More And More, This Feels Like A Correction
CNN Money reports on New York. “What could the collapse in the subprime mortgage market possibly have to do with whether Dr. Jeffrey and Madeline Stier get full price for their four-bedroom house in the wealthy New York City suburb of Larchmont? It’s clear that what’s happening in the subprime market…has for now prompted many high-end homebuyers to either trim their offers or stop shopping altogether. ‘It’s the hysteria on Wall Street,’ Jeffrey Stier says. ‘It’s frightening people.’”
“Six months after the Stiers first listed it for sale at $2.5 million, a price only slightly above what comparable homes had been selling for, the house remains unsold. Tired of waiting, the Stiers finally capitulated and recently dropped their asking price to $1.99 million.”
“The market’s psychology has changed more than the fundamentals, argues Phyllis Radding, a veteran agent who is selling the Stiers’ home. ‘All the negative articles in the press have made buyers more cautious,’ she asserts.”
“The shakeout has already begun, maintains Diane Saatchi, a real estate agent who specializes in multimillion-dollar vacation homes. The head of the East Hampton, N.Y., office of the Corcoran Group, Saatchi says it’s no coincidence that several of her sellers agreed to lop hundreds of thousands of dollars off their asking prices the same week that jumbo rates pushed past 7%.”
“She’s now predicting a 20% price decline for all but the most expensive Hamptons homes (the superrich don’t care about mortgages). Says Saatchi: ‘More and more, this feels like a correction.’”
The Times Herald Record from New York. “The subprime market crunch has hit home in the mid-Hudson Valley. Empty homes formerly occupied by subprime buyers already dot our region. Know this: The impact of living with a subprime mortgage is here and it’s real.”
“Marco and Marissa Meza, a couple from California, snapped up a brand-new colonial in the Town of Wallkill for $319,000 in 2003. It had all the amenities a new homeowner could want.”
“The builder, Gary Swanson of GJS Construction Corp., said it was the strangest closing he’s ever experienced in his years of building and selling houses. ‘When I went to that closing I didn’t think they were going to have enough money to buy the house,’ he said.”
“Still, months into the closing process, Marissa Meza asked Swanson to quote a price for a circular driveway. He told her $5,000 and ended up building it for her. Then, Meza asked him to quote a price for a finished basement. His $15,000 estimate was apparently too high for her. But Meza had another builder do the work.”
“‘These people should have bought a house $100,000 less than the house they bought,’ Swanson said. ‘They can’t afford a house, and here they want a circular driveway. People just think they need these extravagant-type houses,’ he added.”
“Within a year of buying the house, the Mezas had refinanced with Countrywide Home Loans Inc. for a $304,000 mortgage. They also tapped Countrywide for a $38,000 home equity loan. In April 2006, they refinanced again, this time with Wells Fargo, for a $396,000 mortgage. The loan was clearly a subprime one and their initial interest rate rose to 8.375 percent.”
“By August, they stopped paying their bills. Wells Fargo started foreclosure proceedings in March 2007. Marco and Marissa Meza moved back to California. They did not respond to a request for an interview.”
The Buffalo News from New York. “Thomas and Jeaneen Maglietto, who religiously watch TLC’s Flip This House show, decided to buy a second house a few blocks away to use as a rental property.”
“The couple went to Alexis Funding and, on Wednesday, got prequalified for a mortgage from Arizona-based First Magnus Financial Corp. for the $65,000, two-unit house. The price would have been 90 percent financed, with the Magliettos putting about $6,000 down.”
“But the next day, with no warning, First Magnus abruptly shut down. And all the remaining lenders Alexis used now want the couple to put down at least $10,000.”
“‘We really can’t come up with $10,000 or $12,000 for a rental property,’ said Thomas Maglietto. ‘We were looking for someone to work with us. Now everyone wants my first-born, and I’m not willing to do that.’”
“‘It’s almost like Alice in Wonderland. You’re just dropped in a whole new set of circumstances that can change as soon as the fax machine rings or an e-mail comes out,’ said Michael J. Meyer, senior loan officer in Williamsville, who was filling out a client’s paperwork for a home equity loan when the bank pulled out of the business. ‘I’ve never seen this much collapse of a product.’”
“‘I haven’t seen changes like this so drastic, so suddenly,’ said Frank Fialkiewicz, senior sales manager for American Equity Services in Cheektowaga. ‘The public doesn’t understand that things are changing by the hour, by the day.’”
The Boston Globe from Massachusetts. “The escalating mortgage crisis is expected to further depress house sales and prices in Massachusetts during the fall selling season as some potential buyers’ loan applications are rejected or buyers delay making a purchase to see whether prices fall farther.”
“‘This is an amazing scene developing, and it could have a serious impact on people’s confidence to go ahead,’ said Barry Nystedt, a real estate agent in Newton.”
“Pat Magnell, a buyer’s agent in North Andover, said that buyers’ awareness of the industry’s problems was raised last week because Countrywide is so well known, in contrast to the dozens of obscure lenders that failed over the past year. She said a raft of sellers are reducing their prices.”
“Buyers ‘are aware they have more choices, and down the line, their choices may increase exponentially so they’ll wait,’ Magnell said. ‘Can you blame them?’”
“Mark Gibbons, an agent in Stoughton, said a client who was selling a house turned down an offer at the list price, in favor of a bid that was $15,000 lower because that buyer was more certain to obtain a mortgage.”
“‘The dollars weren’t as important as the confidence in the actual closing happening,’ Gibbons said.”
“One of mortgage planner Robert French’s clients, who earns about $700,000 a year and has a high credit score, was recently unable to get a stated-income mortgage. These loans became popular during the housing boom because it does not require borrowers to provide a copy of their W-2 tax form to the lender.”
“Stated-income loans, French said, are ‘just disappearing.’”
The Connecticut Post. “At her two-bedroom condo on the East Side of Bridgeport, Donna Pearce is anxious and a bit angry. The nanny has fallen behind on her mortgage payments and blames her mortgage broker for selling her a loan that she could not realistically afford.”
“‘When she [loan writer] came to me with the loan saying I was approved, the interest rate was extremely high,’ Pearce said. ‘But she said not to worry about it because ‘in six months you will be able to refinance.’”
“Pearce, who earns $525 a week, put $3,000 down on the $135,000 condo and accepted the deal. She figured that she could squeeze by paying $1,300 a month for the first six months and then refinance and lower her monthly payment. Six months later, Pearce found that she did not have enough equity in the condo to refinance nor the money to cover substantial penalties for refinancing.”
“Moreover, she learned that the 13.05 percent interest rate could rise to 15 percent within two years.”
“‘Right now I am in default,’ she said. ‘You trust the person you think is working for you that you will get lower rates and be able to pay the mortgage only to find out there are hidden glitches you don’t know about,’ she said.”
“Pearce does not believe Congress should bail out Wall Street. ‘It’s folks like me that should be bailed out,’ she said. ‘These banks that did this to people deserve what they are getting. They should be made to pay for hurting people like myself.’”
The New York Times on Connecticut. “Three years ago, Martin and Jennifer Cossette bought into the dream of homeownership,— the quintessentially American ideal of personal striving and family stability celebrated by politicians, promoted by Madison Avenue and financed by Wall Street.”
“The modest Cape Cod-style house, in Meriden, Conn., had three bedrooms, and a backyard for their young son. Like so many families, they stretched to buy their first home. In the red-hot housing market at the time, they put no money down and got a mortgage for its entire $180,000 price tag.”
“They had qualms but too few, as reassuring lenders spoke of rising housing prices, falling interest rates and easy access to future loans.”
“None of it turned out that way. There were unforeseen expenses. Bills mounted and credit card debt got out of hand. They refinanced in late 2005, folding other debts into the mortgage, but that proved to be only a stopgap.”
“Earlier this year, the Cossettes filed for bankruptcy under Chapter 13, used by wage earners who want to hold onto their homes. But the monthly payments on the $230,000 mortgage were $1,800, 40 percent higher than the first mortgage, and headed even higher. So they decided to let the house go.”
“‘We were totally naïve,’ said Mr. Cossette.”
“Joseph and Lu-Ann Horn bought their 1,200-square-foot, three-bedroom home in South Windsor, Conn., in 2002, paying for nearly all of it with a $150,000 loan. The mortgage was a 30-year loan with a fixed rate of 7.5 percent. Two years later, they decided to refinance to pay off their truck and their credit card debt and to buy a $4,000 motorcycle.”
“The new mortgage was for $198,000, at a fixed rate of about 8 percent for two years and variable rates afterward. The monthly payment was about $1,600. The mortgage broker, Mr. Horn said, told them not to worry about the variable rate because they could refinance in two years and lock in a fixed rate again.”
“‘They basically put us in a loan that they knew we couldn’t pay,’ Mr. Horn said. ‘We never should have done it.’”
“When the fixed rate expired last year, the Horns found no willing lenders. The interest rate has jumped and the monthly payments rose to nearly $2,200, Ms. Horn said. ‘It just goes up and up,’ she said.”
“Mr. and Ms. Horn make about $70,000 a year, but with two children and other expenses they fell behind on the mortgage. They have been served with foreclosure papers, and have filed for Chapter 13. ‘We’re fighting to hold onto the house now,’ Ms. Horn said.”
“For Mr. Cossette, who is now a renter, homeownership no longer has much allure. ‘You put your life’s sweat into a piece of real estate that may or may not go up in value,’ he said. ‘So I don’t have a house. That’s O.K. with me.’”
“She’s now predicting a 20% price decline for all but the most expensive Hamptons homes (the superrich don’t care about mortgages). Says Saatchi: ‘More and more, this feels like a correction.’”
So long as the stock market keeps rallying, who cares about home prices in local markets like the Hamptons?
http://www.marketwatch.com/tools/marketsummary/
Till they have to sell speculative, overpriced real estate to meet margin calls.
(the superrich don’t care about mortgages)
What a ridiculous red herring. The superrich absolutely care about staying superrich, which means not spending $10M on a place when a nearly identical place down the street is going for $2M
Reminds me of that old grey poupon commercial:
“How do you think I got so rich??”
Actually the point was that price moves respond inversely to interest rate moves. . . except for markets that pay cash.
I was actually responding to JP who didn’t agree with the comment that the rich don’t care about overpaying. The rich guy in the commercial said that he got rich because he cared about not paying too much. Old 80s commercial.
Anyway, I agree with JT. It’s a false assumption to say that the rich don’t care about paying too much for real estate. Maybe some, but not all.
Maybe some of the “mortgage-rich” from the last 5 years don’t care, but every rich person I met before 2000 definitely cared a lot. Many of them were excellent market timers. (stock, precious metals, real estate)
More of the garbage of the “mystique” of rich people. Poor, stupid people that haven’t an inkling of how others got rich in the first place.
Chuck Ponzi
http://www.socalbubble.com“
(the superrich don’t care about mortgages)
Which is why so many of them don’t own but rent high end apartments.
I don’t know a single rich person that rents.
The fellow way up near the top at PIMCO does, I believe.
I happen to know several very wealthy people who rent. One pays 6k/month for a nice single family in Cambridge near Harvard.
Check out Warren Buffet’s house some time (he owns, but owning that house is almost like renting).
PPT has drawn a line in the sand at the flat line… I guess the market will tread water until it goes up a few hundred points at the end of the day?
Time to redraw the line at DJIA = 13K?
Who decides on the strike price for the Bernanke put? Is it BB himself, Geithner, or someone else? Or does the FOMC get a vote?
DJIA 13K, here we sit and will not be moved.
A “correction”..nah…This realtor in the Milwaukee area sums up the upper midwest housing situation in his last sentance( even with the NAR mentality spin) .
As That house is back on the market, said John Newland, the Ogden & Co. broker who is representing it, “and now there are two other houses on the same street that have gone up for sale,” he said. “It would be a buyers’ market, if there were buyers.”
It would be a brokers commission, IF potential Buyers weren’t WALKING AWAY!
Dumb as his impending disaster assessment is, it is, it’s a very telling and profound statement to be in PRINT for the Milwaukee Journal Sentinal
http://www.jsonline.com/story/index.aspx?id=645633
Don’t look now, but the bottom is falling out of the 3-mo T-bill yield again today.
http://www.bloomberg.com/markets/rates/index.html
P.S. For those who did not read about the implications of this in today’s WSJ, think “twister in view– headed for storm shelter.”
Flight to safety hits Treasury bill yields
By Krishna Guha in Washington and Francesco Guerrera and Saskia Scholtes in New York
Published: August 20 2007 14:52 | Last updated: August 20 2007 22:46
Money market investors staged a dramatic flight to safety on Monday, knocking down yields on short-term US government debt, as top Treasury and Federal Reserve officials made behind-the-scenes efforts to maintain confidence in the credit markets.
The yield on the three-month Treasury bill fell 66 basis points to 3.09 per cent after being down 125bp during the day – a greater fall than in the October 1987 crash. The yield on the one-month Treasury bill fell 62bp to 2.33 per cent after being down 175bp.
The frantic scramble to obtain government paper, at almost any price, is a sign of extreme risk aversion and suggested that the Federal Reserve’s cut in the borrowing rate it charges banks from 6.25 per cent to 5.75 per cent – on Friday had yet to stabilise credit markets. This in turn encouraged speculation that the Fed will cut its main monetary tool – the Federal Funds rate.
http://www.ft.com/cms/s/0/699699f4-4f21-11dc-b485-0000779fd2ac.html
Something you never hear in the main stream news are stories about folks who bought into the whole RE industry hype machine over the past couple of years and believed prices would go up, and consequently bought themselves into foreclosure or failed to sell when they could have and ended up (or will) in foreclosure. Right or wrong, people tend to believe “experts” like economists and real estate industry spokespersons, and can act accordingly. If we had medical professionals acting like this they would be telling people to eat as much as they want, smoke, drink and forget the exercise. There must be some accountability here!
Something you never hear in the main stream news are stories about folks who bought into the whole RE industry hype machine
Uh, there’s a dozen of those stories posted here every day. It’s incredibly rare for a reporter to actually fact-check these FB’s tales of woe (to discover the multiple re-fis, affordable fixed rate loans traded for neg-am, etc.). They gambled and lost, and they pay the consequences. Neither they or the lenders should be bailed out.
Posted here yes, but not the mainstream media from a year or two back. If you have followed my general line of thinking, I am one of the last people who thinks bailouts are a good idea, or even for that matter possible.
My point, is that there must be a good number of FB’s who bought into the hype and lies, who are paying the price. It is all snake oil in this industry. I am nut suggesting those stupid enough, or greedy enough to buy in now should be bailed out, only that we cannot have people represented as “experts” lying through their teeth and causing subsequent damage as a result of their actions.
No arguments from me! Let’s do a class action against the NAR! Take ‘em down! Seriously, I’ve been lied to so much, and it has caused so much personal stress to have to play the role of crazy-seeming debunker. Everyone *knows* that carsalesmen will lie and play games, but your ‘agent’ is supposed to be looking out for you and I’ve dealt with one who made many lies of omission and one who just plain lied and misled, misrepresented the actual market as it existed right then, not just made ridiculous predictions. I didn’t buy anything, but it took an incredible amount of will and resistance and game-playing with hubby to accomplish, in the face of bald-faced lies from our ‘expert’.
As far as I’m concerned ,you can take all the examples of FB’s that Ben wrote about in this thread and they are not entitled to a bail out .
The Maglietto’s were just Flip that House want-to-be’s and they had no business buying a rental property if they couldn’t put another 4K down .
Pearce ,who earned $525 a week with only 3k to put down on a 135K Condo bought 50% more condo than she could afford . So easy for this person to walk and than claim she is a victim .
The other couples Ben had quotes about took out money to buy junk and so they set themselves up to fall . Now these refinance addicts are acting like they are victims .The couple that makes 70K a year should have their wages garnished by the bank if they walk .
And to think that the Feds might want to buy time-bomb loans like these examples or even use those loans as security for loans to these lenders . The Feds have NOTHING if this is their security for bail out loans to banks ,(hear me Cramer ).
“credit card debt got out of hand.”
And how did this happen…the cards upped and walked themselves to the mall? Most of these sad stories include refis, HELOCs and massive credit card debt..and yes salaries have been flat, so anyone with a functioning brain cell should have been keeping an eye on the budget.
Reporters don’t ask, because judging from yesterday’s story from the Wash Post reporter, they are clueless about finances, fail to do any research, and buy because they are “entitled” to a lifestyle their salary will not support.
I’d prefer to see these “little guys” get burned, as that seems to be the only way to get their attention. It might slap some sense into them.
Because of the reasons stated here there will be no bail out. Pols are afraid of getting egg on their faces. If they help. who will they help? If they help the stupid, won’t those who were conservative about their finances rebel? I will.
It’s just too big a mess to bail-out. Sure, we’ll hear a lot of bluster and get more regulation, but in the end there will be precious little done to end this mess. And besides, when has the gubmint ever acted in a timely fashion to a crisis.
I wholeheartedly agree with this comment. I’m tired of people who don’t take personal responsibility for their lives, financial and otherwise. Just because a lender tells you that you can afford something doesn’t mean you have to listen. Lenders are selling a product just like any other salesman. I’m an escrow officer and have seen SO MANY PEOPLE buy homes they cannot afford. I closed a loan recently where the borrowers house payment was $3300/mo and their car payment was $668/mo and between the two of them, they only gross $5800/mo. They had no business buying such an extravagant home and will probably lose it.
I recently went to look at new cars, and the car salesman and finance manager tell me that I can afford the payment, but I keep driving my 1993 Honda because I know that I can’t afford it in the long run because I’m saving for college expenses for my kids, retirement for me and my wife, etc., and I make around $150k yearly.
If Americans continue to rack up debt because we won’t forego every luxury whether we have the money or not, we’ll soon find that we have sold our country to foreign investors and it’ll be too late to do anything about it.
Countrywide starts laying off staff.
I guess without all the toxic junk that people were buying, business is going to slow down with having to require a down payment and true appraisals.
http://biz.yahoo.com/ap/070820/countrywide_mortgages.html?.v=1
Countrywide Financial Corp., the nation’s largest mortgage lender, has begun laying off staff as part of its effort to ride out the credit crunch that has rocked the home loan industry, according to a report published Monday.
SunTrust just announced 2,400 layoffs to be made. These layoffs will not help the situation…
And does this count against the employment number?
Oh the economy is fine since the demand for McD’s just went up. Oh, and it looks like they are creating jobs.
1 job at Sun Trut = 1 job at McD’s
That’s according to the Labor Department. The economy is fine.
It’s an ill wind that blows nobody good. Son’s had 2 promotions this year. His company is McD’s accounting IT.
LOL you know what I meant!
McD’s business may be flourishing after all this hits the fan. Where else are these people going to be able to afford to eat when then go out on the town.
That reminds me of when I was in Stockholm. I thought it was funny to see people all dressed up eating at Mickey D’s!
McD’s is even better since they wanted to classify it as manufacturing sector.
Yep, we are an industrial powerhouse.
We’re glad they outsourced his department. He’s at the same desk, but paycheck no longer directly from these guys. Unfortunatley, they’re embarrassing.
Very late in the day now, but another lender laying off:
Capital One Financial Corp. said Monday it will cut 1,900 jobs and shutter its wholesale mortgage banking business, a move that comes as lenders continue to struggle in the nation’s housing and mortgage markets.
http://biz.yahoo.com/ap/070820/business_highlights.html?.v=1
Let’s see here:
1,900 Capital One
2,400 SunTrust
2,500 WaMu
1,500 Argent
500 AHM (possible bonus layoffs of all 7,000not disclosed presently)
?,???? Countrywide (6,000 +/- in their mortgage division, maybe half get fired?)
At a minimum, 8,800 jobs lost already, with an unknown bonus round of layoffs at Countrywide possibly taking the total over 10,000.
If we assume that those jobs were, say, $30,000.00 a year secretarial or administrative positions, that’s over $300 million which just evaporated from the US domestic economy. Poof. Gone. More foreclosures, declining tax revenues, the works.
D’OH! Speak of the devil:
RICHMOND, Va. - Gov. Timothy M. Kaine has ordered agencies to cut their budgets by 5 percent to help cope with a projected shortfall of $641 million in state government revenues by next summer.
Kaine told the General Assembly’s money committees Monday that sharp drops in the housing market have eaten into tax collections so sharply that he might draw money from the state’s “rainy day” reserves.
Virginia started its current fiscal year $234 million short of its targeted goals thanks largely to a sharp downturn in the real estate market. Revenues grew by only 4.9 percent for the year instead of the 6.5 percent growth rate on which the budget is based.
“As you know, most of our metropolitan areas are experiencing significantly slower housing sales and fewer new housing starts,” Kaine said, adding that taxes paid to record deeds and other documents have dropped 16.1 percent from the previous year.
The slowing economy also produced nearly a 22 percent increase in income tax refunds this year, Kaine said. Also, Virginia landowners took advantage of a program to shield their property from taxes by committing to preserve it from development, enrolling nearly double the amount of land the administration had anticipated.
The final figures for the 2007 budget that ended June 30 mark the first time since 2003 that the state failed to meet its budgeted revenue targets. In the four years since, revenues have grown for the most part 10 percent or more.
Kaine has instructed state agencies to curtail discretionary spending, cabinet-level approval for any new hires or for renewing contracts for outside services and consulting. The 5-percent cuts apply to Kaine’s own office and to all state grants to private or nonprofit organizations such as museums, parks and cultural attractions.
http://www.wtop.com/?nid=600&sid=1225846
Somehow the labor department will come up with a hundred thousand + new jobs again when they report on September 7th. For the year as a whole, they even show constuction job gains. Does anybody buy that? A better indicator of the real economy it the monthly freight index. It’s a measure of the volume of freight that is moving about the country. Despite what the government tells you about the health of the economy, the freight index just had its steepest decline y/y in 17 years. It was down 3.4% from June 2006 to June 2007. Here’s the URL http://www.etrucker.com/apps/news/article.asp?id=62199 Wanna bet the government will report the GDP is still growing? Why do they lie? Are we that stupid?
Anyone know what percentage of Countrywide’s Profits are related to sub-prime or alt-A mortages? I can’t imagine that business is ever coming back. Even the prime business will be tough if you can’t sell CDOs and Countrywide has to pay credit line interest rates on money to make mortgages.
Have CDOs based on prime mortgages dried up too?
They sure have dried up. Have you noticed the steep decline in T-Bill yields in the last couple of days. Money Market funds were big buyers of the mortgage backed CDO’s. Not anymore. The SEC has stated that Money Market funds have no business investing in those types of products.
I think we are quickly heading to a new way of doing things. Maybe the mortgage lender will by default have to keep the mortgage they originate on their books until the borrower either pays off the loan, refinances, or goes belly up. Sort of like the way it use to be. The local bank where they knew you and your family in your local town.
“I can’t imagine that business is ever coming back.”
Give it eighty years or so. Interest-only loans were the most popular mortgage financing vehicle back in the 1920s.
I’ve often wondered about that. Got any links? Not doubting - just educating myself.
and they are still the most popular type or mortgage in the Netherlands …
I respectfully suggest that these distinctions are becoming irrelevant. In a credit crisis of this magnitude, nobody is lending. Nobody. They’re too busy covering margins, watching “profit” and principal evaporate, and scrambling to avoid repurchase demands on the junk they’ve been peddling for so long. They can’t sell a mortgage package right now for pennies on the dollar because nobody wants to buy headaches, and the big money has a bellyful of negative-profit loan pools that brokers are refusing to repurchase, so there’s just no way anyone can recapitalize to make more loans.
Did you ever see the old Bugs Bunny where he turned off Niagra Falls? The water flows away and all that’s left at the bottom is a bunch of mud and broken barrels.
Still waiting for the big crash. My initial prediction of Election Week still appears valid, but the liquidity crisis may accelerate things. Depending on what happens next, the acceleration (followed by sudden, total deceleration) may be brutal.
I don’t think you are right. Many US mortgage shops like GMAC are still extremely active in Europe with all the kind of toxic mortgage products that are now gradually removed from the US market (in fact is seems that most of these companies have stepped up their activities in Europe lately). None of them have learned their lessons. Either they know that the FED/ECB will bail them out whatever they do, or they are just too stupid to learn.
That “Screwy Wabbit!”
I wonder how many are sending money to CFC for those CD and savings interest rates. I’m no expert, but don’t they seem a bit high???
Years ago in the late 1980’s or early 90’s I remember someone on TV saying that: “You need to be very careful when putting your money in an investment that pays interest that is much higher than the going rate.”
indymac has a lot of CD’s at the vangard site. higher interest at the shorter maturities. https://flagship.vanguard.com/VGApp/hnw/funds/bonds/bonddesk
I’m entitled!
Like so many families, [the Cossette's] stretched to buy their first home. In the red-hot housing market at the time, they put no money down and got a mortgage for its entire $180,000 price tag.”
Cheese and whine!
“For Mr. Cossette, who is now a renter, homeownership no longer has much allure. ‘You put your life’s sweat into a piece of real estate that may or may not go up in value,’ he said. ‘So I don’t have a house. That’s O.K. with me.’”
Mr. FB Cossette doesn’t sweat very much.
Mr. Cossette, who is now a renter…..
For shame, for shame! Ug, a renter! Cross the street quick!
lmao
renter = leper?
the msm is disgusting
Like so many families, they stretched to buy their first home. In the red-hot housing market at the time, they put no money down and got a mortgage for its entire $180,000 price tag.”
You put your life’s sweat into a piece of real estate that may or may not go up in value,’ he said.
But the best part is………..he took OUT $50,000 in “equity” to pay off credit cards and other expenses.
He’s not the one that put in the sweat, it was the lender.
Now that’s a sweat deficit.
For Mr. Cossette, who is now a renter, homeownership no longer has much allure. ‘You put your life’s sweat into a piece of real estate that may or may not go up in value,’
Buying a home with no money down or using it as a ATM machine dos not “entitle” anyone to homeownership! I understand sickness, I understand death, college anything that would make sense..paying off your credit cards with stupid crap that you bought and a motorcycle that sits in your garage? S-T-U-P-I-D>>>
Oh and by the way…Real Estate is an investment, with investments there comes R-I-S-K..in the long run it will increase in value..but just not at the rate of a 23% credit card bill…
Yeah, it’s an investment, but not a very good one. History will tell you that–it follows the rate of inflation. That’s how we find ourselves in this mess to begin with!
I never believed a home should be looked at as an investment. An investment you should be able to liquidate and walk away from at any time, that’s a little difficult to do with the place you live in. I guess that’s why I’m not caught up in this insanity.
I’ve always thought that a house should be considered — by consumers and purchasers, if not by economists and government officials — as a “durable consumer good”. Unless you’re renting little Johnny’s bedroom when he’s away at college, it’s not an investment. Banking on price appreciation is simply anticipating asset price inflation in most cases — it’s not investing.
RE is an investment for the “long term”..as seen by many a grandparent who died in the house they paid off or sold the “paid” off home of 50 years to purchase something less expensive and add the rest to their retirement fund..so yes over the long term..longer than the 3-5 years of flipping it.. is an investment..
right, or inflation follows home values. same diff. housing can go down or inflation can go up, either way the effect is the same.
and the illiquidity is a killer. is there a good quantifier for illiquidity? should be part of the risk calculation and count against return. haven’t heard of one, but i am an amatuer. if there is one, i’ll bet it is a steep negative curve.
“‘We really can’t come up with $10,000 or $12,000 for a rental property,’ said Thomas Maglietto. ‘We were looking for someone to work with us. Now everyone wants my first-born, and I’m not willing to do that.’”
‘Flip that House’ neglected to mention to Tom that he might actually have to have some of his own money in the venture. Tom thought that it was his right to big profits. After all, doesn’t the TV show make it look easy?
How is he supposed to get big profits on a rental in Buffalo?
That may well be possible on a two family for $69,000, but if he can’t pony up 20% down for the deal how is he going to handle needing a new roof, or boiler, or whatever?
If he had gotten the house and had a crisis, was he going to just walk away from it? Did the stupid SOB even calculate the monthly cost of liability insurance in his business plan? Or was doing what they do on TV=profit his business plan.
I wish these reporters would ask some tough questions for once.
I would flip this guy off before I would let him flip a house . What a feeling of entitlement this guy has to get a investment property on a low down loan .Those FLIP THAT HOUSE watchers will walk easy unless they make big money easy . Who would want their cheap shot ,bad taste ,fix up anyway .
Exactly. Flippin’ idiots who are too lazy to do their homework. “But it worked FINE on Tee Vee!”
Wasn’t it ‘Flip That House’ (the main guy was out of Atlanta?) that was recently found to be fraudulent with the houses supposedly “sold” to his family members on the show and only the rooms shown in the ‘after’ segment actually renovated? I think that whole thing was blown wide open and that guy is up on fraud charges.
Wasn’t it ‘Flip That House’ (the main guy was out of Atlanta?) that was recently found to be fraudulent with the houses supposedly “sold” to his family members on the show and only the rooms shown in the ‘after’ segment actually renovated? I think that whole thing was blown wide open and that guy is up on fraud charges.
Wasn’t it ‘Flip That House’ (the main guy was out of Atlanta?) that was recently found to be fraudulent with the houses supposedly “sold” to his family members on the show and only the rooms shown in the ‘after’ segment actually renovated? I think that whole thing was blown wide open and that guy is up on fraud charges.
Dang touchpad- sorry about that folks! I checked and my original statement was wrong (all 3 times!). The scumbag fraud was hosting a show on A&E called “Flip THIS House”…
We now know the upper bound on the value of their first born. Apparently they believe their own child will be worth less than $10,000.
Probably true.
Got popcorn?
Neil
“Thomas and Jeaneen Maglietto, who religiously watch TLC’s Flip This House show, decided to buy a second house a few blocks away to use as a rental property.”
Beware of worshipping idols and false gods
Oh my, oh my, oh my . . . . Craig Hall joins Team TXChick as a DFW real estate bear! That’s a big one! From Dallas Biz Journal:
“Developer Craig Hall says D-FW’s realty party is over, done”
Mega-developer, Craig Hall, long known as a bullish pioneer in North Texas real estae, has turned into a realty bear almost overnight.
“It’s over,” he said, of Dallas-Ft. Worth’s recent property boom. “It’s gone, it’s done.”
“Overnight, the whole world changed,” Hall said, and it’s not going to change back.”
No shit, Craig! It was done 6 months ago! It was never sustainable. Craig, for those of you who don’t know him, has been a high profile DFW RE developer for well over 20 years. He went bust in a huge way in the late 80s, early 90s, and came all the way back. He obviously learned the lessons of the past bust.
He goes on to say in the article that he’s been outbid in his most recent transaction attempts by people from out of town with artifically low “teaser rate” money. Sound familiar, Cali wannabe home buyers?
Dallas is over. Dead. They’ll carry the carpetbaggers out in body bags before it’s over.
Is he the one that had the weekly real estate radio hour? If so, he sure doesn’t know everything! Didn’t know the answer to my question about REID’s.
Ichabod McLiver says, “If we want this Wall Street rally to keep going, then the FED must keep lowering interest rates.”
London Telegraph overnight:
“The Fed is going to have to make very substantial cuts in the general level of interest rates if it is going to have any chance of preserving financial stability and avoiding an extremely serious recession. It will do that, even if it does not yet realise just how much it is going to have to do, because its mandate will make it do it. The Fed was created, in response to the 1907 financial crisis in the US, precisely to try to avoid further crises.” So…that thud we’re expectiong to hear is the dollar.
Stock Exchange of Hong Kong overnight: I’d have made 11% on my postions, but did not trade a thing, there were no firm signals to trade on, not one. Disorderly markets are falling markets.
I’m still in the dark on how the Fed can lower rates when the rates in other countries are going up. I think we burned the bridges with this mortgage debacle. Even our treasury bonds may not be looked at by foreign investors as riskless in the future. I see interest rates having to go up eventually whether the Fed likes it or not. We have to sell treasuries or the government runs out of money.
Am I missing something?
Is there a major disconnect between the Fed rate and the rate on Treasuries?
Following paragraph was: “In contrast, the EU quite deliberately created the most dangerous credit bubble of all: EMU. And, whereas the mission of the Fed is to avoid a financial crisis, the mission of the ECB is to provoke one. The purpose of the crisis will be, as Prodi, then Commission president, said in 2002, to allow the EU to take more power for itself. The sacrificial victims will be, in the first instance, families and firms (and banks and investors) in countries such as Ireland and Club Med. Subsequently, German savers (or British taxpayers) will bear the burden of bailouts that a newly-empowered “EU economic government” will ordain.
The mechanism is plain to see. Germany entered the euro with an overvalued exchange rate. It then faced a long period of high unemployment that drove wages down and restored its competitive position. But Germany was also helped at the beginning of this process by the newly-established ECB, then dominated by the Bundesbank president, Tietmeyer, and his acolyte, Trichet, then governor of the Banque de France. The ECB initially set interest rates where Germany needed them - far too low for most other EMU countries - and allowed extreme euro weakness.
That combination, and Germany’s initial uncompetitiveness, created booms in many other EMU countries. But, as in the US in the 1920 and again in the 1990s, inappropriate interest rates and temporarily booming growth totally distorted perceptions of today versus tomorrow. The result has been that firms and families in these countries have massively over-borrowed and banks and investors have massively over-lent, often on the illusory security of inflated house prices.”
I’m kind of inclined to think Peter Schiff has the big picture about right, Fed has to lower rates but they’ll bluff as long as they can because the dollar will plummet. We’ve dead ended into a cliff, not enough room to turn around without driving over the edge.
“She’s now predicting a 20% price decline for all but the most expensive Hamptons homes (the superrich don’t care about mortgages). Says Saatchi: ‘More and more, this feels like a correction.’”
THat’s quite a haircut when you are talking 20% off millions of dollars.
The problem with the “superrich don’t care” theory, is that while it is true at the very high end a large percentage of transactions are cash, prices at the lower end affect the prices at the next tier which in turn affect prices all the way up the chain.
Another problem: most of the super-rich are sharks. Just because they could overpay doesn’t mean they will.
Yet another problem: Those of the super-rich who are not financially savvy can afford to pay financial advisers who are. Neither the savvy super-rich nor the advisers of the less-savvy sort think it is wise to try and catch falling knives.
Those with inherited wealth tend to be very cost-conscious.
They check the addition on restaurant tabs and are not shy about speaking up. Also, check the cuffs on a man who inherited a old fortune–probably slightly frayed. They buy top quality and wear it to death.
As for the recently very rich–Wall Street types–even if they can afford something, it’s all about making the deal–winning is getting the best price. As for the junior guys with the huge bonuses–I don’t know these guys, couldn’t say.
I am nowhere near super rich, but I learned a long time ago you only buy quality once.
“…prices at the lower end affect the prices at the next tier which in turn affect prices all the way up the chain.”
When all the plankton die, so do the whales.
Good analogy Professor Bear.
Wasn’t there a guy here who posted that his wife was going to divorce him if he didn’t buy a house in Boston 3 or 4 months ago? I wonder how it worked out? Doesn’t look good if he caved.
Id’ divorce her and tell her good luck in affording a house on her own.
Doesn’t really sound like a house problem. Amazing what all comes to the surface with the bubbles.
That’s what I told him. Actually I think I said divorce would be cheaper and better long term “investment”.
Now, seemingly contradicting what I said earlier about a house being a durable consumer good rather than an investment …. divorcing your b!tch-of-a-wife who’s demanding a new house in a lousy real estate market *could* be considered an investment, and probably a good one at that.
Divorce her and say, “I’ll be generous, you can keep the house and empty savings account and I will just take my clothes and my car!”
Sadly, I have a friend just starting the 6 months of “separation” before they can get a divorce and they may be forced to sell in this market. They are 2 years into a 7 year ARM so they would probably be screwed eventually, but still.
We joke about how dumb everyone is who bought with an ARM or at inflated prices, but I think that a lot of otherwise conservative and financially responsible people are going to get screwed.
The problem is lies, deception, or ignorance from those whom we trust (rightly or wrongly) to give us good advice. If you are not taught in school or by your parents then where do you go to learn? You probably don’t even know what you don’t know!
Oh how true you speak!! My 22yr old son KNOWS what an ARM is…good pa a ma. : )
er…blushing…good pa and ma : /
My generally wise and now debt free parents GAVE me 20% down to buy at Northern VA’s inflated prices in 2004. By 2005 I realized that I couldn’t make it (because salaries were not keeping up with cost of living) and so I sold (for 40K over what I paid a year earlier).
I trust my parents because they have generally made wise financial decisions. I was pressured to buy because “renting is throwing money away”
I figured things out when I was looking at our finances when planing for a new baby on the way.
Many boomers are completely disconnected from reality because in all of their experience they have never encountered anything like todays market.
I have now educated my parents (so they don’t end up living with me) and they moved a third of their 401K into treasuries/money market. My mom still struggles with “throwing money away by renting”, but my dad finally came around. They are still holding out hopes that their stock will go up 20% to “where it should be”.
People are just too busy to act or do any research.
“Many boomers are completely disconnected from reality because in all of their experience they have never encountered anything like todays market.”
Not true, I’m a boomer and the late 70’s early 80’s were nuts–country hit a serious recession, huge job layoffs and interest rates hit 21%. The Bass brothers almost cornered the silver market, and all over Europe folks lined up with antique silver to melt down and sell. Earlier, OPEC strong armed the market, and oil prices skyrocketed, gas lines were around the block, and speed limits were imposed overnight. Real estate tanked big time in the early nineties.
Economic dislocations are nothing new, but this is a real humdinger. You do have to pay attention.
they sound just like my in-laws good grief
Dan,
Please tell me your “Generally Wise” parents don’t have 2/3rds of their 401k in stocks at this point. No, I don’t mean at this point in the business cycle - that’d be gambling on your ability to time a market - I mean at this point in their lives. Shouldn’t they be in their late 50’s or early 60’s.
Quite a risk.
They are in the vangaurd 401k and are in the fund for their target retirement date. So the funds automatically adjust by age.
Their real problem (outside their 401k) is a very large stake in their employer’s stock after many years of stock options. This stock is down from $20/share to $17/share in the past month (15% drop) but they are holding on to the hope of a promised “fair value” of $25/share.
They are wise in the sense that they don’t live beyond their means on borrowed money.
They are foolish in the sense that they rely on Fox news and are too busy to pay attention to the changing economic conditions.
Boomers birth years are 1946-1964. My husband took a promotion and transfer to DuBuque IA where we ended up with a 12.75% mortgage in a market that included 18% and up, unemployment 25%, highest in the nation according to the quote in Time mag, and then they cut his position to cover a failed expansion purchase. We had to walk away. I’m just gonna guess a lot of people in our cohort have had their noses pressed pretty hard against reality.
I don’t think it was a question of learning as much as these people were just gambling on making money during a mania .
Salespeople are always going to sell the up side of a investment and down-play the risk . I agree that the REIC went to far in the assurances they were giving customers ,but if your a adult you don’t buy things you can’t afford .These borrowers having trouble now committed fraud on these loan application and were willing to do this ,so no excuse .
My wife nagged me to buy the house across the street at $635K last year; I offered the seller who refused $535K, which was a compromise on my part (it sold in 3 days for the asking price). Nearly identical house 3 doors down was listed in March of this year for $635K; it’s down to $565 and falling. Marriage still intact; even stronger.
And still, the mystery continues: the lenders have not started dumping the REOs. I’m beginning to wonder what possible reason they have for holding on to these things. Is there an insurance reason? A tax reason? Mismanagement? Why aren’t they slashing prices and dumping the REOs? Countrywide, for example, could really use the cash…
If they sell, the screw up comps. It’s a domino affect. THe same reason people don’t want to sell commercial paper for fear of finding it’s “true” market value. Even Buffet suggested this, but they don’t want to do it since it will result in massive writedowns. Now they are stuck holding it which has caused a liquidity squeeze. Why do you think the FED is holding these as collateral? It’s the only way these firms can get some liquidity. They are also asking for lower interest rates but I doubt they can pass this on. I have no clue how this problem gets solved unless the FED creates hyperinflation to devalue the debt. But everyone loses including the banks, but they actually make it look like they have won. Wait, they did win. It’s the depositors that get screwed.
That sounds like the Spanish Prisoner effect. As long as no one sells, then they are collectively okay.
I wonder that as well. Some may be postponing putting the losses on their balance sheets, but for others it may be that the actual market price is now lower than they believe the property is worth in the long run.
They should have sold in the spring, before the mortgage meltdown. It may be they’ll all try to dump them next spring, which would be yet another rapid unwind of an illiquid asset.
Don’t they have to pay taxes on these properties in October?
They’re worried, and rightfully so, that dumping properties will accelerate the downward cycle and cause even more foreclosures, causing more downward pressure, etc.
My vote: Mismanagement
Someone mentioned that regulators will go over the REOs for the lenders in January - when they push the banks to liquidate the REOs, they will have to do so. So start getting on a first name basis with the officers at you local banks!
God only knows what will happen the the mortgages held by MERS. I wonder if MERS even knows who owns what.
Because they can raise more cash by borrowing money from the FED using the “inflated” price as collateral.
Remember children, debt is equity and slavery is freedom.
“One of mortgage planner Robert French’s clients, who earns about $700,000 a year and has a high credit score, was recently unable to get a stated-income mortgage. These loans became popular during the housing boom because it does not require borrowers to provide a copy of their W-2 tax form to the lender.”
$700,000 a year, but wants a stated income loan? Methinks someone makes $70,000 a year, but has Gary Watts decimal point problem.
700,000 a year, but wants a stated income loan? Methinks
the IRS doesn’t know about the 700K…………..
Indeed, this is one of the major reasons stated income became so popular with self-employed people. Not that they weren’t making a good income, but that they weren’t “stating” it to the IRS.
Oh for the love of God!
If you are really making 700K a year, here are 2 options for you. Save and buy a home for cash (duh!!). Or rent a palace for 5K a month and call it a day. WTF are you trying to buy where you need a large MTG note with a 700K salary?
The stupidity of this entire situation is truly staggering.
Common sense is rare these days!
did close on march 23, 2007. wife’s re-lo package (closing costs, 2 points, moving expenses, 2 months gross salary) expired in april. able to get 10% off of tax appraised value. Probably seller’s entertain 20 - 25% off tax appraisal now. But, no jumbo mortgages available. with down payment, 2 points on re-lo, able to get a 5.7 fixed 30 year. running the numbers, divorce still more expensive. neighbors cut 10% and no offers this summer. not throwing up in my mouth every morning, yet. But know that probably could have gotten at least another 10% off purchase price if able to wait. However, combo of re-lo package expiration and wife didn’t allow for that. my gamble: 5 - 10 years underwater vs. lifetime of alimony. it’s no win, but took the underwater bet.
I wondered what happened to you. Hope it’s worth it.
we’ll see - not everything is pure economics. at some point, need some permanancy, family life, and a plot of land to call your own. unfortunately, can’t perfectly time the bottoms or call the tops - just try to make the best of the situation in which you find yourself
How does the wife feel about the missed 10% (and growing)?
suffering from ostrich effect…head is buried. she’s happy, likes the house, likes the neighborhood, likes the yard. thinks we’re ok because we can make the payments, have further liquidity saved for emergencies, etc.
If you can pay for the place and have $$$ for emergencies, don’t worry about it. I know it’s a competitive thing but it sounds like you decided on your priorities and acted. No argument here.
Alimony? You don’t owe her squat!
that’s not what the courts in MA say
Move to Georgia or Texas. Wait 2 years. And make your move.
When Debt walks through the Door, Love Flys out the Window.
It looks like the Housing Business is about to become as brutal as the Marriage Business.
The Price of Lust is going up !
Sorry so to seem so cold but sometimes it’s good to hear outside thoughts (brutal as they can be sometimes!). Don’t know much about divorce but I was wondering if you don’t have kids why would there be alimony? She works so what happened to equality and all that?
MA courts tend to be anti male
But you live in such an enlightened state! Teddy would never let that happen.
Depends on length of marriage, but I am sure you know how it works. Divorce can be catastrophic in so many unforeseen ways, too, so reasoning and adapting can be sound even if the numbers don’t appear to add up.
Best of luck to you!
Anti-male bias is true in most of the U.S., despite what the states’ laws say. It’s all about how it’s applied by the judges.
Gillsie, I applaud your choices based on your principles. I just wonder how “permanent” the situation will be if she was willing to divorce you over that issue.
I refused to buy a house we were renting because I knew it would devastate us financially (plus it was a piece of crap house), and my wife and I moved into base housing where I live. We are now undergoing divorce proceedings. I should be able to get out of debt in the process (long story), but I’m doing everything I can to fight for the kids. That’s been an uphill battle even in a state that supposedly has no bias in the law (ND).
As a side note, now that I’m looking to rent my own place here (since I’m leaving the military), I’ve had great opportunities (with help from this blog) to teach my older two children (9 and 6 y.o.) one of the golden rules of economics: no asset is worth anything except what you use it for or what someone is willing to pay you for it.
Thanks for the education you guys have given me on this blog. Other than my principles from the Bible (that debt is only a major last resort and equivalent to slavery), I might have gotten sucked into buying a house 6 months ago. Now I have a lot more ammunition as I wait for all these “owe-ners” to start renting their overpriced houses.
Even in Minot, ND, the realtors are clueless and still asking ludicrous prices.
Good luck with the kids…..unfortunately, the reality is that the courts will almost always give custody of the kids to the mother, even if she is totally uninvolved with their care (like my ex-). The only way the father gets custody is if the mother is a junkie, or in jail.
The good news……the kids figure all this out, eventually. Depending on how bitter the ex is, she will use visitation issues to screw with you every chance she gets. It’s a pain in the ass, but look at it this way……when the kids are 18, you are DONE with dealing with her.
If you were still married, you would have to deal with her the rest of your life.
Falconsitter,
Thanks. Amazingly, my kids (even my 2 y.o. to some degree) are already figuring out her antics.
My moment of vindication for my decisions on how to handle matters came one day when the (then) 15 year old got in the car and said:
“Dad, you are not NEARLY as big a loser as (name of ex’s new husband) is !!!!!!
If you knew her, you would realize that this is quite a compliment…..:)
What happened to equal work for equal pay, and all that?
The problem is the “and all that” included more things.
Seriously OT at this point, but just think about this: if the results of the women’s rights movement were all about equality, wouldn’t most women for equal rights support prosecuting women who make false rape allegations (and push for serious jail time for these liars)? Only a very few do support this, and they’re not very vocal about it.
How many times in the 70s, 80s and early 90s were you told, “Women NEVER lie about rape”? Yet now honest police depts will tell you that the single most falsely reported crime is rape. Yet hardly any prosecution takes place, and never any jail time. The false reporters still manage to get treated as “victims.”
This lack of equality in treatment spills over big-time into the family court system.
As I said, seriously OT…
I can think of a hundred more pressing social issues, can’t you? If it comes down to a he says/she says situation, on what grounds could you prosecute the accuser? Even if she recants her statements, there’s no way to know she’s not acting out of fear. Then you’re going to have real victims who are afraid to come forward.
If you don’t mind answering, Gillsie: How much did you pay per square foot and in what town?
$200/sq. ft. of house, 1 acre in Stow, MA
One of the several benefits of the housing market bust has got to be more peaceful life at home for many men among renters. I know that a good many husbands were getting nagged/bullied into looking for houses until the beginning of this year. More women than men seemed to have bought the lines such as
- Buy now or be priced out forever
- They aren’t making any more land
- Renting is like p***ing away your money
- House prices always keep going up
It was a tough battle to fight. Many a marriage may be saved now that sanity is returning to housing market.
Was it on this blog this weekend that people were discussing what one effect from the bubble may become a blessing for some families - returning to multigenerational homes? My 9 y.o. son is already asking me if he would still be “allowed” to live with me even after he is old enough to be on his own. In a farming state like ND (even though I’m not a farmer), I can see saving up over some years, trying to buy some adjacent houses/property and “homestead” like the old days. It would be a great way to help my children learn how to work and save and then help them get started out smartly (instead of in over their heads).
We’ll see how they feel when they’re 18…
I feel lucky I am an economist and no family/partner questions my financial decisions
There was a huge article in Sunday NY Times real estate section about how Manhattan real estate continues to defy the downturn. They called Manhattan the “City of Gold.” Tiny apartments in Manhattan still sell for over $1 million.
Meanwhile, in the nicest nearest-in suburbs (like Larchmont), there is a 24-30 month inventory of nice homes, many with 3-4 bedrooms and lawns for the kids to play. offered for $1 million or less. From Larchmont to Grand Central is 25-30 minutes by Metro North train, less than by subway from some parts of Manhattan.
In Manhattan, the cost of private school education continues to soar, and personal city income taxes take 3-4% out of paychecks, compared to the burbs. Manhattan RE will fall after the recession begins, financial services industry lays off thousands, and families start to feel the financial squeeze. Then, the gap between the City of Gold and the near-in suburbs will narrow as families flee to far cheaper suburban living.
“City of Pyrite” being Newark
Just wait til those Wall St bonuses start coming in. Or should I say NOT coming in….?
Recessions in New York City can be truly brutal. Wait until tax revenues to the city drop and the bureaucrats get creative: (opening mail) “Oh what is this, a special water assessment from the city for a 300% of annual cost? What fun!”
“THEY” put us there. “THEY” did this to us. “THEY” physically grabbed our hand and made us sign the loan documents.
These stories make me sick as they try to generate pity for these people.
The most common one seems to be
“THEY lied to us: THEY said we could refinance in six months at a lower interest rate.”
I cannot understand why it was a lie because all the players including the the broker believed it.
Did I just read that a Realtor is predicting a 20% price decline? I never thought I’d see the day. Progress…
Realtors have realized that the Buyers are now in control. It used to be that there was too much funny money and not enough houses. Now too much houses, and too little real money. The buyer’s Money is in what is in short supply and high demand. As such the Realtors will start playing their head-games on the Sellers so the seller blinks: “Sell before you are locked in forever!”.
Suzanne will be on the phone with the SELLERS now.
http://www.tiny.cc/oOR2K
Rumors Abound About Possible Sale of Pacific Western Bank Parent…
Chief Executive’s Reputation for Selling Banks Fuels Speculation About Buyout…
When you look at what they did lately — the layoffs, taking out expenses, and cleaning things up after their merger with Community National that bodes that he’s doing what he does.”
http://www.tiny.cc/8773R
Keeping his eye on the ball, Warren Buffet is increasing his stakes in Wells Fargo and buying into Bank of America and U.S. Bancorp amid the current credit market turmoil.
Japan and Australia are the first to use cash injections to soothe unease over the effect of the U.S. sub-prime crisis with the Bank of Japan pumping in Y1.6 billion ($14 billion) - only to pump it right back out.
The National Bank of Kuwait won a tender to buy 51 percent of Egypt’s 20-branch Al Watany Bank for $516 million, 4.16 times its book value and 17 times 2008 earnings.
The looming privatisation of Woori is fuelling debate over ownership of Korean banks, with the Ministry of Finance seeking to revise rules for the National Pension Service to take over the lender.
Unless you have personal information about Mr. Buffett increasing his positions in Bank of America or Wells Fargo in the last 6 weeks, I do not believe it. I have seen nothing to suggest that Mr. Buffett has increased any Bank of America, Wells Fargo or Moody’s positions since June 30, 2007.
Hoz…my appologies, as I am just learning tiny url. When I read the article earlier (I cut and pasted from it) it had Mr. Buffett’s name there. I rechecked and it’s no longer there?
BTW…the tiny url site I used is inferior to tinyurl.com.
My humble appologies.
“Joseph and Lu-Ann Horn bought their 1,200-square-foot, three-bedroom home in South Windsor, Conn., in 2002, paying for nearly all of it with a $150,000 loan. The mortgage was a 30-year loan with a fixed rate of 7.5 percent. Two years later, they decided to refinance to pay off their truck and their credit card debt and to buy a $4,000 motorcycle.”
Key word: “decided”. It was their choice to refi, no bailout for these people - I do not want my taxes paying for some boomer’s mid-life Harley! Or their maxed out credit cards! This was a result of their inability to manage their income, and overspending. If they had’nt gotten CC debt, they would’nt have needed to refi. (And I have no doubt the truck was an overpriced SUV). Screw them, as far as bailouts go!
The brokers have as much to blame here, but nobody had a gun held to their head at closing, and if you don’t research things, you deserve the results. I came here after seeing the madness out there, and getting pressure from everyone to “stop throwing money away by renting”, but nobody could answer my questions about what happens *after* making a half million dollar bet on a condo. Then I discovered this blog, and found out. I started reading here before the peak, felt the frustration as the media cheerlead this fiasco, felt the anger at the people who made fun of me for not buying a POS for $400k and being in debt up to my eyeballs, and being sneered at for wanting the security and reason of a traditional fixed loan with 20% down and a fixed rate. I try not to be angry at those who made this impossible…okay, I’ll be honest. I effing despise mortage brokers, flippers, TV shows about flippers, and real estate agents. I hold them in contempt. Yes, i know there are honest ones, but at this point, it’s up to them to prove to me they are the good guys, otherwise, they are scumbags, and they can all die in a fire. Feel sorry for any of them? As if! Let ‘em dig through dumpsters for soda cans, maybe a few years of that will teach them to live within their freakin’ means!
Thanks to Ben and all of you, I’m not a slave to a bank for the rest of my life. You don’t know how close I came to giving into this madness!
Amen Brother!
“I do not want my taxes paying for some boomer’s mid-life Harley!”
Funny and oh so true, that stereotype is always worth a chuckle. Balding, bulbous bellied wannabes making quite a racket as they try to out race the angel of death. Real cyclists must hate those guys.
Double Amen!!!
I have to rant today bear with me please.
I woke up this morning feeling very angry towards the bubble. I found a home online in Wellington Fl last night on 1.5 acres with a barn, this is our dream home no doubt.
My dream that started out back in the year 2000 which included us saving over 150K of our hard earned money. My husband worked doubles over and over, served in the National Guard, went overseas to Iraq and got shot at. I had to work in a horrible industry (collections) because I do not speak french, and Montreal only will hire you if you speak their language.
So there we were saving and saving towards our dream home in Florida and watching that dream go up in smoke because of freaking greed.
My dream had NO greed, we saved our money and wanted to be mortgage free or very close to it.
Last night I found my dream home, as tears streamed down my face looking at the $375,000 price tag.
That same home would have easy sold for 157,000 if the bubble had not happened.
I am so cranky now, I could hit some freaking realtor or flipper or speculator, Greenspan, The NAR, The Banks, Mortgage lenders, greedy homeowners, irresponsible people, the list could go on.
Now I am looking at renting a two bedroom tiny home with a barn for 1175.00 per month in The acreage.
Somebody please tell me, when is it our turn?
When do we get to buy our little acreage with a cute barn and a nice home?
Do we buy it and get a big ass mortgage and “just survive” like our friends did?
How will I be able to buy my horses and pay for feed and everything else? Dream is dead.
Screw this bubble, screw the greed, screw everything.
I am so sick of waking up feeling mad and going to bed feeling mad.
To all of you freaking greedy people that caused this I hope you all rot in financial hell.
I hear you. Don’t do anything drastic; be patient. It’s tough, but that’s what I have to keep telling my wife.
“When is it our turn?” Soon.
I would second that and add one bit of consolation:
When the mortgage money returns (I think by the end of 2011), it will be those with cash and perfect credit who will be able to get the loans. Between now and then, prices will tank, so you may not even need a loan at that point.
I have a good friend near Orlando, FL. He says house prices have already dropped 20% or so, but they still aren’t moving there. He expects further drops too.
Endure, and in enduring grow strong.
I think you will be able to get something at a big discount in the future . Thank God we have people like you who save and don’t take on a obligation they can’t afford .
I want the lenders to give the breaks to the people that saved and didn’t commit fraud to get into the mania market . The lenders should give breaks on the interest rate to anyone who buys a foreclosure and forget about the people who didn’t deserve a a loan to begin with .
To many people are now thinking that they can just walk from their current obligation and just buy another house at a cheaper price . Anybody that has bought another house within a short time of going into foreclosure should have the full recourse of the lenders on their back ,because they are rip-off artists . People should be rewarded for good action not bad action .
I wonder what the percentage of mortgages are protected by the non-recourse clause? How may states have non-recourse protection? I think once you re-fi you lose this protection even in non-recourse states. And non-recourse protection is not afforded to ATM withdrawals (home equity loans) I wonder if people in bankrupcy court with no assets will be ordered to pay a judgement with future income?
just be happy that you don’t live in Europe; financial hell is far bigger and sticky over there. In Netherlands the housing bubble is more than 15 years old and home price appreciation running between about 600 and 1000%. Some speculative areas in Ireland, Spain and UK are probably even worse (of course, it’s heaven on earth for the RE shills and those who purchased early in the cycle).
In Europe there is a whole generation that is shut out from owning a home for good. The EU burocrats will do anything they can to slow the bursting of the bubble, so it might take at least another ten years before very average homes are somehow ‘affordable’ for a normal person/couple.
Interesting. Didn’t I read over the weekend that a German bank had to freeze some funds? I find this interesting because there is a possibility that a resonance may occur between Europe and the US, with vibrations causing increasing instability until they reach a harmonic oscillation, which will bring down the house.
yes, several smaller banks have already failed or been bailed out in Europe. I’m afraid some large EU banks are going to default before the credit spigots to the EU mortgage market shut off. EU home’owners’ are going to laugh all the way to the bank, and EU savers are going to get the punishment of a lifetime
Yea this is how I feel. I get a knot in my stomach when they talk about a bail out and I fear that’s what it’s going to come to.
I don’t think we’ll ever own a home.
That being said I’m not willing to commit financial suicide just to own. But screw them and their rigged market.
SKB — as an aside (and probably too late for you to catch/read this — Wellington would seem to be a relatively expensive area for a horse farm. Personally, I think you would have far better luck in the north half of Florida — anywhere north of Gainesville and either up the center of the state or over toward the “armpit” before you hit the panhandle. This assumes you want the horses for personal pleasure, rather than to rent for rides or other purposes that require well-off people to live nearby.
I am just re visiting this from this morning. If anyone still reads this thank you for your support and comments.
Chip, I sure hope you are wrong as my husband will be working in the area and we will need something within 30 miles of WPB.
The place I love was purchased in Feb 2004 for 238,900 so that was well into the bubble. I can not see what this property has sold for in prior years.
All I want is 1.5 acres with a small barn and nice home. This home is in Royal Palm Beach so it is not really in Wellington, if that makes any difference.
I wish to spend not a penny more than 200,000.
Thanks again all.
SKB
Not boomers:
Jospeh Horn, 34, is a truck driver, and Lu-Ann Horn, 39, is an assistant manager in a fast-food restaurant.
You said it, my friend!
‘I haven’t seen changes like this so drastic, so suddenly,’
Reminds me of comments I heard back in spring 2001. I was working for a compnay that made telcom gear. We’d seen sales peak summer 2000 but only slightly drop through fall and winter.
Sales fell 50% from winter to spring. They fell another 50% from spring to sunner.
Stocks in the NASDAQ eventually fell 80%.
What we’ve seen in home sells so far is the precurser. Tightening lending standards is the fuse that lights the true foreclosure bomb! Followed by crashing prices.
“‘We really can’t come up with $10,000 or $12,000 for a rental property,’ said Thomas Maglietto. ‘We were looking for someone to work with us. Now everyone wants my first-born, and I’m not willing to do that.’”
That just pisses me off.
So you want to make money off a rental, but aren’t willing or even able to pay the price of entry? Go back to dumping your money into lottery tickets or get rich quick DVDs on QVC you scumbags.
not just a “rental” but make money off some poor schmuck Renter that wasn’t able to buy the house because Mr Wanna-Be Slumlord here got there first.
Parasites.
(Someone mentioned that regulators will go over the REOs for the lenders in January - when they push the banks to liquidate the REOs, they will have to do so.)
But the banks won’t have the REOs. Fannie and Freddie will get some, but not many more than in a typical recession.
It’s these mortgage-backed securities that will hold the REOs. So now what? You don’t send in the bank examiners to require write downs are reserves against losses. So what will push the issue. The accountants? The SEC? Not having enough money in the pool to make an interest payment to investors?
Maybe there will be municipal tax liens for sale, that could then be foreclosed… what a mess.
That isn’t how it works.
The MBSs have a processor. The processors for most are the BIG mortgage brokerages like Countrywide, WaMu, Etc.
They have been taking the REOs so that they don’t have to book the losses, which would then have to be reported to the MBS holders.
We’ve asked why the processors were taking and holding the REOs. I think the answer is now clear. They didn’t want to have to book the losses, because buyers of MBSs would see the losses and stop buying.
Well, now the investors have stopped buying the MBSs. Time to go ahead and dump the REO to cut their holding costs and pass the losses onto the bag holder MBS owners?
Countrywide layoffs
The Wall Street Journal, citing an internal e-mail sent Friday to employees of Countrywide’s Full Spectrum Lending unit, said the company has laid off workers in that division, which handles home loans rated between prime and subprime. The e-mail didn’t detail the number of employees laid off, the report said.
It employs a total of about 61,000 people, and about 6,800 of them worked in sales at Full Spectrum as of June 30, according to the Journal.
http://money.cnn.com/2007/08/20/news/companies/countrywide_layoffs/
If it walks like a duck…
-emergency loans
-insider selling
-layoffs
It must be a dying duck.
The duck is already cooked.
Since the original post mentioned Tucson’s very own First Magnus, here’s the latest:
http://www.azstarnet.com/dailystar/197166
The comments that follow the story have a lot of HBB-er sentiments:
http://regulus2.azstarnet.com/comments/index.php?id=197166
“Six months after the Stiers first listed it for sale at $2.5 million, a price only slightly above what comparable homes had been selling for, the house remains unsold.”
“Only slightly above”, that part says it all…. Especially since it remains unsold at $1.99M.
Hoz, I was able to locate the article that I cut and pasted above, about Mr. Buffett increasing in Wells Fargo.
Here’s the link.
https://www.theasianbanker.com/A556C5/Update.nsf/0/6E3BE765D14D3F794825733D000E5B73?Opendocument
Another group that has it wrong. These were purchases made between March 31, 2007 and June 30th, 2007. This was in Berkshire Hathaways SEC filing August 14th of stock ownership prior to July 1, 2007.
“…Omaha-based Berkshire said it owned 8.7 million shares of Bank of America, the second-largest U.S. bank, valued at $425.3 million, according to a U.S. Securities and Exchange Commission filing showing investments by the company as of June 30….”
http://tinyurl.com/yqhhz7
Reuters
Between June 30, 2007 and Aug 6, 2007 the world changed.
Buffett is not a short term investor. And he is cautious and conservative. If he was buying BAC and WFC in June, then you can bet he saw value in those picks at June levels. Since prices have come down, my guess is that he is probably buying more.
A shakeout is good for the survivors, because they build market share as their competitors die off. I would guess that BAC and WFC will survive. Countrywide, I’m not so sure about.
I am not privy to Berkshire Hathaway’s daily trade sheets, but based on his quarterly filing, he dumped a lot of stocks he had bought between January and March 31, 2007. Yes, he has a history of long term investment; he also has a history of cutting his losses.
I would wager that Berkshire Hathaway could generate an accurate NLB in less than 24 hours. There are not many companies that can do the same.
NLB is not ‘Network Load Balancing’ in this post but ‘Net Liquid Balance’; my old accounting prof used to use the acid or quick ratio.
True, Buffett isn’t a short term investor, but he has no problem buying stocks for a short term profit (I guess that would be arbitrage?) That’s why he bought a small stake in the Wall Street Journal (or Dow Jones, forgive any errors) before the final family vote. Media types were scratching their head as to why he had done so, given the negative outlook for newspapers in the future, but for anyone who has read his biography, that’s old news.
Buffett also makes calls a bit too early from time to time. Remember him shorting the dollar a couple of years ago only to have it go up ? I believe he lost big. He was about a year or so early.
Supposedly Deutschbank has borrowed from the “discount window” to show support for the Fed’s moves to shore up the credit markets.
there were some rumours floating around last week that Deutsche Bank itself was in serious trouble; no idea how reliable this info is, but still … judging from the size of the liquidity injections something is scaring the hell out of the ECB burocrats. Or maybe they just realised that their whole Ponzi scheme is becoming unstable. Two of the smaller banks that were in trouble are now being purchased by other EU banks. I wonder why these banks don’t wait until they can buy at pennies to the dollar, maybe they are purchasing with free money from the ECB?
Why would any bank borrow this expensive money unless they had to. I call BS on the show of support claim.
Mr. Cossette: ‘You put your life’s sweat into a piece of real estate that may or may not go up in value,’ he said. ‘So I don’t have a house. That’s O.K. with me.’
It just dawned on me how the term sweat equity in RE has changed. Now it means sweating bullets, waiting for either A) the arm reset, B) the foreclosure notice, or C) the miracle buyer.
“‘The dollars weren’t as important as the confidence in the actual closing happening,’ Gibbons said.”
This is a tune that we will be hearing over as this thing plays out.
“The market’s psychology has changed more than the fundamentals, argues Phyllis Radding, a veteran agent who is selling the Stiers’ home. ‘All the negative articles in the press have made buyers more cautious,’ she asserts.”
Phyllis Radding is a perfet example of the blame game being played out as their wealth is shrinking. Perhaps Phylis can get a job at some fast food place in order to supplement her income.
I do believe all the ideas you’ve introduced to your post.
They are very convincing and will derfinitely work.
Still, the posts are very brief ffor novices.
May you please extend them a littlee from next time?
Thanks for the post.