There’s No Getting Around The Softness In The Market
The Gainesville Times reports from Georgia. “A Gainesville real estate executive said mortgage originators who work ‘out of the back seat of their car’ will be a thing of the past as mortgage companies struggle with fallout from the collapse of the subprime mortgage business. Frank Norton Jr….who monitors business and economic development trends, said money for mortgages for people who are not creditworthy has dried up. ‘HomeBanc was relying on a warehouse full of money,’ Norton said. ‘It’s now empty, and they have to close.’”
“Rich White, chairman of United Community Bank in Hall County, said it is hard to see the direction of the current upheaval in the banking industry. ‘We don’t know where rates are going,’ White said. ‘We don’t know what this is going to do to the mortgage industry.’”
The Charlotte Observer from North Carolina. “The nation’s mortgage crisis and housing slowdown are hitting Charlotte, driving new home permits to the lowest level in at least 10 years.”
“Pat Riley, president of Allen Tate, said challenges facing the company this summer include potential buyers who can’t sell their homes in other markets. But he said ‘We are still in the real estate mecca.’”
“At Beazer’s Ardrey Woods, also in south Charlotte, agents declined to discuss sales Thursday, as landscapers spruced up gardens and a family toured the model homes. A sign out front encouraged buyers: ‘Save Thousands Now!’”
“At Cunnane’s Ardrey, Sandy Gay was choosing colors for her new home on Thursday. She and husband Mike expect to move from Florida in March. ‘We don’t expect to have any problem selling our house,’ she said.”
The Palm Beach Post from Florida. “Out of 20 single-family housing markets in Florida, 18 posted declining existing-home sales in the April-to-June period, according to a Florida Association of Realtors report released Wednesday.”
“Palm Beach County and the Treasure Coast were among those markets. Miami saw the biggest decline, followed by the Treasure Coast, which tied Orlando for No. 2 with a 40 percent year-over-year sales slump.”
“‘There’s plenty of inventory, and sellers will bend over backwards for you,’ said Douglas Rill, president of Century 21 America’s Choice.”
“‘Plenty of inventory’ could actually be an understatement. There are nearly 25,000 homes for sale in Palm Beach County, according to Illustrated Properties Real Estate. At this time last year, there were 22,000 homes on the market, according to Illustrated’s Web site. That’s a 12 percent increase.”
The Sun Sentinel from Florida. “The Grove, a proposed development in the county’s extreme northeast corner, could encompass the city of Okeechobee. Twice.”
“Barron Collier plans to raze the grove and replace it with nearly 14,000 homes. Although the housing market has slumped in recent years, Ryan Noah, assistant project manager with Barron Collier, said the developer wants to get The Grove approved and started soon in preparation for a market rebound.”
“‘We don’t want to waste time building when we could be selling,’ Noah said. ‘Building in Florida is not going to go away. (Evans Properties) is out quite a bit of money if they don’t develop the property.’”
The Tampa Tribune from Florida. “The highest priced homes in select Tampa Bay area neighborhoods, exclusive properties and waterfront communities, are still selling, but the bulk of homes on the market are sitting longer.”
“Increased competition from national home builders willing to take a loss just to clear their books may be part of the reason, a Florida real estate expert said Wednesday.”
“Those deals could lower prices in the rest of the neighborhood, said Michael J. Timmerman, Florida managing director of Hanley Wood Market Intelligence.”
“‘They’re reducing homes to less than it costs to build them,’ Timmerman told dozens of real estate professionals. ‘That sets a dangerous precedent when you’re trying to get appraisals’ on other nearby homes.’”
“Sales prices have fallen in recent months, but sellers need to lower their asking prices even more, Timmerman said. At the current sales pace, he said, it could take 25 to 30 months to sell all of the homes on the market in the Bay area.”
“‘People still don’t want to give up the amount of money they thought they had made in their homes,’ Timmerman said. ‘In order to stimulate sales, prices need to come down.’”
The Bradenton Herald from Florida. “Everybody knows about the decline of the subprime market, but now the mortgage industry problems seem to be more far-reaching with mortgage brokers going out of business every day.”
“‘Sellers cannot overprice their homes or hold out in hopes of unrealistic offers as the market continues to be very price sensitive,’ said Shane Masterman, co-founder of Concierge Lending in Sarasota. ‘Buyers who are on the fence waiting for prices to drop another couple percent need to get off the fence and buy now while multiple mortgage options still exist. The number of mortgage options is reducing every day.’”
The Herald Tribune from Florida. “The Sarasota-Bradenton-Venice market sits in the top third of the 100 communities with the nation’s highest foreclosure rates.”
“‘Everyone knows Florida was hot during the boom, and so was Las Vegas,’ said Nancy Detert, a former mortgage broker. ‘And the hotter the market, the more likelihood for foreclosures.’”
“The main culprits were bankers who offered complicated loans and 100 percent financing to people who could not afford it, Detert said. ‘The loan products banks were offering was almost like putting cheese in a rat trap,’ she said. ‘The loans caused people to bite. But when the market turned, it snapped their necks off.’”
“‘These loan programs are fine for getting people into home ownership,’ Detert said. ‘But when they’re used to help people buy two or three houses, that’s not good. No one is going to feel sympathy for the bank or the borrower in that situation.’”
“‘It’s just a crazy market,’ Detert said. ‘Banks should have known better.’”
“‘What few buyers you have are now drying up because there’s no mortgage money out there,’ said George Huhn, a Venice real estate agent and foreclosure specialist. ‘I’m hearing stories all day long about people who meet with mortgage brokers and are told there will be no problem. But when they get to the closing they get turned down. It’s really getting ugly out there.’”
USA Today reports on Florida. “The problems in the mortgage industry, which began late last year and have rapidly deteriorated since June, are having a domino effect in the real estate market.”
“Homeowners are also having more trouble refinancing their escalating adjustable-rate loans, and that is increasing the number of foreclosures and the supply of homes on the market. As a result, sellers are having to wait longer and cut their prices more deeply.”
“When Christine and Michael Canavan moved from Fort Lauderdale to Melbourne, Fla., two years ago, they bought a $250,000 home with a subprime-borrowers ARM that allowed them to pay only the interest on the loan each month.”
“After two years of making their payments on time, their credit score had improved to prime level, but the value of their home sank suddenly this summer.”
“‘I had to go to (the mortgage broker) three times because our appraisal kept depreciating,’ said Christine.”
“‘At first he said, ‘Great news, your home appraisal would be $275,000.’ Within a week, the home had gone down to $240,000. When I went in to do the paperwork, I was in tears. It had dropped to $230,000 in two weeks,’ she said.”
The Orlando Sentinel from Florida. “The building frenzy that has created too many downtown condominiums has also spawned something few people think about: too many downtown penthouses.”
“All told, there are more than three dozen of these exclusive units in various stages of construction floating over Orlando like an Isleworth in the sky.”
“The Florida condo market in general is headed for some rough times. WCI Communities, for example, said just last week that 17 percent of its condominium buyers who signed contracts on units nationwide walked away from the closing table this year.”
“Here in Central Florida, there is evidence to show that the condo inventory is also outnumbering buyers or that buyers have simply changed their minds.”
“Condo sales in the Orlando area declined 64 percent in July from the same month last year, according to a Realtor report released this week.”
“At The Vue at Lake Eola, three of six penthouses are under contract. The units will be move-in ready at the end of the year. They come standard with Subzero refrigerators, a wet bar, rare blue and green granite countertops and remote-controlled Kohler Infinity bathtubs (in case you can’t be bothered to enter the bathroom to run your bath).”
“The Vue penthouses cost $2.2 million to $3 million, not to mention the 29 cents charged per square foot as condo-association fees. For a 2,700-square-foot place, that’s an additional $783 each month.”
“At The Sanctuary, which at about 20 months is one of the oldest towers, there are two of 12 penthouses for sale. They are listed at $2.8 million and $1.8 million. The Sanctuary has a total of 173 units and 11 are empty.”
“It’s doubtful the newer buildings will be so lucky. So far, 55 West at the Esplanade has received contracts on three of eight penthouses (all upward of $4 million) scheduled to be completed next summer.”
“An ad on Craigslist offers another penthouse for rent at the ‘very low’ price of $3,800 a month with an option to buy.”
“Listing agent Jane Scrima of Stirling Sotheby’s International Realty said the level of intrigue is increasing, with two showings just this week. ‘People are looking at them; they’re just not committing on paper,’ she said.”
“There’s no getting around the softness in the market. It may take years to cycle out of the overstacked inventory. But are there enough high rollers, especially as home and condo sales in Central Florida plummet, to fill the ritzy digs? After all, that remote-controlled bathtub doesn’t come cheap.”
The damn Fed pulled a rabbit out of the hat with the .5% drop in the discount rate (making official what they had partly done in stealth).
The market shot up almost 300 points in the opening minutes…this will not end well…
I’m really depressed about this, doesn’t it mean that the government is just going to keep the party going? At the expense of well everyone.
Privatize the gains. Socialize the losses. It is best to live small in these times.
doesn’t mean it pisses me off any less.
Oh and the crowing for the realtors about how “it’s always a good time to buy!”
‘Oh and the crowing for the realtors about how ‘it’s always a good time to buy!’
Now we have a new urgency:
‘Buyers who are on the fence waiting for prices to drop another couple percent need to get off the fence and buy now while multiple mortgage options still exist. The number of mortgage options is reducing every day,’ said Shane Masterman, co-founder of Concierge Lending in Sarasota.’
Yes. Exactly.
That and the piteous looks I get when we say we rent.
Uh. Thanks Fed you just added a few years to this mess AND made my savings even more worthless.
Don’t get me wrong I’m pissed as well. But I was more angry about all this crap aoubt 17 years ago as a teenager learning about what had occured during the early part of the 20th century in the financial sector.
BUT, the system is what it is. The Egyptians had their ways, same as the Greeks, and Romans etc. The question of “How do you chose to live within the constraints of the society you are born into?” will always be left to the individual to answer. Some chose the if you can’t beat ‘em join camp, some become revolutionaries while most just try to stay out of the way.
Since we’re only dealing with retarded bankers pulling the strings in this particular instance of our society, I chose to let these idiots play their stupid numbers games while protecting myself with assets I can understand and directly control.
A classic line I like about individual wealth: “If you can count your money, you are not truly wealthy.”
‘Buyers who are on the fence waiting for prices to drop another couple percent need to get off the fence and buy now while multiple mortgage options still exist..”
Oh Yeah ..Get IT Right Realtiwhores….Most POTENTIAL Buyers are FINALLY AWARE of the US Real Estate DEPRESSION and CRASH that is coming and AWAIT one HELL of a lot more that a MERE COUPLE of percent off these overpriced POS !
Are you sure long term rates will go down?
What if it doesn’t and even another surprise 1/2% still won’t lower the rate on a 30 year mortgage?
Interest rate could be zero and many people simply will not qualify for a loan. Few have 20% down, and those that did have it in their house lost it with the falling house prices. Most now can’t pay for the ARM and their credit rating is ruined. Plus in a lot of areas people won’t qualify to buy even the cheapest house, because the prices way outpace wages. Interest rates can’t correct any of these problems, so the housing is still going to have to correct itself.
The .5% here will have no affect on consumer loans. They only cut the discount rate, not the Fed Funds rate.
I agree. Even if the Feds cut the rate..how is this going to save homeowners when
1)The are upside down on their mortgage
2)They have a teaser rate of 2% and when they refi the mortgage is still going to increase hugely
3)They are “stated income.” So who is going to finance you when all the companies who did those loans are out of business or no longer providing them?
I also love i love this one:
At Cunnane’s Ardrey, Sandy Gay was choosing colors for her new home on Thursday. She and husband Mike expect to move from Florida in March. ‘We don’t expect to have any problem selling our house,’ she said.”
Oh really, so said the couple who lost their $60K deposit two houses away from me when they thought their current Florida home was “so special.” Good luck..better make that contract contingent upon the sale of your current home..and I wouldn’t pack until the deal is sign sealed and FUNDED…
“Buyers who are on the fence waiting for prices to drop another couple percent”
Too late in Cali, the “needed” programs (100% LTV, stated income, Alt-A) are, for the most part, gone. Jumbo 30 years are at 7%-8%. IT’S ALREADY TOO LATE.
And why would I want to buy when I’m pretty sure I wouldn’t be able to sell if I had to due to “even tighter lending standards”.
“The .5% here will have no affect on consumer loans. They only cut the discount rate, not the Fed Funds rate.”
No - they cut a “key” discount rate - the rate available only to ‘certain’ banks.
This doesn’t do squat. But the sheep sure lapped it up…
Someone on this board said “America is capitalist for the poor and socialist for the rich”. That summarizes it nicely.
…and the worst of both for those caught in the middle.
In the 1960s, a guy named Paul Ehrlich wrote a best-seller predicting mass starvation throughout much of the world in just a few years, because we were running out of farmable land and crop yields were as good as they would ever be. He could not anticipate the “green revolution” advances that came afterward, and his book is probably the best example of how static analysis (evaluating a situation based on what’s happening today, and not assuming there can be change or progress) can bite you on the azz.
Those who didn’t anticipate this move by the Fed (with more moves likely) saw only doom and gloom, which was based on similar static analysis. But just like “Gunny” Highway’s Marines, the Fed and the finance industry can adapt, improvise, and overcome. Selling them short (literally as well as figuratively) is a risky game.
On the other hand, the fed has totally blown its reputation as a sound central bank.
Still, when the US is like argentina, you too can emulate your hero ‘Gunny’ Bernanke, and adapt and improvise to find food and shelter.
Housing corrections take years. What is a wiggle in ST rates going to do to change that?
Yes, I just don’t see how this is really going to have any major effect on the housing market, I think that’s toast no matter what. The ST rate wiggle (love the term) I believe is for the short term benefit of some of DaBoyz, maybe for some banks and that’s about it. PUH THETIC!
I agree, and the bubble really had less to do with low rates and more to do with lax lending standards. Unless we see no doc options loans return in force, which we will not, a half a percent rate cut is all but irrelevent. I doubt it will have much impact on mortgage rates anyway for now.
“I agree, and the bubble really had less to do with low rates and more to do with lax lending standards. Unless we see no doc options loans return in force, which we will not, a half a percent rate cut is all but irrelevent.”
And let’s not forget Japan. Their interest rates went to 0% and it didn’t save their RE market. And they’re an island….talk about not making any more land.
Exactly. What’s another few weeks added onto a multi-year downturn? Sit back, relax, and spectate.
Got popcorn?
Neil
Looking at it the other way, look at the new conventional wisdom, stated matter of factly:
“The nation’s mortgage crisis and housing slowdown”
They also changed to 30-day loans from one-day.
“Housing corrections take years. What is a wiggle in ST rates going to do to change that?”
Exactly. Hence my rant below urging everyone stop “tizzy-ing”.
bingo. On the mark. Enjoy, relax and don’t worry about it. It cannot change a thing. If you want to speculate short term, make your money. Otherwise, the long term trend is our friend.
Got popcorn?
Neil
I am going to laugh if the market closes down today.I have a feeling that this rally will peter out and we will be back to the downfall.Cramer thinks we will be up huge today.Who pissed in his cheerios today?
Cramer is selling his stock. Who are you kidding? This gave him a nice exit.
exactly. And you can bet your lifesavers Cramer and his ilk aren’t going long in dollars either.
I love this site and really appreciate the work that Ben does. On the other hand I find it odd that pretty much everyone thinks the Gov and Fed should’ve done something to further regulate the lending market when funny money was running loose and housing was skyrocketing, but should not do anything when the housing and stock markets are dropping quickly.
Is this selective libertarianism?
“Is this selective libertarianism?”
As a Libertarian, I will tell you that this isn’t selective Libertarianism. This is a hands off approach. Libertarians believe in consumer protection. The protection should have been in place BEFORE the mess started.
protection within the tort system- BB is a whore and it’s not going to work
Not at all. When I was interviewed for the Opensource radio program in the summer of 2005, the Feds role was brought up. I told them that the matter of what the Fed should have done/ should do/ is entirely separate from the question of ’should there be a Fed.’ After all, you and I didn’t set up this system.
The Fed bears a lot of the blame for the housing bubble, and I think even the Wall Street Journal and NYT editors would agree with that.
IMO, libertarians, like everyone else, have to choose their battles carefully.
’should there be a Fed.’
Well, you know how I feel about that. I don’t believe private financial cartels should hold sway over countries. I’m with Ron Paul on this one.
“Is this selective libertarianism?”
Huh? Since when does trying to penalize crime and enforce criminal penalties equate to libertarianism?
I think many take Libertarianism to it’s absurd extreme - basically saying Libertarianism = Anarchy, and thus anyone who claims to be a Libertarian but calls for controls of some kind is practicing selective libertarianism.
In reality even Libertarians realize that some laws must exist to protect the consumer - e.g. protection from outright fraud. However it’s a very fine grey line between outright fraud and a caveat emptor approach.
For instance should the government have outlawed stated-income loans, and enforced it? One could say that stated income loans are essentially outright fraud and yes they should be outlawed. Or one could say that they can make the process more efficient and if the bank trusts the person then it’s not the government’s job to say otherwise - the bank should take the fall if the person defaults.
Personally I think all thing being equal I prefer the latter. However being that it’s not just the loaning bank that will take the hit - it’s the taxpayers, due to bailouts of one form or another (e.g. Fed infusions) - if the Fed/public is responsible for bailing out the banks, then the Fed/public should have a say in the bank’s activities, e.g. whether or not they’re allowed to provide stated-income loans.
Packman,
That’s really what I’m getting at, not overtly criminal acts. Libertarians, unfortunately, are no more consistent in their views than other ideologies.
I’m personally against the Gov intervening between two consenting adults and don’t think they should “regulate” the mortgage market by making certain products illegal. However, it ain’t right if the risk takers get bailed out by my tax dollars.
I don’t see the current Fed move as a bail out, they’re just buying time until cooler heads prevail in the credit markets.
That’s sophistry, and you know it.
No….it’s *Bearism*. Among bears, whatever doesn’t confirm misery is patently incorrect. And, according to permabears, everyone who says differently is lying, stupid or misinformed.
So Cramer’s now selling his stock. Dolt. He already lost lots of money in the hedge market. Now he’s going to realize his paper losses by selling stocks. I hope no one here actually watches this clod for anything other than pure entertainment.
Not only does he not know what he’s talking about, but he hasn’t the discipline to sell high.
I’m sick and tired of the “war on savings.” You should be able to put $2Million in the bank, and live modestly off the interest. You can’t because interest rates are being held low so “Harry Howmuchamonth” can have his McMansion, “investment Condo” and Hummer.
I think that the Fed is responding to the fact that the liquidity injections by the central banks of the world are failing. It was the Japanese market falling over 5% yesterday as well as all of the other problems that made them realize the liquidity injections were not going to be enough.
This interest rate cut is the “sign” that the Fed intends to respond with everything it has in its power to reflate. The liquidity injections were not working, let’s start the process of cutting interest rates to the bone.
I don’t believe that these interest rate cuts are going to be our salvation because the problem is that there are no credit-worthy borrowers left. The last couple of years, the financial institutions were looking at their collateral (real estate) and since it was going up, they felt fine with lending money even though most borrowers were not credit-worthy. Now, the value of their collateral is collapsing. To whom are you going to loan money? The financially solvent and the renters are still credit-worthy but they will refuse to borrow. That’s the rub!! Just like Japan in the 1990’s, plenty of liquidity, low or zero interest rates but no one credit-worthy who wants to borrow.
“At Cunnane’s Ardrey, Sandy Gay was choosing colors for her new home on Thursday. She and husband Mike expect to move from Florida in March. ‘We don’t expect to have any problem selling our house,’ she said.”
la la la la, I can’t hear you housing market. la la la la la
Unbelievable. Head, meet woodchipper. I’ll bet they buy before they sell, too.
” I’ll bet they buy before they sell, too.”
I HOPE they buy before they sell, LOL!
Only if they qualify under conforming standards will they be able to buy before selling. Depends upon their debt to income ratio and I seriously doubt they can stay below .35(?).
Everyone is moving out of FL. Good Luck.
Correction..Everyone is TRYING to move out of Florida..if they could only sell their overpriced home…
A bit of good news Four yes FOUR homes sold this last week in my Beneva Clark 34231 neighborhood in Sarasota FL All FOUR fetched close to what they were asking
My home will be up for sale soon
Wish me luck!
Sounds like a dead cat bounce. Sarasota has a long way to fall. The effect of ARM resets, high insurance, taxs, etc. are piling up. I hope you sell soon, as things will be worse in 1 year and 2 years.
Sincerely, best of luck Mike.
Mike, do you have a wife named Sandy?
Where are you moving Mike? Why are you moving? Just curious on getting reactions from folks who have been bailing Florida. Some have left because of taxes and insurance, others because the grass is greener or a job transfer. Anyway if you feel like responding I am curious.
Yes. however did they all close?
Are you moving out of FL?
what were they asking?
I don’t think this is the same Mike you all are thinking of. For one - the userid isn’t capitalized. Maybe I’m wrong - it doesn’t sound like him though.
That aside - yes a big dead-cat-bounce is going on in the Sarasota area right now. I look for another big leg down starting right about now. (I’ve been keeping track since I’d like to buy there someday)
“Save Thousands Now, Advise Them Not To Buy A House!”
“At Beazer’s Ardrey Woods, also in south Charlotte, agents declined to discuss sales Thursday, as landscapers spruced up gardens and a family toured the model homes. A sign out front encouraged buyers: ‘Save Thousands Now!’”
Me like’um save thousands idea. How much cost me save’um thousands?
“and A FAMILY toured the model homes”
Just one, huh? I’ve noticed the traffic die down substantially in our area. We live in a new home community (renting, of course), but there are several new developments underway in our tiny little area. Many a Saturday we drive by the Builder Showhome Offices only to see just the agents’ cars in the lots. Not many lookie-loos anymore. And there are still a few blocks of land in our development that are just dirt. No sign of being built on soon.
They bring the family out of the box to ‘tour the house’ when newspaper types are around.
Back in the box Gimp.
Like that Chevy Chase movie, “Funny Farm” where he’s trying to sell the place and has a deer in a cage that he releases as soon as the prospective buyers pull up out front, “Cue the deer.” he says to his wife over a walky talky who pulls the pin on the cage door and the deer goes bolting out of it. Classic.
Staged deer -that’s funny as hell!
Might have fire up the ol VCR, figure out how to get the flashing clock set with that doohicky which takes batteries, and get into town to rent that there Funny Farm movie.
Realtors who ARENT chatty?? Wow, what surprise. They wont talk about sales if they are bad but will happily chirp away like the proverbial chatterbox cheerleaders convincing you to buy.
We all know that people who make a living on commission sales will do anything to make a sale. It’s just the pious, good-for-you, american dream, better act now lies that spew forth like a never ending post party vomit train.
These type of people do not care ONE BIT that they are discussed/exposed for their behavior. They are like the high school cheerleaders who bask in their snarky spotlight, thinking only ” they” get ” it” and are part of a special group of people who are clever enough to live off other people’s legitimate earnings without a degree.
No shame now. No shame ever. All you can do is recognize, laugh at, and beware of their self-serving immoral behavioral business ethics.
“‘We don’t want to waste time building when we could be selling,’ Noah said. ‘Building in Florida is not going to go away. (Evans Properties) is out quite a bit of money if they don’t develop the property.’”
Translation:
We are in a poker game and all of the cards have been dealt and we’re sitting on a pair of 2’s~
But, but…
The pot is so large, gotta be in it to win it.
They’re All In
“The main culprits were bankers who offered complicated loans and 100 percent financing to people who could not afford it, Detert said. ‘The loan products banks were offering was almost like putting cheese in a rat trap,’ she said. ‘The loans caused people to bite. But when the market turned, it snapped their necks off.’”
That is what you should have titled this one Ben.
In the banking crisis of the 80’s Savings Banks were those most involved however, this failure is caused by mortgage brokers and equity banks, The savings banks generally maintained traditional loans with 20% skin in the game.
Drop rates and bail out the HF and Private Equity so deals can get done.
“Bennie your doing a fine job there”, GWB
“After all, that remote-controlled bathtub doesn’t come cheap.”
I’d hate to see one of those babies malfunction.
Palmetto posted
“I’d hate to see one of those babies malfunction ”
Now THERE is a hellova an image !! And good luck finding a competent repair person for the new tech system. get ready for extra plumber bill.
Larry Cocaine Kudlow on tv - Oh the FEd woke up on what is going on out there its horrible - WTF You drug addict?
I thought It was the greatest story never told??
He it a total tool.I heard him on cnbc this morning talking like he knew what he was doing.What happened to goldilocks he has been spewing about? The guy is worhtless at this point.Put him in a wheelchair and wheel him out later this afternoon.
He belongs in a prison cell. I’d bet right now there’s a 40% chance he might see the inside one.
‘Buyers who are on the fence waiting for prices to drop another couple percent need to get off the fence and buy now while multiple mortgage options still exist. The number of mortgage options is reducing every day.’”
Buy now… before someone who cannot save a down payment is priced out! Or… wait and only compete with fellow savers. Hmmm…
I’ll wait. I fully expect that I’ll be able to “only borrow 66%” of what I could have a few weeks ago. Ok… It just means I get a better house for LESS! But they’re salespeople. Nothing more. I wish they’d stop quoting them… but since Realtors ™ need exposure to sell… Cest la vie (Insert Upton Sinclair quote here.).
The rate cut is not going to have the market rushing back into mortgage bonds; its just going to have them rushing out of the market slower.
So get comfy. We all know this is going to take a while. Let us put it this way, our biggest disagreement is how many years should we wait before buying. . So grab a drink, munchies, and let’s have fun debating while the J6P’s hope this will help them unload their flips.
Got popcorn?
Neil
I am actually waiting until multiple mortgage options no longer exist, so I can afford the loan I do get. As to the rate cut, it will not have much impact on the mortgage market is my take, given it has become risk shy.
The bottom line, is that it is not buyers who are sitting on the fence waiting, but sellers who are sitting on the fence waiting for the market to make a comeback so they can retire. Unfortunately, they are going to be working of debt in their retirement years, but that is the gamble they took when they bought overpriced homes with dangerous loans.
In our area it’s the young 30 somethings that bought the overpriced McMansions and they’re going to be working into retirement also to pay all that back with their 40 year mortgages.
Oh gee, I hope they don’t forget to start saving now for the retirement they’ll never have.
Note to self: don’t drink coffee while reading this blog!
Man… that hurt keeping it in the mouth. lol.
Got popcorn?
Neil
“Oh gee, I hope they don’t forget to start saving now for the retirement they’ll never have.”
It’s the young 30’s that bought into the whole real estate never goes down mess. You must understand that the house WAS their retirement. Buy a McMansion for $500,000 today and sell it in a year for $750,000…keep the $250K in the bank…buy a $750,000 McMansion and sell it in a year for $1,250,000…keep the $500K in the bank and wash, rinse, repeat.
The problem is there’s very limited market for those McMansions in a regular market. No one bothered to tell them that…and if they did it fell on deaf ears.
Oh, there is a Market for McMansions. My wife and I are hoping to pick up one “at the right price.” But not a requirement. You just need to have the means to support yourself in one.
The idiots thought they could retire on the wealth of their lands. Guess what… find a buyer. Wait… patience… years of patience.
Neat thing about a market, there are buyers and sellers if the correct price can be found. It will be a long time until the sellers wake up enough to what the market is really like.
Got popcorn?
Neil
Woohoo, more deserted resort areas for years to come for me and everyone else on this blog!
Where do you live, Ghostwriter?
Just curious.
How much will this rate cut help current ARM holders allowing them to easier refi into fixed 30’s?
Zero. They cut the discount rate, not the Fed Funds Rate.
Short term solution. You notice Oil prices also went up. Although this is not the Fed Funds Rate, it’s going to have an adverse affect on inflation. As for mortgages investors, they will not fall into a trap again. They have already set the risk and rate. Either way, Loams are hard to come by. This move only helps out huge institutions not the consumers.
Even if they cut the fed funds rate it wouldn’t help. The bond market decides mortgage rates, and from the looks of the past few months, no foreigners or anyone else wants to invest in anymore crappy MBSs.
” ‘HomeBanc was relying on a warehouse full of money,’ Norton said. ‘It’s now empty, and they have to close.’”
And with that said I’ll say that this is the mortgage company that was trying to get me to send them documentation for our no documentation loan a full 3 months AFTER closing. They knew the end was near and I can’t believe I didn’t see it.
I’m waiting for some brilliant “economist” to explain one thing concerning those in the media (like the comedy duo act of Mark Haines and Larry Krudlow on the CNBC Comedy Business Channel) who are calling for Freddie and Fanny limits to be raised for home purchase. My question being, what difference will that make? If people are being foreclosed because they cannot afford the mortgage payments - how will they be able to afford the mortgage payments if Freddie and Fanny let them borrow more?
They just wan’t off load the problem onto the tax payers. After raising the limit, a ton of mortgages that nobody want’s get stuffed into Fannie and Freddie.
It won’t make any difference for the bad mortgages already out there. Assuming F&F are smart enough to recognize a bad loan they won’t buy it no matter what the Jumbo limit is set at. The institution holding the hot potato is stuck with the hot potato—F&F won’t take it off their hands.
Where it will make a difference is new mortgage issuance. The market for mortgages that are not backed by F&F has shrunk dramatically. Raising the limit would increase demand for new mortgages >$417k to be written and sold in the secondary market.
Whether this is a good idea or not is another question.
Basically it is a way for “jumbo loans” to have a life again…with the limit set at $417K, anyone holding a mortgage for more runs a highter level of risk.. and therefore has to charge a much higher rate of interest(double digits) if the limit is raised it would then allow for lenders to lower the interest rates on these types of loans.
In states like CA and NY where some cities can have a medium RE price of well over $800K it would basically kill their market and totally stop the flow of RE transactions. Alot of these cities are major economic and financial hubs..they can’t afford to have a huge reduction in employment which would cripple other services of that city(the snowball effect.)
Broker Outpost actually pissed Bernanke cut rates after asking or them because Bond Yields aren’t doing what they expect them too. Instead of dropping, they are widening.
http://forum.brokeroutpost.com/loans/forum/2/155024.htm
“austinmp
Posted - 08/17/2007 : 07:08:47 AM
Uncle Ben to the rescue!”
good point rally fizling as BB can’t control long rates- the ones that count
we do
‘We don’t know what this is going to do to the mortgage industry.’”
OT, best article of the week, from Calculated Risk blog’s comments:
Central banks’ easy virtue, easy money
that’s a good read.
GREAT ARTICLE! Worth the read everyone.
A touch lengthy, but a much better explanation of the relation of interest rates than my Grad school books. Now I see the connection! So it may have an effect after all!
“Much like pregnant ghetto teenagers, they say that those suffering in the subprime crisis are there wholly through their own misguided actions, specifically, their greed. No government actions, including anything by the Federal Reserve, should be taken on their behalf. They must suffer the pain that is the rightful and just consequence of their imprudent actions. An editorial in Saturday’s Wall Street Journal summarized this philosophy very succinctly. ”
I totally agree to no bailout. But it is truly amazing that Greenspan encouragd people to take out these crappy loans, then once everyone was in and it was to late to refinance, ‘predicted’ an unwinding an advised as ‘prudent’ to get out. If this was late 18th century France this Greenspan would be the first on the chopping block.
Warnings against the dangers of excessive credit utilization are also a regular part of Federal Reserve communications with the general public. In a publication titled Building Wealth, the Federal Reserve Bank of Dallas provides these dictums.
Liabilities are your debts. Debt reduces net worth. Plus, the interest you pay on debt, including credit-card debt, is money that cannot be saved or invested - it’s just gone. Debt is a tool to be used wisely for such things as buying a house. If not used wisely, debt can easily get out of hand …
Develop a budget and stick to it. Save money so you’re prepared for unforeseen circumstances. You should have at least three to six months of living expenses stashed in your rainy-day savings account, because as the poet [Henry Wadsworth] Longfellow put it, “Into each life some rain must fall.” When faced with a choice of financing a purchase, it may be a better financial decision to choose a less expensive model of the same product and save or invest the difference. Pay off credit-card balances monthly. ”
Coming from the Fed, as the creators of the debt-as-money scam , to say something like this just takes solid brass balls.
AndyInJersey posted
“When faced with a choice of financing a purchase, it may be a better financial decision to choose a less expensive model of the same product and save or invest the difference. Pay off credit-card balances monthly. ”
Oh yessir, paying cash whenever possbible has been my motto for a long time now. I do carry a debit & a credit card (notice I said “a” not several) for emergency purposes but will go out to my ashtray of quarters to finish a must-have transaction to keep it all cash.
Some people might be embarrassed to count out loose change in large amounts. HA! I passed that point of care long ago . . . but I wont count out nickels or dimes past a buck or so .. I just go to paper. Personally I think any clerks annoyance factor is overriden by the appreciation of making a sale. Any sale.
(I usually keep about $20 in quarters and few loose bills in my car to feed those odd meters when encountered.
Also have a hidden cache of $500 in low bills just in case of emergency road repair/tow when only cash will do.)
Let’s see if dropping overnight lending rate has any affect on 15 adn 30yr rates and loan availability. The dollar is taking a dive over this thus foreign lenders may think about investing elsewhere. Carry trade may tank.
“There’s plenty of inventory, and sellers will bend over backwards for you,”
Once sellers start bending the other way… then it’s time to buy!
RE: Bending over the other way.
Good thing I was eating popcorn instead of drinking coffee.
Bear Stearns and Goldman Sachs gave up their gains for the day.
BSC is actually negative.
LOL this is funny.
http://www.reuters.com/article/marketsNews/idINN1745405220070817?rpc=44
NEW YORK, Aug 17 (Reuters) - U.S. stocks rose on Friday after the Federal Reserve unexpectedly cut the discount rate in a move to keep credit flowing, but market euphoria faded as investors questioned whether the Fed’s action would be enough.
Like a drug addict coming down from a high, they keep wanting more and more. THE FED MUST DO MORE!
Do you think Larry Kudlow is feeling the crash from this high?
A run on the bank at Countrywide:
Anxious customers jammed the phone lines and website of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank.
http://tinyurl.com/2fsg6j
I had this thought about E-Trade since they’re rather heavily involved in mortgages. I know it is really chicken little of me but I moved our money from there to a local bank.
You believe it is “chicken little” of you because you have been brainwashed since birth to believe our financial system is safe and stable. Maybe it is, maybe it isn’t. But it’s your money, and before you do anything with it, make sure you can answer immediately two important, fundamental questions.
1. What is money? (medium of exchange, store of value, unit of measure)
2. What is a dollar? (silver coin with 371.25 grains of fine silver; our “dollar bills” are actually Federal Reserve Notes. The traditional role of a federal reserve note is something that you can exchange for a dollar, not a dollar itself.
The real question is a local bank safer? The big banks are more likely to get a bailout. Smaller credit unions have been closing over the last year…
From the article:
Bill Ashmore drove his Porsche Cayenne to Countrywide’s Laguna Niguel office and waited half an hour to cash out $500,000, which he then wired to an account at Bank of America.
“It’s because of the fear of the bankruptcy,” said Ashmore, president of Irvine’s Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees.
Yeah, the president of Impac Mortgage should be worried about bankrutpcies and subprime fallout … and perhaps he should contemplate his own role in the debacle.
The rush to withdraw money — by depositors that included a former Los Angeles Kings star hockey player…
Gretzky lives CFC adjacent, hmmm
Did anyone catch the Glenn Beck show last night on CNN? He interviewed Peter Schiff about the coming credit storm. One of Peter’s comments was that the people/countries that bought our mortgage debt are not likely to buy any debt again from us. That stands to reason and is a major psychological issue with this credit squeeze. It won’t matter how much the Fed or anyone else lowers the discount rate. A high interested mortgage to a deadbeat is still worth nothing. I think that a lot of foreigners are going to see the average American as a deadbeat soon, if they haven’t already come to that conclusion.Thoughts anyone?He alo came to the conclusion that the dollar would be devalued substantially within the next few years. Sounds like he expects a Fed bailout too.
Peter Schiff is on CNBC right now but I had to shut it off. He’s having a tough time talking because he’s being interupted and pretty much being treated like a crazy by the other people on the show.
They are really trying to marginalize the guy. Probably because they have long positions and margins on a lot of stocks.
You can’t trust anyone in the media.
I think you’re dead on. Such is the cold realization that globalization has its own drawbacks It was great while the other countries were willing to buy our crap mortgages in exchage for us buying their crap poducts made by slave labor. But the gig is up and now we can’t even continue buying their crap, thus breaching our end of the bargain. I don’t think it takes a rocket scientist to figure out that our use to them has evaporated, therefore there will be no need to buy our toxic paper any longer.
Does all this mean the day of the “Jack of all Trades” is finally coming? I’ve always prided myself on being able to fix and build stuff. I look forward to the day I can charge people out the ass to fix their Walmart toaster or repair their 7 year old 2007 Ford or GM.
Peter Schiff realizes that Americans basically need to be given free money for our economy to function.
Who in there right mind want to live in Okeechobee? Completely out in the sticks. Unless the lots are at least an acre.
Two things. In regards to the rate cut today, I don’t see how this can really affect anything with housing. Banks have already pulled back on lending standards. That alone is enough to continue the status quo. The answer is so simple that the summary of this blog is the answer: Housing prices across most of the nation are too high. The price of housing is the leading reason behind the credit situation and has a trickle down effect.
All attempts by the banking and lending institutions will fail because quiet simply, Americans have already been squeezed of every possible cent they can possibly put into housing. That threshold has long since been passed.
I’m one of those Americans who didn’t buy and will continue to wait until the prices are justifiable. Meanwhile, the US economy will have to count me out of the consumer market because while I save for my future house, I will continue to drive my old car, watch my non-flat screen TV, Eat cheap grocery store food, and stay at Hotel 6 on vacations. Just imagine what those people who bought those monstrously overpriced homes are doing. Oh how they would like to spend money yet can’t.
The little.5% cut will have little bearing for the long term. This was only meant to make an attempt to shake off panic. Give it a few days. We’ll start seeing that little needle start edging down into the red once more. I guarantee it. Why? Because if consumers aren’t buying anything, then that cut really didn’t mean that much did it?
Nice post, and I generally agree with you. On the other hand, while I agree that housing prices are too high to continue the equilibrium that we’ve enjoyed over the past several decades (i.e., high disposable consumption in the U.S.), they may not be too high for an equilibrium with drastically reduced domestic consumption.
If present and future generations are expected to devote 60% of after tax income to housing, then we simply can’t maintain our prior consumptive lifestyles. While this is likely to cause a global recession, it is possible that a new equilibrium will form whereby we save and other countries spend. The likelihood of reaching this new equilibrium I think it depends on the speed with which cultures can be changed in developing markets. We’ll see.
A great post. Thank you.
Keep on watching those demographics. And not just the U.S.A. The sheer number of people worldwide who will see increased buying power during the next 1-3 decades is staggering. Like 1-2 billion.
I wonder which economist or politician will be the first to concoct a means by which people born and living in foreign countries will pay for our social security and medicare costs.
Perhaps foreign employees of U.S.-based companies will be taxed like U.S. workers in exchange for military protection, for example. Yeah, yeah. Sounds crazy, I know. However, if we’re going to pay the money and lives to protect others elsewhere, why shouldn’t they have to pay into our system?
Yeah, I’m crazy. I know.
The most important point is that lending standards have changed. Trust has been lost and it’ll be a long time to get back. Like a 20 year marriage were trust builds and builds and then all of a sudden you come home and find your wife banging the 19 year old poolboy next door. Sorry, that trust ain’t coming back anytime soon.
“The Florida condo market in general is headed for some rough times.”
“Condo sales in the Orlando area declined 64 percent in July from the same month last year, according to a Realtor report released this week.”
I would hate to see what they thought was ‘actual rough times’ since a 64% decline is just ‘general rough times’. This type of reporting is just sickening.
Again, editorializing by the paper. If condo prices are reverting to normal, isn’t that “good?”
Housing outlook darkens in Tucson. Houses no longer an automatic ticket to retirement.
http://www.kold.com/Global/story.asp?S=6944906
What cracks me up about Central Florida, outside of downtown Orlando, is that one piece of swampland is exactly like another. And there’s no need for a bidding war between specuvestors on condos when you’re surrounded by EMPTY LAND!
again, an example from Zillow:
http://www.flickr.com/photo_zoom.gne?id=998445269&size=o
The red flags are “for sales” (and not even half of them), many have been for sale for over a year! Both of these developments are surrounded by EMPTY, UNDEVELOPED LAND.
DUH! Are you people thinking? There’s no reason for a bidding war when someone can build more right next to you!
Of course, R-E is inflated across the board. But while areas with desirable geography (Manhattan or SF with nice views of the City, or a good beachfront in LA or San Diego) may fall 25% or so, these condos and ticky-tack homes in central florida could fall 80%!
In fact, if you had to hand the keys back to the bank or go BK, it’s effectively lost *all* it’s value. Face it: A condo on which you have a i/o adjustable exploding mortgage that you haven’t sold in over a year is worth ZERO! You’d gladly give it away in exchange for stopping the payments and not having to “ruin” your credit or go BK.
better watch those sinkholes, er sandtraps
Kudlow and Cramer to the FED: “We need more cuts!”
“F” those guys, since when so we let two crackhead television “Personalities” dictate economic policy ?
Sam Waterston does…
Fred Thompson wants to~
http://money.cnn.com/2007/08/17/news/economy/fed_rates/index.htm?cnn=yes
One money manager said the Fed should not go ahead and cut rates to bail out consumers who took out loans they never should have - and the banks that made the loans and hedge funds that invested in them.
“The Fed is putting its fingers in the cracks of the dyke,” said Matthew Smith, president and chief investment officer of Smith Affiliated Capital, an investment advisory firm based in New York. “There is nothing the Fed can do. They are just prolonging the inevitable. The Fed has to get the speculators out of the market.”
Hope he is the Smith in Smith Affiliated. Otherwise he will be looking for other employment on Monday.
” Fingers in the crack of the dyke “. Better watch out, some of those dykes are tough. They might not take kindly.
yahoo marquee “fire sale on financial stocks”
haven’t folks figured out that they have no real assets
“Two things. In regards to the rate cut today,”
(Warning, rant ahead)
Ya’ll should stop tizzy-ing, and learn to love the bomb. Stocks at this point are going to do what they are going to do. Same with the housing market. If you think you know which way things are going to go short term, roll your dice and move your mice (like txchick). This is *much bigger* than the last two weeks of the stock market. I know a lot of us are looking for vindication on our predictions that housing will bring the economy down. So be it, I’m one of them. However, the constant obsessing with minute market moves is driving me crazy. I’d urge everyone to be more like TXChick, and make some money on the moves. Long term, I believe that the economy is in trouble due to consumers cutting back as the housing ATM closes. That’s long term. I’ll still believe it even if the S&P rallies back to its highs. IMHO, there is not much left that can be done to ignite the economic jet engine; it’s a flame out, and adding more fuel will just mean more vaporized fuel exiting the back end…the thrust is gone.
Sorry, this qualifies as a rant, and thanks for letting me do it. I think I’ll take the kids bike riding.
“I know a lot of us are looking for vindication on our predictions that housing will bring the economy down.”
True to contrarian form, I do NOT share this view. There’s not nearly enough people in this country that have been caught with their housing pants down.
Will the popping of housing mania slow the eocnomy? Sure. It did starting in 2006 and it will for quite a while into the future.
“…penthouses come standard with…remote-controlled Kohler Infinity bathtubs*….The Vue penthouses cost $2.2 million to $3 million, not to mention the 29 cents charged per square foot as condo-association fees.”
* Buyers can upgrade to toilets equipped with Auto Wipe. Add 12 cents per sheet to the condo association fee.
isn’t this how you define failure ?
.5 cut and long rates up
ROFLOW !
30-yr Bond 4.9740% Up 0.0490
Out of 20 single-family housing markets in Florida, 18 posted declining existing-home sales in the April-to-June period,
where was there a possitive markt in FL ?
Tallahassee?
“‘People still don’t want to give up the amount of money they thought they had made in their homes,’
———————————————————-
What a coincidence. I, as a buyer, also don’t want to give up the amount of money they thought they had made in their homes.
So I will continue to rent for half the cost.
“At Beazer’s Ardrey Woods, also in south Charlotte, agents declined to discuss sales Thursday, as landscapers spruced up gardens and a family toured the model homes. A sign out front encouraged buyers: ‘Save Thousands Now!’”
Should have said “‘Save Thousands Now!’. Save hundreds of thousands later.” LOL
“‘Sellers cannot overprice their homes or hold out in hopes of unrealistic offers as the market continues to be very price sensitive,’ said Shane Masterman, co-founder of Concierge Lending in Sarasota. ‘Buyers who are on the fence waiting for prices to drop another couple percent need to get off the fence and buy now while multiple mortgage options still exist. The number of mortgage options is reducing every day.’”
Or, let me guess, they’ll be priced out forever. Man, they just don’t want to let go of this sacred cow.
Well, this ‘sacred cow’ (buy now or be priced out forever) has clearly yanked off the picturesque little bell and is now trying to trample everyone in the pasture, bellowing angry mooing sounds and leaving moist, stinky giant brown patties all over the place.
And I think that the general public is becoming aware of this. Downtown yesterday at lunch I overheard some people talking about subprime loans and renting vs. buying, both of them agreeing that they’d hold off buying for awhile, since renting made more sense. !
I think/hope the public is waking up to all sorts of things, and is now getting ready to go get some nice fresh ribeye steaks, just right for grilling.
Ahahaha, I could visualize that little scenario. Mad Cow!!
“The New York Stock Exchange kept enthusiasm in check, however, instituting trading curbs on the upside for a little over an hour just after the market open.”
Must be the RPT, Rocket Protection Team at work today at the NYSE.
As Woody and Buzz noted in Toy Story, rockets explode.
Looks like the DJIA rocket is coming in for the day’s soft landing at 13K…
http://www.marketwatch.com/
“The main culprits were bankers who offered complicated loans and 100 percent financing to people who could not afford it, Detert said. ‘The loan products banks were offering was almost like putting cheese in a rat trap,’ she said. ‘The loans caused people to bite. But when the market turned, it snapped their necks off.’”
How pleasant. And as a reward for such behavior, lenders (like CFC) get free bailout services from the Fed.
“(like CFC) get free bailout services from the Fed.”
Did I miss it? What was the free bailout for CFC?
All this week has done - is teach Joe Sixpack and Jim “Baby Boomer” (who retires in 10 years) to keep gaming the market! If the stock market ever goes down, the fed will jump in and “restore confidence”.
This just encourages further reckless investment. As it becomes a “sure thing” now that it won’t go down.
Without pain there is no learning for most. Take away the pain, you take away the learning.
Don’t worry, while they’re focused on the ’shiny object’ (the stock market), the other shiny object (precious metals) will go up much more than their coveted DOW and 10 years from now they’ll wonder why they still don’t have sh!t even though DOW says 35,000 and their magic carpet of retirement, their house, has flatlined for the past decade. That’s under the best scenario. More than likely though, there will be a major stock crash. Remember, the DOW and S&P and NASDAQ are only a small percentage of the stocks listed, and if anyone of them do really bad they can substitute another one that’s doing well and call that DOW worthy. The DOW means nothing. The Fed doesn’t have to do much to keep those stocks falsely elevated to make the DOW or NASDAQ or S&P ‘look good’, meanwhile the other 98% of listed stocks are going in the crapper along with pension funds that are invested in MBSs. You WILL get your economic collapse, and it won’t be pretty.
santacruzusx
This is a great explanation of wealth;
“wealth represents goods that have been produced but not yet consumed.” So as for wealth/money/savings, its purchasing power equals existing goods available for consumption. However, when new debt is issued it is an entirely different phenomenon. New debt is essentially a claim on goods that have not yet been produced, since it is an expansion of existing purchasing power, which itself represents all produced goods. In other words, new debt pulls demand from the future into the present
‘Buyers who are on the fence waiting for prices to drop another couple percent need to get off the fence and buy now while multiple mortgage options still exist. The number of mortgage options is reducing every day,’ said Shane Masterman, co-founder of Concierge Lending in Sarasota.’
A perfect example of GREED and false information passed on to the general public!! It looks to me that Shane Masterman is only interested in lining his pockets at the expense of the consumer with more of the toxic loans. This guy needs to be shutdown!!!