The National Housing Slump Is Hitting Close To Home
The Baltimore Sun reports from Maryland. “During the hot real estate market, this Roland Park brick Colonial probably never would have seen an open house. ‘One and a half to two years ago, this house would have had multiple contracts within three to five days,’ said Jim Mikula, who, with his partner Realtor Jeff Tessmer, is listing the property with a $419,900 price tag.”
“The number of homes sold in Baltimore and the five surrounding counties fell 12.36 percent to 2,921 in July, compared with 3,333 homes in July 2006, according to MRIS. With listings at a record 19,985, homes took an average of 80 days to sell, compared with an average 55 days in July 2006, when inventory was 16,749.”
“‘From the peak year of boom it’s been like taking a 20 percent pay cut,’ said Realtor Wayne Curtis. ‘That’s not easy for anyone to do.’”
“As for that Roland Park Colonial, the Aug. 5 open house was its first since being listed less than a month ago. It still hasn’t sold, Tessmer said yesterday, and has been taken off the market, at least temporarily.”
“While many homeowners are feeling the pinch of rates resetting on so-called ARMs, some are getting crushed by what housing advocates call ’strangulation ARMs’ that continue to reset as often as every six months.”
“‘Over the last couple of years, people became so desperate to buy a home that they stopped asking what the payments would be over time,’ said Nicolas P. Retsinas, director of Harvard University’s Joint Center for Housing Studies. ‘The only question they asked is what’s the least possible payment I can make next month so I can afford to buy that house.’”
“Cornelia Barnett said she and her husband are struggling after the adjustable mortgage on the Edgewood home they bought in 2005 reset $330 higher in June to nearly $1,900 a month. The couple did not refinance for the first two years of the loan because they couldn’t afford the prepayment penalty.”
“Now the rate is scheduled to reset again in December, perhaps up to 11 percent. The initial rate was 8 percent. ‘We really, really are not in a position where we can afford this,’ Barnett said.”
“Barnett acknowledges she was a novice to the home-buying process when she signed up for her ARM but said that she was under pressure to close the deal. ‘As a lay person, how am I supposed to understand all this the day before I go to closing,’ she said.”
The Times Community from Virginia. “With money lenders refusing to lend any more to some mortgage companies, just how difficult is it to get a mortgage in Fauquier County these days?”
“‘You can still get a decent loan if you have a good credit score, and especially if you can put 10 percent down,’ said Bruce Qualters, principal in Nationside Mortgage in Warrenton. ‘And they are still doing loans that require only 3 to 5 percent down, but you have to be able to document those loans.’”
“‘Credit score requirements have increased, and the easy mortgages are no longer there,’ said Book Sengstack, owner of Cardinal Mortgage in Warrenton. ‘Most of the programs based on sound business practices are still there, but those where they didn’t verify the income have gone,’ he added.”
“It was the increasing appreciation in housing that impelled mortgage companies to continue to lend money, Sengstack said. ‘Few were willing to turn down loans based on the fact that prices were increasing 24 percent a year,’ he explained. ‘But that was unsustainable.’”
“‘People are closing loans, but then the mortgage company may not be able to sell it. They have three days to back out, and some of them are,’ according to Valerie Frank, president of Preservation Mortgage in Old Town Warrenton. ‘You could close today, and the money might not be there, even though the borrowers have the loan rate locked. That’s the state of the market today.’”
“‘You used to be able to get a mortgage without the company even checking what your income was,’ she said. ‘I talked with a lender today, and she said that she had seven loan applications that her company was working on. Normally they would have 50 to 75. A senior underwriter can process three to four a day, so you can see that the business is really slowing up.’”
“Fauquier has weathered the storm better than many other places, but has not escaped it entirely. There were just seven foreclosures here in the last half of 2006. In the first half of 2007, 48 other properties were sold on the courthouse steps.”
“‘I understand that there were 900 foreclosures in Prince William County last month,’ Frank said. ‘For Fauquier County, it’s harder to get hard statistics, but we are seeing them, as well.’”
“‘What we have seen is more inventory coming onto the market, and when that happens, sellers are continuing to have to lower their prices,’ said Herb Lisjak, a real estate broker in New Baltimore.”
“Lisjak said that the homeowners who are facing the most difficulty are the ones who bought a home in the last few years, who have no equity in the house, and who have to move for one reason or the other.”
“The decline in the average price in housing is hurting them the most. The latest statistics show that the average price of a house sold in Fauquier County declined 25 percent from July 2006 to July 2007.”
“Last year was the first time that Prince William’s housing values have fallen since 1993. As of June, the assessed value (not the sale price) of homes in Prince William had slipped to an average of $413,00, down significantly from a high of $429,000 in 2006.”
“Rising rates of foreclosure are an ominous sign and foreclosures have an impact beyond the homeowners affected directly. ‘Any foreclosure in a neighborhood tends to depress the existing housing prices in that neighborhood, and nobody likes that,’ said mortgage broker Andreas Keller. ‘And we’re going to see more, I think.’”
“‘A lot of loans made in 2004, 2005 and 2006 were made with low initial teaser rates, and now some of those are resetting to higher rates. People are faced with increased mortgage payments that are 20, 30 even 50 percent higher. That will be very painful,’ Keller said.”
“‘We could see a further 20 percent decline,’ he said, ‘”and it’s going to be a question of how they can be arrested so we don’t have a meltdown in the market.’”
“At current rates of consumption, there is an 18-month supply of housing inventory on the market, and that doesn’t account for any new listings. ‘This is the worst for me in the 12 years that I’ve been in the mortgage business,’ Frank said. ‘A lot of people are getting out of the business.’”
The News Journal from Delaware. “In a sign that housing market troubles are far from over, foreclosure filings in July increased by 21.74 percent in Delaware, a report said.”
“As many as 6,000 households in Delaware hold subprime, adjustable-rate mortgages that are due to reset at a higher rate in the next few years, said Gerry Kelly, Delaware deputy bank commissioner for consumer affairs.”
“Delaware court records from each county show foreclosure filings in Delaware increased year over year in July by 34 percent in New Castle, 43 percent in Kent and 54 percent in Sussex.”
“‘The filings that we have show a record year, far surpassing 2002 and 2003, and with much more uncertainty in the marketplace than we had in 2002 and 2003,’ said Kelly. ‘There are so many different things that are uncalculable.’”
The News & Observer from North Carolina. “The national housing slump is hitting harder close to home. ‘A lot of us have said it’s not as bad as elsewhere, but the area is starting to catch up with elsewhere,’ said Michael Helmar, an economist with Moody’s Economy.com who follows the Raleigh-Durham-Chapel Hill market. ‘The trends affecting other areas … are starting to bite the Triangle now.’”
“In July, a total of 2,947 existing homes were sold in Wake, Durham, Orange and Johnston counties, down about 13 percent from a year earlier, according to data collected by the Triangle MLS. New home sales fell 10.3 percent during April, May and June, according to the latest figures available.”
“That was the steepest quarterly drop in nearly seven years and came during the spring quarter, which is traditionally the busiest selling season.”
“Local home sales have set records each year since 2003. Unless the market improves dramatically, something observers agree is very unlikely, 2007 will mark the first decline since 2002.”
“Sales began slowing here last fall largely because many potential buyers couldn’t sell their homes in overbuilt markets elsewhere. Helmar predicts further sales drops into early 2008 as problems roil the credit industry and slowing job growth weakens confidence.”
“‘There’s now such a big inventory of homes sitting out there it will take time to work though that,’ Helmar said.”
“The July inventory of unsold homes was up 19 percent from a year ago to 16,786. Pending sales contracts were down 8 percent in July from 2006. Owners have lowered prices on 39 percent of homes now on the market, up from 34 percent a year ago, and 23 percent more homes were taken off the market in July than in the same month a year ago.”
“‘There are some frustrated sellers,’ said Susan Holbrook, senior VP of one of the Triangle’s largest residential brokerage firms.”
“She said it’s becoming common in closings for buyers to learn they need to come up with a bigger down payment. ‘Multiply that by all the [real estate] offices in the Triangle, and you’ve got a numerical effect of what’s going on,’ Holbrook said.”
“Sales are being stymied because potential buyers can’t sell their homes in distressed markets in Florida, California and elsewhere, said broker Joe Ward. Three buyers now are looking at the same $420,000 home in North Raleigh, but none will make an offer.”
“‘They’re all afraid they can’t sell their house,’ said Ward, who sells about 100 houses annually but this year is experiencing a 10 percent drop-off. ‘It’s a common theme right now. Can you tell I’m angry about it? It’s been going on the past 12 months.’”
Can you tell I’m angry about it? It’s been going on the past 12 months.’”
Ha! Not nearly as angry as I am having watched this moronic debacle for the past 6 years.
Yes, I really saw the nonsense around 2003 in sacramento.This is going to take years to shake out.Now people are whineing cause they can’t sell for 2005 prices, bo ho.Rick santelli house a mr housing bubble tshirt on cnbc, funny stuff.
Now people are whineing cause they can’t sell for 2005 prices,…
If you ever see that in person, slap them right on the spot.
I want to hear from Greenspan, the master of disaster who instigated this whole debacle. Predictably he has been mute.
Interesting article in the Washington Post about the disconnect between lender advertising and the current credit landscape.
http://www.washingtonpost.com/wp-dyn/content/article/2007/08/23/AR2007082302101.html?hpid=topnews
What Credit Crunch?
To Judge by Lenders’ Teasers, It’s Still Subprime Time
By Nancy Trejos
Washington Post Staff Writer
Friday, August 24, 2007; Page D01
On AOL.com this week, the Internet-based loan company LendingTree offered “Bad credit options” and a $425,000 loan for only $1,376 a month. And Countrywide Financial, the nation’s largest mortgage lender, declared, “Bad Credit? Call Today. Refinance or Tap into Your Home’s Equity” in an online ad from its Full Spectrum Lending Division.
No-money-down mortgages and subprime loans that cater to people with spotty credit are quickly disappearing as lenders tighten their standards in response to a rise in foreclosures. But you wouldn’t know that if you looked at the ads that some banks and loan companies have placed on the Internet and in newspapers, including this one, often right next to the very stories chronicling the meltdown in the mortgage industry. So what’s with the mixed messages?
if you ask me, it’s bordering on illegal bait-and-switch now.
I clicked on the Lending Tree Ad. The teaser payment was only for the 1st month and then it reset bigtime. I know auto dealers have to watch when they advertise rates in papers, so why don’t mortgage companies?
“While many homeowners are feeling the pinch of rates resetting on so-called ARMs, some are getting crushed by what housing advocates call ’strangulation ARMs’ that continue to reset as often as every six months.”
Auto-Neurotic Cashphyxiation
12 on a scale of 10
That was supposed to be:
I’m a little tired of hearing people who’ve gotten a financial windfall in the past complain about it not continuing indefinitely.
Me too.
I have a relative who sells real estate; she makes a killing. But she also knows that at any time there will be a two year period sans income. The latest windfall has been a blessing for her. If she didn’t love the social contact, she could retire.
I’m sure all the realtors ™ and mortgage brokers saved their windfalls and will help prop up the economy for the next few years. Oh yea… Good thing they didn’t waste that once in a life time event!
Got popcorn?
Neil
Yea, he sure didn’t mention the 200% increase in salary he’s taken over the last few years. I used to sell real estate. Do you realize how much commission is involved in selling 100 houses? Probably minimum 2k a transaction up to as much as 10k. Plus there’s no way in h*** he can actually service the client selling 100 houses unless he has his own staff. I used to sell about 10-15 a year, and at 15 I was working day and night. That idiot is just collecting pay checks. We used to see those kind all the time. Write hundreds of offers, no matter how outrageous, and collect on the ones that don’t fall thru the cracks.
Right, and a windfall at the expense of new and generally younger buyers. They are going to be doing a LOT of complaining over the next year as their windfalls reverse faster and faster.
20 percent….ah yes, the appetizer.
gulp, slobber, drool, ok I can swallow 20 percent…burp!!!
Ah, but the main course is still to come….
Moody’s also estimates that median home prices in Delaware will fall much less than the rest of the country, dropping 3.3 percent from their peak, compared with 9.8 percent nationwide, Seweryn said.
This is so wrong.
Delaware is hammocked between two bubblicious metros - DC and PHL. The house price mania spilled over from those cities to the First State, and the subsequent RE deflation will affect DE to the same degree that Philly and DC real estate devalues.
From earlier DE articles, Rehoboth Beach is down 10% already.
You could buy a four bedroom house within a block or three of the beach in Rehobeth for 150K in the mid-to-late 1990’s. Prices went up six or seven times. “10% already,” yes, but the mortgage market only blew up last week. Look out below.
Sussex county is in for a world of hurt. My contact there indicated that even the summer tourist season was a bit flat. (So far)… The rampant stucco box building in Sussex County rivals the DC area.
Delaware is going to get hammered! There is a town called Middletown, DE that reminds me of suburban Phoenix (minus desert). Crappy houses sprouting up like weeds. The best part is a bunch of people living there moved from Philly. The still work in Philly, but gave up a 10 minute commute and a nothing/next to nothing mortgage just so they could have a big house and a hour plus commute. My wife and I have been down to Middletown several times this summer for different peoples bar-b-ques (so they can show off their McMansion and recruit Philly folk to move down there).
I don’t like to visit them. Too depressing. It reminds me of Phoenix (as depressing of a city as one can find except Vegas) and Phoenix is what planet Mars will look like in 500-1000 years…
DE is going to hammered. Throw in a future hike in gas prices? watch out!
Tim, I bet the natives just love those Philly folks. (sarcacism off)
phillytim,
Yea, those 300 days of a year of biking, hiking, golfing, tennis, & boating are real depressing. IMO every morning’s like another day in paradise, but you are free to have your own opinion. Good thing the thousand’s that move here every month don’t agree with you. While we’re crashing early, we’re probably going to rebound earlier too.
Peace,
Lip
Lip youre in DE? Kent County I presume?
Duh… Phoenix. Proctologist just found my head.
300 days? I thought zonies pretty much stayed indoors half the year because its too hot.
I’ve been to Phoenix a couple of times in the last 4 years. Both times in spring. They must be playing Wii golf, Wii tennis, Wii biking, etc. Because I never saw anybody outside. All the houses were sealed up tight. No kids playing, nobody walking dogs, etc. It was weird. The ONE EXCEPTION is Tempe. Tempe is an OK place. People were walking the streets, shopping, etc.
300 days of boating in Delaware?
Is Phila really bubblishous?
Realtors (yes I know, I know) keep on telling me that it didn’t go up “that much” or some such nonsense.
Breaking news. July home sales up 2.8%, says Reuters. Stocks jump. How long will it last?
“WASHINGTON (Reuters) - Sales of new U.S. homes unexpectedly rose 2.8 percent to an 870,000 annual sales pace in July, reversing two months of declines, and inventories eased, a Commerce Department report showed on Friday.”
Just stealing sales from the resale market. Been going on for months with incentives, etc.
Right now I believe new homes represent a better value that resale, since builders are more in tune with market conditions and need to sell. Overall, the overwhelming concensus is that sales are at the lowest levels in years. I cannot wait to see Septembers numbers in the post credit tightening era.
What is interesting about these states (sales up and prices up) is that all the national builders have been showing that sales are down for July and prices are being cut. Just seems like the FED data and the company data are not adding up very well.
Sorry States = stats
I agree. The govt. numbers don’t match anything else. Like they are talking about an alternate universe.
Look at the job numbers. Whenever housing starts were up 10%, construction jobs were up 10%. We added millions of construction jobs as housing starts skyrocketed. Now, housing starts have crashed, housing starts off 50%… construction jobs off 5%?
Credit crush underway, and durable goods orders up? Okay, maybe the construction workers were illegal and don’t show up as job losses.
Now we have mortgage originators/brokerages laying off 10,0000+ a week. And unemployment down?
Every builder saying they can’t move inventory, have massive cancelations… New home sales up.
Seems to me…. govt is just plain, Lying! I mean, distorting the truth…
We have nothing to fear, except fear itself, so we’ll lie to you until your fear goes away… while the economy crumbles around you, since telling you the truth won’t stop the crumbling, only make it worse.
“Now we have mortgage originators/brokerages laying off 10,0000+ a week. And unemployment down?
My guess is that those people were 1099 earners, so they “don’t count”
P-R-O-P-A-G-A-N-D-A
It is that simple, twisting facts to serve their purpose. We have seen this done so many times before it isn’t anything new.
‘My guess is that those people were 1099 earners, so they “don’t count”’
Not true. Yes, there are lots of 1099ers that are ALSO losing their jobs, but the 40,000 in the last few weeks were W2.
They might be W2, but I don’t think they count either.
Besides, we probably added 40,000 waiters, cooks, and other W2, so its a wash! Yea… similar incomes, right?
Got popcorn?
Neil
I’m with GH. I can’t wait to see what is going to happen in September and October. The withdrawals from the hedge funds will have hit, the selling season with be at a low, and the first of the big ARM resets is going to occur (which may take some time to impact the economy.)
The slow motion train wreck is easy to picture. It’s just going to take time and patience (something I do not have in ambundance.)
Me neither. This is one ADD enhanced girl who wants to see a massive implosion NOW! Wall streeters running around with their hair on fire, Bigfoot rising up and trampling builders, realtors being eaten by displaced forest dwelling cannibals, stuff like that.
Of course, current events ARE pretty exciting, even without that…I guess I can wait just a bit more for Bigfoot and flames.
Olypmpiagal, you are too funny !
Not much patience here either, but we live in an increasingly emotion driven society - which only means its an increasingly volatile society. So, once this really turns (probably this fall/winter) it’s going to turn fast - so fast we may long for the dog days of August when the smell of cooked economic data wafted through the summer air.
You make it sound so tasty.
Quickest way to see Wall Street Schmucks running w/hair on fire is to circulate a rumor that Pepsi needs extras for filming a new commercial by the BULL.
Beat it on down to yer local casting office.
They say this now, but two months from now they will be issuing a statement about how it wasn’t as much as they thought and that sales were actually down. Oops, our bad.
Lately, I’m beginning to think all these associations, companies, etc. are lying to artifically create interest and stock jumps. Because really all they have to do is report falsely and later on down the line blame some other factor (poor management, bad accounting practices) for the incorrect information and say “We’re sorry, it’s not our fault.”
Better to ask for forgiveness later than permission up front… right?
I think it was 2.8% from June’s numbers but weak in comparison to 2006. Also, fence-sitters who must move because of the school year had to make a move in July. The rest of the year will be depressing and I wouldn’t want to be long the market for the August Numbers release date. Remember WCI Tower’s 99% revenue decline.
Up 2.8% MOM, down 10.2% YOY.
Error rate: 12%
The 2.8 figure doesn’t include cancellations.
People are trying to keep the Titanic afloat as long as possible.
The 12% error rate makes the monthly figure rather useless except for propaganda purposes. Hardly anyone looks at revisions and the government knows that. That’s why they can massage a number and put in an enormous error rate and feed it to the public. Why are errors always made on the side of low inflation and strong growth? I’ve got my tin hat on!
That’s what I read up 2.8% MOM and down 10.2 YOY.
Most people probably saw up and didn’t read the rest of the sentence.
And that’s why it rallied. . .
NC suffers from the ‘it’s different here, people move here from _____’, and the ever-popular ‘people make six figures in RTP’. Nice to see those myths are finally deflating. 400k and up for houses in Raleigh is way, way above what the average income will support.
For perspective, Wiki on Raleigh incomes;
The median income for a household in the city was $46,612, and the median income for a family was $60,003.
So that 420k house is 7 times the median income. Yeah, that’s sustainable.
Hmmm…. my brother just ordered a new 3000 sq ft house in the Raleigh area and its only going to cost about 220K. I don’t think that 400K is the median price in that area.
Saw an ad in a local paper this morning touting NC (Charlotte) as the place to move. All sorts of stats (6th in number of Fortune 500 companies!!!) provided.
Looks like the ad was run by a single real estate broker (not the local chamber of commerce, which might make sense). So, how bad does stuff have to get for an NC realtor to be running ads in a DC paper?
I am writing this from the middle of the RTP (Raleigh-Durham-Chapel) as we speak. This area did not go through a bubble like the areas on the coast of NC; hence, I haven’t seen a drop in prices in the Chapel Hill area as of yet. Living in a just built-out sub-division which is just outside the RTP, I can tell you that the big problem here is too many people with bushel baskets of money coming into the area from NY, CA (25% in my sub-division are recent well healed CA transplants), MA, CN and I could go on. We have recently instituted what for all practical purposes is a moratorium on any more developments in Chatham County because of rapid population growth. Many of the newcomers are scientific types (I work in Molecular Carinogenesis) and it is nothing special here to have a Ph.D. in some discipline. I built a custom home with 20% down, got a 30 Yr, 5.25% Jumbo in early May of 2003 and am hunkered down with some dry powder. I wonder what German got stuck (Countrywide) with my Jumbo with the going rate of 8% now?
Tell that to the people in Virginia Beach, VA. Median household income ~$60K, median home sale price $440K or something ridiculous. Housing tracker has the area at median home asking price of $330K, which is still high considering all neighboring cities to VaBeach have lower median household incomes (like, $40K for Norfolk or so).
Foreclosured on Fauquiers
“Fauquier has weathered the storm better than many other places, but has not escaped it entirely. There were just seven foreclosures here in the last half of 2006. In the first half of 2007, 48 other properties were sold on the courthouse steps.”
Nice to see that you actually have to prove that you can afford something. Maybe this will spill over into all of society, remember the days when the boyfriend said i want to marry your daughter and you ask him how are you going to support her, like the housing mess the kid would shrug his shoulders and have to dumb look like i have to work to get married?
I hope we all get back to basics in this country, this thing may turn out to be a blessing, a nation of values and hard work equals good life and satisfaction.
“Barnett acknowledges she was a novice to the home-buying process when she signed up for her ARM but said that she was under pressure to close the deal. ‘As a lay person, how am I supposed to understand all this the day before I go to closing,’ she said.”
It is quite simple Bi@tch, it is called P-L-A-N-N-I-N-G.
Geez, I have to say the lack of accountability, intelligence and pathetic excuses just continues to roll along.
I don’t know if J-A-C-K-A-S-S-E-S have the mental or intellectual capability to engage in such esoteric exercises as “Planning”.
I agree, SKB, the excuses are truly pathetic. These people don’t even have enough sense to sit down and STFU. They’re all sobbing to the press in the hope that a magical Fairy Godmother will appear and make it all go away.
Can I say it for everyone on this board:
Sit down and STFU, “looser”.
One of my wife’s co-workers has a daughter that ended up being a shill buyer. Her boyfriend, of a couple months, got her into one of his get rich quick deals.
My wife didn’t have all the details, but it sounds like one of those “I’m flipping it, already have too many in my name, and making too much money, so need to do it in your name. It will only be in your name for a few days…. just sign these blank loan docs and I’ll fill in the rest later… Here is $2K for your trouble…” kind of deals.
Her income is WAY lower than what the paperwork shows. Listed assets don’t exist.
She went to closing and signed the paperwork anyway.
Mom wants to get her a lawyer, but the gilfriend thinks she can get her boyfriend to just “take care of it”. She thinks she’ll be able to get the transaction cancelled, her credit fixed, no loss, etc. Unfortunatly, is having slight difficulty contacting the boy friend.
Throw her in JAIL!!!!
JAIL is where “loosers” belong.
“loosers” - I love it!
No, no, no. Bill Gross says it’s OK to just bail them out with our (taxpayer) money. PIMCO’s health and continued prosperity is paramount, silly readers.
I kind of feel sorry for the girlfriend. I mean idiocy is a tough thing to deal with. She’ll need to use Steve Martin’s excuse when in front of the judge:
“Your honor, I forgot … that fraud … was against the law.”
LOL!!!
Yes, how was I, a simple lay person, supposed to understand P/E ratio the day before I bought all that loser stock? Think Scottrade will give me my money back? Maybe George Bush will just write me a big check.
I admit, I’m still on the fence about just how much responsibility the borrowers have. They can’t be expected to have a degree in finance, any more than I am expected to have a medical degree when I go to the doctor’s office.
Then again, the financial people have been violating “good faith” for years just to line their pockets with fees on expensive exotic loans. Maybe we need a “Mortgage Facts” box like they have for cans of soup. How bout a sample PITI amortization table, and a warning that past performance is no guarantee of future results. Oh, and that you might not necessarily be able to refinance.
(If it’s a no-doc, all bets are off.)
I am not without compassion myself. There are certainly people who were taken advantage of, yes. But where do you draw the line? How do you differentiate between people who were victimized by the machine and those who were victimized by their own emotions? Impatience, greed, etc.
There was a piece in the Washington Post over the weekend written by a guy who bought the peak with an I/O loan. He admits, and even describes his own statement as “crass,” that he and his wife “deserved” the house and that their parents “bought a house when they were our age.”
How do we separate the little-old-lady victimized by predators from this guy?
Here is my compromise on the public policy issue. Let’s amend the Internal Revenue Code to prevent people from being taxed on loan forgiveness as income. Let’s say, OK, if you lose hour house, we won’t make you pay taxes on your loss. This would only apply to documentable, PRIMARY residences, and would not apply to any amount borrowed above and beyond the purchase price - “cash back” does not apply.
Any takers?
I’m close to that. I like the non-recourse walk-away for primary residence only. Go BK, take the FICO hit, bank takes house and nothing else. Spend seven years renting and repairing your credit, which is what you should have been doing in the first place.
Speculators and banks can go hang.
Nope ,I’m not for letting anyone slide on the penalty for walking . Most of these people are only holding the house for a sort period of time and for anyone to expect a profit for such a short holding period is are a speculator .
It goes without saying that people that took out equity and than defaulted should pay the penalty .Forgiven debt is a windfall . These people are still getting off cheap for the gamble they took IMHO.
These people are still getting off cheap for the gamble they took IMHO.
and not paying any penalty whatsoever for helping to jack up prices for responsible homebuyers.
The problem with this approach is that loan forgiveness is one way for companies to hide compensation to executives who probably could afford to pay the loan. In general, if you remove taxation from loan forgiveness, it will become a huge loophole for hiding income. Not gonna work.
Right ,people will just abuse this forgiven debt concept and it will become a way for crooks to avoid regular taxes .
I’ve sort of convinced myself that a plan like that makes sense — although I was thinking more along the lines of taxing the loan forgiveness at the investment rate, 15% for most and 5% for low-income.
I don’t think your idea is too bad either, but if primary residence defaults are totally untaxed, then second mortgages and secondary residence loan forgiveness should be taxed as regular income.
All in all, pretty much the same idea, just different when you try to figure out the nuts and bolts.
Devil is always in the details, yes.
What is “different” this time, and almost no one is talking about it, is that generally, people’s circumstances have not changed, only their monthly payments have. It’s not like, say, Pittsburgh in 1979 with major industries going belly up and laying off workers by the tens of thousands. The “beyond anyone’s control” argument does not apply today.
‘As a lay person, how am I supposed to understand all this the day before I go to closing,’ she said.”
Well she did get laid. Or some may call it screwed either way she has worked herself in to a position!
‘As a
laylaidscrewed person, how am I supposed to understand all this the day before I go to closing,’ she said.”I am woman hear me make a total @ss of myself.
Makes you wonder what part of “ARM” didn’t she understand?
The part that says you need to know what the initials stand for.
Adjustable Rate Mortgage. If she doesn’t know adjustable is, God help her.
I was going to say R-E-A-D, but read a report this week that 1 out of 4 adults in the US and A didn’t even read one book last year. Not even one??? Sheesh.
CFC -4%. Guess someone read the fine print. Nice, Voldemort!
LOL!
“Voldemort”
Is that one of the tan man Godzilla’s many nicknames?
The evil wizard in Harry Potter.
There’s some talk on this blog about…
Will the govt. bail out home owners? How is the govt. going to deal with the housing crash and CC debt crisis in this county?
The govt. has already answered these questions with The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This law represents a major reform of the U.S. bankruptcy system. Changes instituted by this new law took effect on October 17, 2005.
The govt. saw this train wreck coming and this is their way of dealing with the problem. To assume the govt. cares about Main St. is simply delusional.
They did that, because the people weren’t demanding otherwide…..
The politicians ignore main street, right up until their jobs depend on not ignoring main street.
That ignoring Main Street for just so long usually gets the peasants riled sooner or later and politicians are hanging from lampposts or rode out of time on a rail.
I would settle for a few regional succession movements to wake up the slumbering ones on the Potomac.
“‘Over the last couple of years, people became so desperate to buy a home that they stopped asking what the payments would be over time,’ said Nicolas P. Retsinas, director of Harvard University’s Joint Center for Housing Studies.”
So that blockhead Retsinas has finally decided to join the housing bust story. Ben has been posting his views for nearly two years–all along the lines of there is no bubble, Goldilocks is fine and the three bears will never be seen again.
All of the shills are now changing their story without so much as an acknowledgement that they have been wrong for years.
Diane Swonk, the George Mason fools, the dolts at Harvard…have now established that they have zero intellectual honesty.
As for Bill Gross, he’s having a melt-down that rivals Cramer’s.
Now the rate is scheduled to reset again in December, perhaps up to 11 percent. The initial rate was 8 percent. ‘We really, really are not in a position where we can afford this,’ Barnett said.”
“Barnett acknowledges she was a novice to the home-buying process when she signed up for her ARM but said that she was under pressure to close the deal. ‘As a lay person, how am I supposed to understand all this the day before I go to closing,’ she said.”
Sooo, what part of “A-D-J-U-S-T-A-B-L-E Rate Mortgage” did you NOT understand?.
Obviously, they didn’t want to understand. For more on this point, see:
http://robfrankel.blogspot.com/
This is my only “problem” with this board…so much great reading, so little time (at work).
UUUGhh! the part where my property value went down and I did not get rich?
No, the part where the monthly housing nut adjusts to equal the cost of six (6) Coach bags, four (4) pairs of Manolo Blahniks, and a year’s subscription to ELLE Decor.
“‘From the peak year of boom it’s been like taking a 20 percent pay cut,’ said Realtor Wayne Curtis. ‘That’s not easy for anyone to do.’”
Get accustomed to it turd….
No, it’s not easy to do. I’m glad to see you’re adjusting to it though.
I for one am actually glad to see a slowndown in the NC, Southeast region. Why? because I’m from that area originally and my whole family lives there as well. For the last 5-6 years, they’ve been getting an enormous amount of people from places like CA, FL, NY, MA, MI, OH… basically any other place that is overpriced or suffering from a bad economy. Many of these people could care less about the local economy. All they want to do is buy a home with cash from their previous home’s sale from wherever they came from and pop out a bunch of babies. Either that or retire.
The bad part about people moving in with less economic ambition and more about taking advantage of the “cheaper” real estate is that it doesn’t help the economy. You can’t base an economy off of home sales and chain retail stores. That’s how things have been going down there for years now and the fact that those who were moving in and setting the prices artificially high have had their tools for doing so swiped out from underneath them means perhaps that region will grow in a more healthy manner.
Jetson,
While I understand your mindset there is another side to the story. I moved our company to WNC three years ago, and the company currently pumps over $120,000 each and every year into the local economy. The guy I purchased the house from was a nice guy but government employee. I have nothing against government employees, however they are not injecting new money into the local economy. Our personal spending in the local area is somewhere around $100,000+ per year. When we purchased our home I still did what I could to beat the seller down and then fought the assessment. I know the local folks don’t like that people like us have “run up the property taxes” however we came here for the quality of life and to flee the lack of quality thereof in SFL. When you have a nice quality of life it is a good thing because executives and small business owners want to move there. We care very much about the local economy and quality of life. I would like to add the people here are some of the best folks I have ever met anywhere in the USA.
Everything you said sounds just fine. I have no problems with new people moving in. But even if everyone from everywhere else is nice, about 90% of those moving seem to be singing the same song: It’s cheap, it’s a better quality of life, and so on. Mainly that it is cheap. Eventually this are will also turn into another chunk of the northeast and suffer the same bad problems of being overbuilt, overpriced, and over congested. When I come and visit my family there, I’m almost disgusted at the rampant building going on: huge Mcmansions next to the freeway and nothing but chain eateries and shopping centers. Perhaps you would see things differently had you known the area as I did as a kid, which was that it was actually significantly less populated, more open, more mom-n-pop, and so on. I wouldn’t say that’s the case now, and most of these changes have come from the last 5-10 years. I will give the area around another 5-10 years before it too will start to suck and the whole cycle will start anew: the folks who moved from the Northeast, who moved to Florida, and then the NC for a better life will screw that region up as well. Then it’s off to some other place, like Kansas, North Dakota, or who knows?
I know what you are saying however the credit bubble is responsible for much of what you say. I have to do a lot travel for my business and I tell you what you describe can be seen any many parts of the USA. Every crackpot with an idea could get cheap money to build whatever they wanted. Those days are over.
These newcomers can only sell to other newcomers at artificially high prices. That kind of Ponzi can’t last because it isn’t supported by local incomes. Don’t worry, prices will come down.
For those home owners looking to the govt. for a bailout…maybe they should have a sit down talk with victims of Hurricane Katrina…perhaps Katrina survivors can enlighten these home owners about about the much the govt. cares about poor people in America?
Dan,
That’s a great idea… FEMA has a lot of trailers left over from Katrina. Bail out the home owner - give them a FEMA trailer.
FEMA trailers are a great idea for the FBs! A new era of Hoovervilles only this time we’ll call them Bushvilles and set them up in Texas. Maybe the sub-primers can give them a mortgage on the FEMA trailers, too? I just hope they don’t give them the trailers that were constructed with toxic chemicals that make people sick…as they did in New Orleans
First bailout plan I’ve ever seen that I like. Free fema trailer with every foreclosure!
Have the FEMA trailer parks erected in the home towns of every Senator & Congressman who advocates an FB bailout.
Almost 1100 signatures.
Say no to a bailout!
http://tinyurl.com/ywkfvj
“As of June, the assessed value (not the sale price) of homes in Pince William had slipped to a average of $413,000, down significantly from a high of $429,000 in 2006.”
Two obeservations:
1. A price slip from $429,000 to $413,000 is not all that “significant”; in other words “you ain’t seen nuthin’ yet”
2. Sellers are being fed the idea that “assessed values” are the “true values” of their homes and don’t like the idea of a prospective buyers attempting to chisel them out of their money.
While I agree that there is more to give, a move of 4% in the average price it noteworthy. It is the same as saying that each and every one of hondreds if not thousands of homes sold in the timeframe all lost that amount of money. $13k each over 1,000 homes is $13M. Not quite federal gov’t money, but a small town or a mid-size company would hurt if it took that size hit.
Realtor Ad:
If you buy a $500,000 Archie Bunker house in Prince William county, we’ll give you a 2 hour daily commute - free of charge!
Get yourself a ticket to Prince William County paradise.
http://money.cnn.com/2007/08/24/news/economy/newhome_sales/index.htm
What housing slump?
“New home sales post surprise gain
Sales pace unexpectedly rises as lower prices help builders cut into new home market glut.
NEW YORK (CNNMoney.com) — New home sales posted an unexpected gain in July, according to a government report Friday a rare ray of good news in the stormy housing market but economists warn the glint of sunshine is likely to be short-lived.
New home sales rose 2.8 percent to an annual rate of 870,000 from a revised 846,000 rate in June, the Commerce Department reported. Economists had been looking for sales to fall to a rate of about 825,000, a level that would have been a seven-year low.”
Does anyone have the non-revised number for June? Now that they are comparing month to month, the cancellations really start to matter. I bet the July number will be revised down 15%, just in time to be compared with the August number.
I heard the NPR headline story on this at 8:30am this morning. The reporter noted that economists were “surprised that new home sales rose 2.8 percent given the housing slowdown and the credit crunch.” Where does NPR find economists to interview who are so stoopid that they think an August credit crunch could have impacted July new home sales?
Since they’re comparing a revised June rate to an unrevised July, I’m not sure why’re they are suprised. Anyway, I would expect new home sales to peak in the middle of summer, even in a downturn.
What they aren’t really talking about is the fact that this bust, just like the boom, will be spread out over years. Here in “but we’re different” Seattle, we’ve only just reached the top and are just starting the long ride down.
Wow… Rick Santelli on CNBC…. I’ll bet everyone in the booth that the fed won’t cut the target rate in Sept OR the next meeting after that.
He is a firm believer that the Fed is working with liquidity injections to keep the effective rate below the target rate, without making a formal announcement that they are lowering the target.
Bernanke is working on actual market fundamentals, NOT on psycology.
I really get the feeling that Ben wants the hedgies and others that hold the crap debt to go broke, while covering the bank deposits without tapping the FDIC too much.
He can’t be happy with the return of the Carry Trade. I think that will kill any chance of a rate cut.
“‘Over the last couple of years, people became so desperate to buy a home that they stopped asking what the payments would be over time,’ said Nicolas P. Retsinas, director of Harvard University’s Joint Center for Housing Studies. ‘The only question they asked is what’s the least possible payment I can make next month so I can afford to buy that house.’”
Over the last couple of years, lenders became so desperate to keep making home loans that they stopped asking whether borrowers could afford the payments over time. The only questions they asked were whether the borrower could afford to make the least possible payment at the outset of the loan, and whether some investment bank was willing to accept the loan as raw meat to be turned into subprime sausage which could be resold to some hedge fund.
LOL. right on PB . This investment scheme in which people purchased property with the idea that they would need to refinance within 2 to 3 years is a joke. Everytime you refinance your cost of money goes up and getting a 30 year note that isn’t good for anymore than a couple of years is a bad choice .
Not only where these borrowers sold a bill of good that money would be available , but they were sold a bill of good that they would be able to get a better loan in 2 or 3 years . Realtors and loan brokers that promised this light at the end of the tunnel to borrowers should be shot for false advertising of future benefits promised .
Borrowers were nuts to believe commissioned salespeople .
People got in for no skin in the game ,so the big investment lie of refinancing down the road made the deal a no-risk game in the minds of borrowers .
Now all these stupid borrowers are expecting the govt. to give them a low rate loan ,even if they have no equity or can’t qualify for a new loan at good terms . The REIC promised these people a better loan in the future while they knew that most those people could never qulaify for a prime rate loan in the future . They just planned to put them on another toxic adjustable . Telling people that “real estate always goes up” , and they ,”can’t afford not to buy” ,was the big lie that people were brainwashed into believing . To think that a entire industry got away with those kind of investment projections into the future is a joke .Now they all want to be bailed out . No way !
Ward, i’m worried about the Beazer…
“‘They’re all afraid they can’t sell their house,’ said Ward, who sells about 100 houses annually but this year is experiencing a 10 percent drop-off. ‘It’s a common theme right now. Can you tell I’m angry about it? It’s been going on the past 12 months.’”
“Cornelia Barnett said she and her husband are struggling after the adjustable mortgage on the Edgewood home they bought in 2005 reset $330 higher in June to nearly $1,900 a month. The couple did not refinance for the first two years of the loan because they couldn’t afford the prepayment penalty.”
“Now the rate is scheduled to reset again in December, perhaps up to 11 percent. The initial rate was 8 percent. ‘We really, really are not in a position where we can afford this,’ Barnett said.”
“Barnett acknowledges she was a novice to the home-buying process when she signed up for her ARM but said that she was under pressure to close the deal. ‘As a lay person, how am I supposed to understand all this the day before I go to closing,’ she said.”
LET ME GUESS - Barnett did not look at one book, magazine / newspaper article, website about RE finance / investment. BUT she did plenty of pre-shopping for curtains, furniture, garndening supplies. Planned whom to invite to the house warming party, and and Thanksgiving. Even planned where to put the Christmas tree. BUT taking care of the business side of things - no chance.
And all the talking heads are crazy - tried to watch Cramer yesterday - at first it was funny because it reminded me of Soupy Sales (showing her age) but then it seemed more like Peewee’s playhouse and that was amusing. Then I actually started listening to him without all the schtick and it was not funny - he’s in another world like the rest of them
Cashphyxia
A condition in which an extreme decrease in the concentration of money in the bank account.
I like it. I liked it up top under cashphixiation, but I’m not quite sure the “auto-neurotic” works quite as well.
Good job. We should put together a housing bubble dictionary. Some with newly coined words like this. Some with new definitions of old words and phrases.
Do financial journalists have to pass grade school arithmetic? Because I am having a hard time figuring out how the numbers in these two Financial Times articles add up (or should I say “subtract”) to a brightening picture for U.S. housing.
(1) Current rate of new home construction = 1,381,000 units per year
(2) Current rate of new home sales = 870,000 units per year
(3) Current rate of overbuilding = (1)-(2) = 511,000 units per year
Of course, this is a conservative estimate of the rate of overbuilding, as new home sales do not reflect cancelled orders.
“Crunch set to prolong US housing slump
By Eoin Callan in Washington and Doug Cameron in Chicago
Published: August 16 2007 15:19 | Last updated: August 16 2007 21:24
…
Housing starts fell 6.1 per cent in July to an annual rate of 1.381m units, the lowest point since 1997, according to government data. There were also signs of slowing activity ahead as applications for construction permits fell 2.8 per cent to a 10-year low of 1.373m units.”
http://www.ft.com/cms/s/0/0fd930c0-4c01-11dc-b67f-0000779fd2ac.html
“Housing and factory data offer fillip to US economy
By Daniel Pimlott in New York
Published: August 24 2007 14:21 | Last updated: August 24 2007 14:21
Higher sales of new homes and sharply stronger factory orders for big ticket goods in July raised hopes that the US economy might be able to weather troubles in the credit markets and a deepening housing slump.
…
New homes sales rose 2.8 per cent in July to an annualised rate of 870,000, easily beating expectations of a 1.4 per cent decline, the Commerce Department revealed on Friday.
http://www.ft.com/cms/s/0/212eb7ba-523b-11dc-a7ab-0000779fd2ac.html
“Cornelia Barnett said she and her husband are struggling after the adjustable mortgage on the Edgewood home they bought in 2005 reset $330 higher in June to nearly $1,900 a month.”
Things like this are quite telling. A lot on this blog are probably renting at $1900/mo. yet we are continually being bombarded on how these poor home owners can’t make the added payment. If that is the case how do they expect to pony up a first, last and cleaning deposit to get in a rental property when they belly up?
Stop making house payments and live rent free for 6 months waiting for the sheriff to show up and kick them out. Duhhh.
Bill Gross said that homeowners should be bailed out. Now, until you pay off the mortgage, the “homeowner” is the bank/lender, right? LOL! See, he was being honest!
Ugghhh… The silly “should we raise tax on hedge funds”..
Pro: there is no reason the rate should be lower. It ins’t like these guys would say, ” Hmmmm… I could make a billion bucks, but if I do, I’ll have to pay 35% instead of 15%… Guess I’ll not bother to make the billions of dollars.”
Con: “I’m a bafoon and a clown and if I dazzle you with double speak perhaps I’ll convince you there is some great good in the rich getting richer, and it will be the end of the world if the billionaires have to pay more taxes… And Chewbaca is a big hairy ape, but he’s to co-pilot of the milenium falcon and he hangs out with ewoks… that don’t make no sense.. ”
Ughhhh….. The world will end if the head of Blackstone has to pay 35% tax instead of 15% tax…. Where is a jashua tree when someone really needs it crammed up their arse!!
Darrell, hit ‘em and hit ‘em hard. 50%. It’s time the moneyed interests and privileged elite return something to the US Treasury. The charade has gone on long enough.
Is this moron hour????? Now CNBC has a bafoon on saying you need to buy houses when fewer are buying… You cant live in a stock….
My dad bought in 1960 for $17K and sold in 2005 for $700K. AHHHHHHHH…. he bought in a deflated market and sold at the top of the most ginormous bubble in history… and you’re trying to convince people to buy near the top of the GINORMOUS bubble.
Rent is money down the drain….
AHHHHH what a moron…. Make it stop!!!!
This whole attempted change in tax treatment is a bunch of BS.
The long term capital gain treatment is granted to the Manager because the the underlying investment activity generates long term capital gain based on a 12-month holding period, and the Manager is essentially a 20% owner in the company by virtue of their creation of the Fund. They generated the profits based on their management of the company’s capital.
I know, I know. They’re just traders, right? Wrong. The purported change impacts ALL private partnerships that have operating partners who’s income is tied to the success of the venture. Real Estate Developers (big and small), and Venture Capital Funds will also be effected. These are entrepreneurs who actually CREATE something of value, not simply lever up companies to destroy them.
And the compensation is far from guaranteed.
Is this all that different than an entrepreneur who put $0 into a company, but is a company’s founder who later sells their shares and receives long term capital gain tax treatment? Isn’t that “compensation” for their work? Why should they get long term capital gain treatment, and not the Venture Fund Manager that helped provide the capital and expertise to make the whole thing happen?
I don’t have a problem with taxing these individuals more, but let’s call it what it is, a stealth progressive Long Term Capital Gain tax on a select group of tax payers.
I have a better idea. Rather than complicate the tax code further, with special definitions of “Fund Manager”, and I’m sure plenty of structural loopholes to get around being part of that definition, let’s simply make LTCG a progressive tax. The first $x is taxed at 15%, the next $y is taxed at 25% and everything beyond $z is taxed at 35%.
There, now wouldn’t that be easier and have the same effect?
Ford asking for a bailout. Says the FED needs to cut rates. AUTOS are not selling!
http://money.cnn.com/2007/08/24/news/companies/ford_fed/index.htm?postversion=2007082406
Ford CEO Alan Mulally became the latest high-profile business executive to suggest that the Federal Reserve needs to cut interest rates, according to a report published Friday.
Noting that credit conditions were posing a “big headwind” to the company’s turnaround plan, Mulally told the Financial Times he is concerned about the state of the larger economy.
“It is a really important job to manage inflation and economic growth [but] focusing on economic growth appears to be a really important priority now,” Mulally told the paper, hinting that the central bank needs to take action.
Our whole economy is a sham.
I would think that Toyota & Honda would sell even more cars than they are now if the Fed were to lower rates. What makes Ford think they will benefit more than the other automakers? Ford is toast in my opinion. And it’s not because of high interest rates. Your competion builds better cars and you know it.
This company had so many headwinds to deal with before the credit crunch, interest rates should be the least of their problems. I’d bet an interest rate reduction wouldn’t result in a reduction in price of a new car.
How China does negotiations.
http://www.rense.com/general78/howchina.htm
Gee, it seems all these government statistic are through rose colored glasses. They don’t report incentives which builders throw in. They don’t report cancellations. Inflation is low because they don’t report food and energy prices to say nothing of the 100% to 400% inflationary housing market prices in the last 5 years. Keep pouring money into those 401k’s folks, because when the rose colored glasses are taken off and the Financial Gangsters of Wall Street (of which Paulson is one and the SEC is the Financial Gangsters of Wall Street’s backup men) and the Kenneth Lay’s and Kowalski’s and Mozilo’s fall from grace, guess what funds the Financial Gangsters of Wall Street are going to steal from to make up the losses? You better thank your lucky stars that the Bozo in the White House never got his way and privatized Social Security. If you think Da Boyz were making out like bandits earning $60 million + bonus payouts, you can quadruple that figure from the money they would have stolen from Bozo Bush’s “privatized” Social Security fund.
“‘There are some frustrated sellers,’ said Susan Holbrook, senior VP of one of the Triangle’s largest residential brokerage firms.”
Love her name, time for a new commercial,
Wife: I hate this house and the lousy public schools, lower the listing price.
Husband: The kids are three and one.
Wife: Their organs are havestable. Suzanne researched this. We can do this.
Husband: Okay … Did you see the size of that apartment?