing market depends a lot on the military move cycle (PCS - Permanent Change of Station). Unfortunately for a lot of people, the government is trying to save money by not moving people so often, so people that are having to move don’t have the influx of people PCS-ing in to buy their houses. Combine that with the huge buildup of base housing (here in Minot) and sellers here are finally starting to get nervous. What’s interesting is (like banks in high foreclosure areas) the base is eating the cost of a lot of brand new base houses sitting empty.
I’m separating from the Air Force in the next few months, and I currently live in base housing. I’m holding out for a good rental situation, but the rentals here are all crap. I expect there may be a few sellers soon who will take some rental $ to avoid foreclosing.
Yes, as I was driving in Western Wyoming a few weeks ago, between Jackson and Evanston, south of Alpine. Hamlets with 200 inhabitants, and big signs that five new realtor offices ‘just opened’, plus of course the brand new Lowe’s. Big sky and horses for sure, median household income 30K, and most ‘houses’ above 500K (many betw. 1 & 2m). This is five hours from everywhere.
Saw that happening in Wyoming and Montana. Low wage states if you can find a job and then high buck RE.
These new Lowe’s and company are going to die when this stuff dives 80% in value in the recession.
You should see around Cheyenne and Laramie the 3-5 acre craptacular mansions they have built and still on market and still building and nothing is selling.
What is the attraction of Cheyenne where it blows 300 days a year? Commute distance to a failing, soon to be exported job, in Denver or environs?
I have never understood why houses cost more in Laramie & Cheyenne than in Fort Collins (the median household income in Ft. Collins is about 25k higher).
The only upside I can see to living in SE Wyoming is the lack of a state income tax. Otherwise its a run down version of Colorado.
And I just read that home sales are up 10% in Wyoming! (no doubt fueled by the oil/nat gas boom).
Well, all the REOs will now force the other side of the flipper coin; investors with cash who can negotiate with banks for short sales, below the upset price. Flippers exist when markets are burning hot and freezing cold… not sure if its yet the right time as banks are still dreaming about the prices they are asking.
I have a friend who does pretty well with short sales. Like anything else, fear sells. He talks up any repairs needed and sends lots o’ photos about the most petty problems to loss mitigation at the bank. Also, now that things are imploding, he’s got even more leverage on them.
That approach also works when you’re buying an REO from a bank (but much later in the cycle than we are now).
Wow, curbed.com is alive with worry- most recent post about NYP story on credit tighening in commercial RE mkt:
http://www.curbed.com/
scroll down for amusing craigslist post, “BYE BYE NYC Real Estate Market”
“63 percent of the 1,415 Florida homeowners surveyed by the big title insurance underwriter expect that the value of homes in their community will remain the same or rise in the next 12 months. ”
Conditioned Response.
Like Pavlovian Dogs, the masses think their house is a money pump that will inflate them into retirement nirvana. With the Fed’s actions the past 8 years, they may be right.
But, more likely, the inflation of housing will reverse and they will lose, but still, they are conditioned to cling to the supposed “value” of their “investment”.
What idiots!
I like to watch Pavlov’s Dog…
Or what some people prefer to call it, Las Vegas
The truth is starting to leak out in Tucson:
http://www.azstarnet.com/business/196339
home sales hit 5 year low:
AP - Sales of existing homes fell in 41 states during the April-June quarter while home prices were down in one-third of the metropolitan areas surveyed, a real estate trade group reported Wednesday.
http://biz.yahoo.com/ap/070815/home_sales.html?.v=7
From the story:
The states suffering the biggest drop in sales in the second quarter, compared to the same period a year ago, were Florida, down 41.3 percent, and Nevada, down 37.5 percent. Other states with big declines were Arizona, down 23.4 percent; Tennessee, down 21.5 percent; Maryland, down 21.1 percent, and California, down 19.8 percent.
Woo, Arizona! We’re Number Three!
I’ve said from the beginning that Nevada is ground zero and I stand by that statement. This is just the beginning of the bubble burst.
Nah, Florryduh’s got it all over Nev. We’re Number 1 with a bullet!
How to speak hedge fund:
http://www.slate.com/id/2172224/
Hedge-Fund Phrase: Challenging
Translation: Run for the hills!
Hedge-Fund Phrase: Unprecedented, unique circumstances
Translation: Stuff happens. But we had no clue.
Hedge-Fund Phrase: Market volatility has produced unfair, unrealistic prices.
Translation: The market is efficient only when it works in our favor.
Hedge-Fund Phrase: Our results were affected by the selling behavior of other firms.
Translation: We made the same dumb trades as everyone else.
Hedge-Fund Phrase: We just want to protect investors.
Translation: We just want to cover our butts.
Hedge-Fund Phrase: This isn’t a rescue.
Translation: THIS IS TOTALLY A RESCUE!!!!!!!
Good one, aladinsane. But now, I was wondering if you could do anything with this:
“Cantey Tull, of Tull Mortgage in Charlotte,” as in Jethro? Seems like there’s some sort of lyrical opportunity in this. Considering all the underwater properties, Aqualung, anyone?
If housing prices had only gone up (say due to Greenspan’s rate cuts), there wouldn’t have been this mess. But a lot of owners couldn’t resist refinancing to pull out cash and spend it all. With house prices dropping, mortgage-backed securities that once seemed to be of high quality, are suddenly very risky.
One of our friends is trying to sell a condo (in MA) for 210K, while another identical unit went for $152K. Even that was high, I think.
Friend says, “There is no way I can sell it for less than $205K” Why?
“Because I owe that much to the bank!”
We thought she had bought it for 95K many years ago. “Yeah, but refinanced it took out money in the last 5 years.”
A lot of sellers think that whatever they owe to the bank is the minimum the house is worth!
“There is no way I can sell it for less than $205K”
Your friend already in effect sold her condo when she ‘liberated the equity’ and spent it. If she still has any of that money left, she can bring it back to the closing at the market price. If she never refied she’d probably have a nice gain by selling for 150K.
Let her rot.
Home equities are another reason we’re in this mess. Used to be you could only get a second mortgage to add onto or improve your home, and the bank oversaw that you used it to improve your property. Like everyone here has been saying home equity loans are nothing but ATMs.
“‘With a rate increase from 6.75 percent to 7.5 percent, the buyer’s buying power just dropped by 10 percent,’ said Frank Borges LLosa, a broker at FranklyRealty.com. ‘That $600,000 buyer will now have to look at buying a $550,000 place or paying 10 percent more per month for the same house versus last week.’”
If you dumbAsses encouraged prospective buyers to consider signing for a modest, reasonable shack instead of buying as much as they could(n’t) afford, you wouldn’t have this problem now. Nooo….. that makes too much sense.
“People Are Smart”
This may be stupid, but does anyone else think Fifth Third Bank is a dumb name. They need to make up their minds do they want to be fifth or third.
It caught you attention, so it did its job. Dumb but catchy name. It also could be named after its location.
No question is dumb, even asking how many stripes are on our flag. Kills me that people have to guess at it. Sad.
From Wikipedia:
Name
Fifth Third’s unusual name is the result of the June 1, 1908 merger of two banks, The Fifth National Bank and The Third National Bank, to become The Fifth Third National Bank of Cincinnati.[5] Because the merger took place during a period when prohibitionist ideas were gaining popularity, it was believed that “Fifth Third” was better than “Third Fifth,” which could be construed as a reference to three “fifths” of alcohol.[6] The name went through several changes over the years, until on March 24, 1969, the name was changed to Fifth Third Bank. [5]
Thanks. I figured it probably had to do with a merger.
I would have gone with “Third of a Fifth”. Has a nice alcoholic ring to it, no?
“‘The people who have a good job and pay their bills on time and are financially responsible, they are having no problem getting homes,’ DiMauro said.”
But these people do not want to buy an overpriced home now and I am one of them.
Hey Ben. The wife just made a small donation. I don’t post that often but I am on here daily. We appreciate your coverage of Regina, SK. The prices up here are unreal. I’m originally from Florida and can’t wait to get back. Hopefully that will happen in the next 2 to 3 years. What are things looking like in Jacksonville?
“‘The people who have a good job and pay their bills on time and are financially responsible, they are having no problem getting homes,’ DiMauro said.”
Yes, but, do they WANT homes right now, that’s the big question.
Jax is loaded with inventory and prices down abour 15 per cent.
“Because I owe that much to the bank!”
We thought she had bought it for 95K many years ago. “Yeah, but refinanced it took out money in the last 5 years.”
So what did they do with this money ? Spent it ? Come on.. It’s not pocket change.
“63 percent of the 1,415 Florida homeowners surveyed by the big title insurance underwriter expect that the value of homes in their community will remain the same or rise in the next 12 months. ”
You know what this tells me? People have no sense of humor.
just more blood on the streets of florida in the near future
Note from Oak Park near Chicago I’m just about to close on an excellent quality almost new 1-bedroom condo at $250K. Hard to tell what the prices are doing here–I think we’ve been going up slightly because people have been transplanting here from the more expensive neighborhoods. There a bit of old condo stuff around at $170K or so but it looks to be sitting on the market (quite often because no parking is available.) On the other hand, we’ve got someone trying to flip a 2-bedroom at $385K (ha!) and there’s a bunch of new construction coming in at $340K and much higher. Actual houses are $600K and up–multimillion dollar houses not rare around here, especially if you can whisper “in the style of Frank Lloyd Wright.” Further in towards the Loop? $400K and up.
Anyone else notice the collapsed $2.45M deal cited in the SFGATE article, the house was listed for $2.2M, conveniently 10% above listed? Methinks they found another 10% back at closing FRAUD deal in the works, I bet the $5M dollar home already owned conveniently sold at 10% above listing. Really sickening this is still happening.
“Florida is the ‘canary in the cage,’ according to Jan Hatzius, chief economist at Goldman Sachs.”
Yup, and you’re the dear in the lamplights Jan.
Hi Ben, thanks so much for the blog. I read a lot but don’t post. Just made a small donation by mail. Thanks again.
here is some Key West data of bubble prices paid and current asking prices, http://keywestchronicle.blogspot.com/2007/08/flippers-in-key-west-losing-their.html?ref=patrick.net
also a Sannibel Island broker sent emailed me a listing for a 2 br 1.5 bth piling home for 399K, that used to go for at least 600K during the bubble, still needs a 50% haircut, sorry don’t have a link as it was an email, but it shouldnt be hard to find on the MLS