It’s Not The Perfect Storm — It’s The Perfect Tsunami
The Boston Globe reports from Massachusetts. “When Paul Rappoli Jr. put his four-bedroom Colonial on the market for $449,900 in June 2006, he felt good about its chances of selling. Eight months later, the house finally sold for nearly $75,000 less than the initial asking price. ‘It was a long, drawn-out, frustrating ordeal, and it was unfortunate,’ said Rappoli. ‘I felt like we were constantly chasing the market, just constantly chasing it.’”
“Why didn’t the house sell sooner? That’s easy: the price.”
“It was a beautiful house in a great neighborhood. There was absolutely nothing wrong with it,’ said Jeffrey Ledin, a broker with in Stoughton who stepped in after Rappoli’s contract with his first broker expired. ‘The problem was the price.’”
“When Ledin took over the listing, he repriced the house at $379,900. Just nine days later, it sold for $375,000. ‘We had eight showings in the first three days,’ Ledin said. ‘The price sold it.’”
“Peggy Buresh in Quincy initially had the Rappoli listing. She said they were building a new house in Foxborough and were willing to take a bit of time selling. She priced it at the high end, thinking, ‘Let’s just try it and see what happens. Then the market started to change.’”
“Rappoli said, ‘Part of it had to do with what I thought I’d like to get and what other homes in the neighborhood had gone for.’”
“Now, he advises buyers, ‘Forget about what you want, about what you could have gotten a year ago, what your neighbor got two years ago - those days are gone.’”
The Eagle Tribune from Massachusetts. “The banner hanging above the entrance to the spacious new home in North Andover captures the plight of the real estate market in just four words. ‘MAKE ME AN OFFER,’ it pleads.”
“Owner and developer William Barrett already dropped his asking price from $929,000 to $799,900 for the house on a sprawling, well-manicured property with a stone wall and brick walkway. Even so, the two-story, 3,700-square-foot, yellow-and-white four-bedroom home with a two-car garage has been sitting idle on the market for 15 months.”
“‘Basically, right now I’m looking to get rid of the property at the level where I can get rid of the loans,’ Barrett said. ‘And if I make no money, at least I won’t have the monthly payment.’”
“His situation is typical in today’s real estate market. For buyers, the climate translates into a plethora of properties from which to choose, allowing them to shop around for deals that did not exist a few years ago.”
“Work at the Monarch on the Merrimack has all but stopped, some contractors and subcontractors haven’t been paid in months, and the future of the $200 million condominium complex might be in the hands of a California bank.”
“Bob Ansin, a Fitchburg-based developer, needs another $40 million to finish the first phase of the three-phase housing and retail development, Chief Operating Officer Shaw Rosen said.”
“Neither Rosen nor Ansin commented on why such a dramatic shortfall surfaced even as signs on the mill promise it will be ready for occupancy this fall. It’s a strange turn of events for a project that has been hailed by city officials as key to revitalization — to bringing new money and energy here.”
“Ansin has characterized Lawrence as a place with ‘pent-up demand … for an exciting revitalization’ that city residents ‘are hungry for.’”
“A potential buyer who toured the site late last month said he was concerned by what he perceived as a lack of progress. ‘They were nice enough to give me a (hard) hat to go onto the construction site. But nobody was there,’ said Stewart Hou, who lives in Quincy and wants to relocate to the Merrimack Valley.”
“‘There was no construction going on. I thought maybe they were just taking a break,’ Hou said.”
“Contractors say they pulled out of the project because they aren’t getting paid. Plumbing contractor David Youngblood pulled 25 of his licensed plumbers off the site in June for nonpayment. They began work at the Monarch on the Merrimack in November 2006.”
“‘Like everyone else, we are owed a fair amount of money,’ said Youngblood. ‘All the work has stopped.’”
“Across the street from Monarch on the Merrimack, Lisa Arcand opened an eatery, Fisherman’s Corner. ‘One of the reasons I grabbed this place was knowing there would be condos there,’ she said. ‘This could be a gold mine. My interest in this place is that there would be people living there and all they’d have to do is walk across the street.’ Since contractors left, she said, business has suffered.”
“Lawrence Mayor Michael Sullivan said. ‘The whole story is easy for me to talk about because it’s very real.’ ‘Stick with it because it’s going to happen,’ Sullivan said. ‘I still see this property appreciating. Once people are in there, the prices are still going to go up.’”
The News Times Live reports from Connecticut. “Thousands of state residents never thought they would find themselves fearing the loss of their home. Foreclosure rates in the state, however, have skyrocketed in the past year.”
“Industry experts say adjustable-rate mortgages and interest-only loans are just some of the hybrid products offered during the housing boom of the past few years that have gotten homeowners into trouble.”
“‘There were a lot of people who bought houses they couldn’t really afford using mortgage products tailored to get them into the house — not to stay in the house over the long haul,’ said Jay Lent, chief operating officer for Union Savings Bank.”
“The brokers, who made their money up front, then packaged the mortgage with others and sold them to investors, ridding themselves of risk.”
“Fairfield County alone had 403 foreclosures in July, compared with 240 in July 2006 and 127 in July 2005. During the last 12 months there have been more than 4,400 foreclosures in Fairfield County.”
“Sheritha Jones of Danbury refinanced her home with an adjustable-rate mortgage two years ago. Her first mortgage, also an adjustable-rate product, was readjusting and she couldn’t afford the new payments.”
“‘I didn’t want to refinance but I had to do something,’ she said. Her lender, she said, tried to rush the process, telling her she would have to accept a higher interest rate if she waited. The lender even offered its own attorney to look over the paperwork, Jones said.”
“‘I knew it sounded too good to be true,’ she said, adding that her mortgage payment has increased from $2,000 to $3,000 in the past five months. ‘Now I regret it.”
“Debbie Killian, owner of the Charter Oak Lending Group in Danbury and education chairperson for the Connecticut Society of Mortgage Brokers, said several factors led to the current crisis. ‘It’s not the perfect storm — it’s the perfect tsunami,’ she said. ‘It was a culmination of several factors moving at the same time.’”
Here’s a good piece on the MLN crash in Connecticut:
‘Several floors above, the noose on MLN was tightening. Wall Street funding was cut back so far that MLN’s largest lending division - loans through outside mortgage brokers - collapsed. Hundreds of borrowers, their brokers and their attorneys were now stranded without money for sales and refinancings that had already closed.’
‘An attorney called a loan processor in Rocky Hill. ‘I’ve seen this before,’ the attorney said. ‘You better start looking for another job.’
Is it possible, the bubble bloggers and bear bloggers have caused, or contributed to the bubbles staying inflated longer than they should have been? It seems to me, those certain types of personalities, who don’t like being told they are wrong, have been fighting us tooth and nail. We indirectly have helped to keep the lid on the pressure cooker longer than it should have been, by egging the bulls to stay bullish longer. We are now seeing the results of our blogging, with the cascading of the bank runs, both here in the US and England.
It’s very doubtful if bloggers have had much influence in this boom and bust. There were no bloggers around in the South Sea Bubble or any other bubble/burst in the past. Fear and greed (the two main drivers of booms and busts) over ride everything including individual common sense when booms start and busts inevitably happen. What really caused this boom and bust to this extreme was all the free money which flooded the banking system because of Mr. Magoo, coupled with massive fraud committed by brokers, appraisers and realtors.
au contraire . Bloggers have surely influenced this boom and bust. I can personally vouch for at least one soul saved from financial destruction through the wisdom of these blogging sites. The effects these influences have had may be small in the big poicture, but they are still present.
Than our arguments are much stronger than we ever realized. I would hope that our common-sense financial analyses broadcast on this blog ultimately prevail, bringing back sanity and fiscal prudence to an industry and a national financial marketplace that desperately needs that slap up against the side of the head.
I’m reminded of those types of people who vehemently choose to ignore history and the laws of supply and demand. People like Lance on David’s blog, Bubble Meter, and home sellers that refuse to admit prices will continue to fall in housing cycles that take many years to play out.
“Is it possible, the bubble bloggers and bear bloggers have caused, or contributed to the bubbles staying inflated longer than they should have been?”
This was just a giant Ponzi scheme and what you are seeing is the death throes of one dying. The bloggers have helped bring this thing to its knees by balancing the MSM and RE spin and by helping some find an island of sanity in an irrational RE world.
Mike a.k.a./Sage: is it possible, the bubble bloggers and bear bloggers have caused, or contributed to the bubbles staying inflated longer than they should have been? Do you mean by reverse psychology, we made people buy expensive houses with booby-trapped mortgages? Or do you mean that we made you buy an expensive house with a booby-trapped mortgage? Mike a.k.a/Sage: what else are you known by?
The bubble stayed inflated until the financing stopped. Words by bloggers or anyone else fell on deaf ears. It’s only when the lenders finally said the word “No!” that the bubble stopped growing and began to deflate.
“When Ledin took over the listing, he repriced the house at $379,900. Just nine days later, it sold for $375,000. ‘We had eight showings in the first three days,’ Ledin said. ‘The price sold it.’”
I bet this is the assessed priced. I watch a few zip codes in MA and the story repeats itself often. The over-priced stuff sits and sits, then a gradual reduction in price and then faster price drops. When it hits assessment it sells.
I’m holding out for 30% below assessment. I think at that point price to rent will make sense to buy.
That correlates with this from above:
The Boston Globe reports from Massachusetts. “When Paul Rappoli Jr. put his four-bedroom Colonial on the market for $449,900 in June 2006, he felt good about its chances of selling. Eight months later, the house finally sold for nearly $75,000 less than the initial asking price. ‘It was a long, drawn-out, frustrating ordeal, and it was unfortunate,’ said Rappoli. ‘I felt like we were constantly chasing the market, just constantly chasing it.’”
“Why didn’t the house sell sooner? That’s easy: the price.”
Anyone else noticing a trend? These sales are starting to go deeper and deeper into conforming loan territory. In other words, raising the conforming limit will force those above the limit to drop their prices, but those not selling below the limit will have to continue to ride the slippery slope.
Got popcorn?
Neil
Neil, was discussing this very thing with wife yesterday. It appears the people priced >480 and
Appears original post got partially eaten. My point is that for homes 480K up to 700K or so there are not enough buyers with 100K downpayment and willing to take on a $3500-$4000 nut each month. Those buyers who have 100-200K plus to put down are looking at more expensive properties.
I disagree….I have the 100K but I want a 350K property..then again I might be in the minority
If you have 100K, you are definitely in the minority.
Hobo, what you’re saying in effect is that you don’t want the $3500-4000 nut which serves to make my point that the 480-700 price point is toast.
I have $420K and would also like a $350K home. I think that’s probably pretty close to what homes in the Boston suburbs are really worth. I may not hold out for that price for my own primary residence since it could take an exceedingly long time (see Japan), but I definitely won’t pull the trigger until prices are back in line with incomes for the area.
Anyway, I do think we are both in the minority of people who actually could afford to buy in the area. The funny thing is, it looks like the people who can buy, don’t want to.
I have $420K and would also like a $350K home. I think that’s probably pretty close to what homes in the Boston suburbs are really worth. I may not hold out for that price for my own primary residence since it could take an exceedingly long time (see Japan), but I definitely won’t pull the trigger until prices are back in line with incomes for the area.
Anyway, I do think we are both in the minority of people who actually could afford to buy in the area. The funny thing is, it looks like the people who can buy, don’t want to.
(Sorry if this is a duplicate. I don’t know if the spam filter ate my post or if it is just delayed.)
Depends WantsOut,
That kind of thinking is what got all these people into trouble. Doesn’t matter how much you have down –what matters is can you service the remaining loan on your current income? Can you handle the taxes and insurance as ongoing concerns? Having 100 or 200k to put down doesn’t mean you’re making 200~300k a year to service a half mil loan (not really an uncommon situation, especially if you realized profit from a previous sale). For example, even if prices drop 50% here we’re still looking at making quite a nice sum. That doesn’t mean we would be interested in servicing a higher mortgage. What we make decides how big a mortgage we’d be comfortable managing, so the difference between what we make on this house and our new mortgage after a move has to stay in line or we are just being stupid and falling into the same trap as all these people who have discovered getting the loan and paying for it are two different things indeed.
I did a deed search on the three houses mentioned in the article. One house was purchased in 2003 for 202,000 and sold for a gain of 173,000, another was bought in 2005 for 390,000 and sold for a loss of 15k not including RE fees…
That’s worth a look just to see the totally ugly MLN would-be headquarters.
‘At its essence, the rise and fall of MLN is the story of another bubble in American industry, an echo of the boom and bust of the Northeast office market in the ’80s and the dot-com era of the ’90s. The effort would crown Smith’s career. He had persuaded longtime friends and professional contacts to leave other jobs and come to work for him at MLN. His reputation was now on the line. ‘I’m not trying to weasel out of your question,’ Smith told Heffernan. ‘I’m just trying to be frank with you: I told you guys when you ramp this up, this is like Eisenhower on the 5th of June committing to invade Normandy. They are in their boats. They are in the water. Can I bring them back? Yeah, but there’s going to be a lot of loss of life.’
why do they pay a realwhore ?
Ledin said. ‘The price sold it.’”
and the internet
“For buyers, the climate translates into a plethora of properties from which to choose.”
El Guapo: Jefe, would you say I have a plethora of pinatas?
Jefe: A what?
El Guapo: A *plethora*.
Jefe: Oh yes, El Guapo. You have a plethora.
El Guapo: Jefe, what is a plethora?
Jefe: Why, El Guapo?
El Guapo: Well, you just told me that I had a plethora, and I would just like to know if you know what it means to have a plethora. I would not like to think that someone would tell someone else he has a plethora, and then find out that that person has *no idea* what it means to have a plethora.
LMAO. That word is forever bound to the three amigos.
Jefe: I know that I, Jefe, do not have your superior intellect and education.
El Guapo: Jefe, you do not understand women. You cannot force open the petals of a flower. When the flower is ready, it opens itself up to you.
Jefe: So when do you think Carmen will open up her flower to you?
El Guapo: Tonight, or I will kill her!
Sweeny…. that sounds biblical. Something like proverbs.
Genesis 3:16
And God said to the woman: “I will greatly increase your pains in childbearing; with pain you will give birth to children. Your desire will be for your husband, and he will rule over you.”
Mass is going to be crispy burnt toast. The pain has just begun. My North Shore city has more inventory (source: Ziprealty MLS) than at any point in the last 2 years.
Last fall, by this time, there had been a big dip in MLS listings. Presumably, the “we’ll relist in the spring when the market comes back” crowd. That is not happening this year. Desperation is notable.
Eastern Mass is a little unusual in that it doesn’t have a lot of subdivision development. Mostly existing homes that are being sold. But my city has a 150 or so home subdivision coming online; the homes are just starting to hit the MLS. I think this will be the tipping point for my city, as existing home owners wage war with the builder and chase the discounts down.
Spring ‘08 is going to be very ugly here.
Maybe, but Mass will be better off with more affordable housing. The bubble was choking the state.
More affordable housing will help things, but the quality of life here is miserable for other reasons that are unlikely to change.
Investment in infrastructure is practically nonexistent. Bridges and roads are deteriorating badly. The few new projects that get off the ground are over budget and take too long to complete. Private contracting of road building is a failed experiment in this state, hijacked by special interests and political hackery.
The traffic is insane.
Massachusetts is also a state willing to pump endless amounts of money into a lost generation of people who subsist on public assistance. This does not benefit working people or taxpayers in any way.
We’re an amnesty state, so when you’re out on the road, you have to be doubly careful of the large number of unlicensed, uninsured drivers. The local police logs are pages long with arrests for this. I can’t even imagine the cost.
The only bad thing that happens to Massachusetts that is NOT the will of the political establishment and the voters here is the weather.
Bedrock employers are shaken by the course Massachusetts is taking, I think. Fidelity already has one foot out the door.
Craven, I’m a fellow North Shore resident. Can’t drive on the roads due to potholes etc, but the state is spending 25 Mil to put up sound barriers on highways throughout the state. The one in Lynnfield especially burns me (7 Mil) as those homes have were built by people who knew they were next to a highway. Last year they erected all those new off ramp signs from Beverly to Gloucester to make sure the tourists didn’t get lost. Not sure what they blew on that but it was significant.
Oh, yes, the “save our property value” people … they make me sick. Remember what happened to that proposal for an Orange Line station and IKEA shopping plaza at the old Somerville Lumber site in Somerville?
YOUR HOUSE IS NOT A RETIREMENT PLAN.
What do you mean by no investment in infrastructure? You had the BIG DIG!
That was started when I joined the Army and was finished after I retired. What a colossal waste of money. But it set the new staandard for waste fraud and abuse in gov’t projects in Taxachusetts.
For a great many, it’s too late to “Sell Now, or Be Trapped Forever”
The Trap has Sprung and the NOW the agony begins
I am SOOOO glad I am not “trapped in forever”. I just got the most unimaginable deal, a contract on my house for $5K over asking AND they will rent the house back to me for my current mortgage payment. This allows me to pull out 80K worth of equity and invest it elseware.
For a great many, it’s too late to “Sell Now, or Be Trapped Forever”
The sad thing is most will not be trapped forever because they can’t afford the payments. They won’t be able to sell either, only submit to foreclosure.
RE: “Ansin has characterized Lawrence as a place with ‘pent-up demand … for an exciting revitalization’ that city residents ‘are hungry for.’”
LMAO…Lawrence, MA-ex milltown, crime infested shit-hole filled to the brim with immigrants in all the old worker housing.
Hypster musta be smokin’ some serious weed to make that pitch.
We have been actively looking in MA. Have gone to a lot of Open Houses since June this year. We didn’t see many people during the Open Houses so far. Thing are bound to worsen because now the credit standards are going to be stricter than before. But the sellers in MA are still asking for too much. They need to wake up to the fact the bubble has burst. May be they didn’t receive the memo in this part of the world.
They won’t wake up until they are forced to sell by job loss/relocation/retirement. As long as decent paying jobs are available, homeowners will continue to ask for wishing prices. It could take another few years of lower comps and inflation before we get back to what I consider affordable.
On a related note: The job market in Boston has held up remarkably well from what I can tell. I’ve started looking for a better paying position (IT) and have had no problem lining up interviews. The one lament I have is that many companies have moved offices to the 128 area, vs. downtown Boston/Cambridge. I don’t mind long commutes, as long as it’s mostly on public transit like the rail or T…
Mmm, Bus 70A …
Gotta love the breakdown lane as travel lane from the Newton/Needham exit north …
RE: The one lament I have is that many companies have moved offices to the 128 area,
Ugh..Rt. 128
Full gridlock on that POS roadway in 5 years.
The horror, the horror…
Here’s an example of really bad MSM math, re a couple in PA:
“That would immediately lower their monthly payment from the $1,800 they were paying - which included escrow payments for property taxes and mortgage insurance - to about $1,100 and then to about $1,350 when the rate gradually rose to 4 percent. Instead, they say, their interest rate remained at 1 percent only for the first 30 days, and then their payment quickly ran up to $2,100 a month.
“In early 2005, when they bought their three-bedroom, one-and-a-half-bath ranch house for about $235,000 in Bangor, Penn., they were solvent and comfortable with a near six-figure household income. They were newlyweds, each with adult children from previous marriages. They put a lot of money down on their home - about $130,000. Even today, they say they’ve never missed a house payment.
“The Olivers finally chose to refinance back into a conventional 30-year fixed, which they got last week from Countrywide … Their new rate of around 6.5 percent results in a payment of $2,155 a month, including mortgage insurance and property taxes.”
First, they put almost 50% down and had to have mortgage insurance??? If it was voluntary, why?
Second, I don’t know what property taxes in PA are, but isn’t this awfully high for a mortgage of about $125K (235-130+20)?
http://tinyurl.com/3dmlle
What the f**k?? This makes no sense at all.
They have a 6 figure income and are having trouble with a 135K MTG at 6.5%?? That’s insane, they have a spending problem, not a housing problem. What in the heck is the property tax rate in that town?? The 135K MTG at 6.5% should cost them about $860/mo. How in the heck do they get to 2,155 a month? That would put their taxes/insurance at $16,000/yr, or almost 8% of value??? Oh come on, no F-ing way. This is some crazy math, something is horribly off here (like by a factor of 2X).
Principal borrowed: $135000.00
Annual Payments: 12 Total Payments: 360
Annual interest rate: 6.50% Periodic interest rate: 0.5417%
Regular Payment amount: $853.29 Final Balloon Payment: $0.00
Well, in the article, it mentions that the wife quit her job to take care of her mother, and start a internet-based candle making business; so they refinanced to “free up some cash”.
It also says that in the end, the fees and transactional expenses of refinancing twice: loan origination, credit report, underwriting, processing, application/administration and title insurance - plus the prepayment penalty of $7,500 - came to about $20,000, most of which was added to the principal.
The second time they got a loan was a “neg-am” loan. All in all, sounds like they really got screwed. I would imagine that’s why the payment is that high.
I added in the $20K refi cost. Where the MSM screwed the readers, for some yellow journalism, was their failure to delve into and report on the “free up some cash” part. I will be that the amount currently finance exceeds the purchase price of the house — meaning all the deposit was spent, and more.
A different twist on a current retail naming-fad: “Bankruptcy and More!”
“The second time they got a loan was a “neg-am” loan. All in all, sounds like they really got screwed.”
They screwed themselves when the failed to READ the contract before they signed.
Rip off artists were on both sides of that little theft fest:
‘Gee, 1% interest sounded too good to be true. So I took the opportunity to rip off those who would be stupid enough to lend me money at that rate.’
You need to read the entire article to understand. They initially had a 1% option ARM where the regular (true) rate was 7.15%. That 6.15% added to the principal every month (of course, they claimed to be swindled by an unscrupulous broker). This was before they refinanced to the Countywide 6.5% fixed rate costing like $20K due to prepayment penalty fee and other costs (of course, you guess it, was added to the principal as well). So the loan was more than 135K. My estimate is the loan is about 225K - 250K.
I still don’t see how they cannot afford a 250K mortgage if they make over 100K a year.
Property taxes in PA are very high. We used to get a lot of PA people come to OH just to avoid the taxes. When we sold our first house in OH we had a PA couple come look at it. They same they were almost identical except their’s was not in as good a shape and their property taxes were triple ours. Also in PA, if the schools need money there are no levies on the ballot. PA simply ups the taxes without a vote. I don’t know if this is because it is a commonwealth government or not.
All this wanton building makes me wonder: Where are all the occupants supposed to come from?
occupants? occupied?
Buy and sell to another investor at a profit.. they then sell it to someone else, etc, etc.. Everyone gets rich.
Like the tulip bulbs that didn’t get planted and eventually rotted.
They’re on a really big bus - with bulging pockets - heading right your way any day now. Tick, tick, tick…
Just like “speed”, as long as the bus is going full throttle all is well, if it drops below 55-BOOM!
I think that many see the housing crisis as having some sort of bottom within the next 12-18 months..just based on the articles I have been reading lately I would say it will be more like 2-7 years. I don’t think anyone is taking into account 1)People who are upside down, can still make their mortgage payment but have no equity to move onto the next home so they are stuck in their home until home prices start to rise again to give them equity or level them off regarding mortgage balance and worth of the property and 2)Those that sell and find themselves in a situation where 100% financing is no longer available and they need 20% down to get a mortgage but the price they sold their house for does not give them the 20% so they have to rent and save to return to homeownership…this wound runs much deeper than many even know…
Totally correct.
And add into the mix the pyschology factor. For so long, housing was the “golden ticket”…the way to fund a lavish lifestyle and it became a mindset about one’s “worth”. Now it’s changing so fast and so hard…literally and figuratively radically changing people’s lives…it will be a long time before there is any “bull” market in real estate. It’s like some terrible disease…once you have it, nothing looks the same anymore. You’re either grateful you’re cured or you’re terminal.
Also, possibly:
3) Future homebuyers who got sucked into the bubble, who might normally have bought later (kinda like the auto industry with incentives), and
4) All those bubble buyers who now or will have BK and/or foreclosures on their credit which will follow them for years, along with not having downpayment money, which prevents them from buying again anytime soon.
“I think that many see the housing crisis as having some sort of bottom within the next 12-18 months..just based on the articles I have been reading lately I would say it will be more like 2-7 years.”
I’ll add another….the impact of foreclosures and short sales on neighborhood comps…the neighbors’ “equity” takes a hit as well.
The bottom should be around 2015 if patterns from past bubbles are followed. Past housing bubbles or cycles have taken roughly 2 times as long to reach bottom as time to reach peak.
With more foreclosures prices might be less sticky on the way down. So maybe 7 year from peak to bottom. Who knows, but it should be much more drawn out than 2 years.
It will be much faster. It would take that long if the boom/bust were recession/jobs driven (the bust will be, but the boom wasn’t). This was all about financing. It go looser every year for 5-7 years. Then, last month, it suddenly got A LOT tighter. The Cayote has run off the cliff, but just hasn’t looked down yet…
I think a lot who are upside down in their mortgage have adj rate equity lines that they may not be able to make the payments on.
I used to live in MA. Stoughton is way the heck aways from downtown (a real crappy ride if you go downtown) with a corrupt police force to boot (not sure if they’ve cleaned this up yet). 449k for a house in freaking Stoughton? Were they on crack?
RE: with a corrupt police force to boot
Mazzholeland-Cop State with HS educated coppers earnin’ low triple digits with their BS “only state in the nation” construction detail work and staff up for school sporting events.
Ipswich population 7k is forced to put on 4 for a Friday night football game.
And the athletic department’s are broke with the parent’s now having to pay a “participation fee”. Whatta crock.
Anyone contemplating moving to this place is on serious drugs.
“Industry experts say adjustable-rate mortgages and interest-only loans are just some of the hybrid products offered during the housing boom of the past few years that have gotten homeowners into trouble.”
Leverage crisis. From hedge funds, big banks to individual home owners this is a crisis about the over use of leverage. I/O and other bridge loans combined with small downpayments for fixed rate loans create the perfect storm for over individuals and business to take on more debt then they there cash flow can service.
Here is a biting analysis of Countrywide’s CEO Mozilo’s 12 Sept visit with Treasury Secretary Paulson, written by Kevin Duffy of Bearing Asset Mgmt.
Duffey tranlsates Mozilo’s doublespeak into real thoughts. My favorite: “After the boys at the Fed dropped interest rates through the floor earlier this decade, they inadvertently ignited a housing boom. Everyone and his brother thought real estate always went up and we simply let them place that bet on margin with hardly any money down. Our bad. I’d love to tap our underwater customers on the shoulder and get them to bring their equity up, but it’s too late for that – you can’t get blood from a turnip. So now we’re left holding the bag and our lenders are tapping us on the shoulder. We’re basically screwed, and the only thing that can save us is a new bull market in real estate.”
http://www.lewrockwell.com/duffy/duffy12.html
I like this line:
“Mozilo is the last remaining Oompa-Loompa, thus his beautiful orange glow.”
You know that some of my friends still insist on calling this a “housing correction” even though most economic indicators and media outlets call it a housing collapse.
I don’t know about you but I owned a housing that was “worth” 300K less than why I paid for it I would call it a crash. Thank God I read HBB and had some common sense not to buy at the peak of this debacle.
I imagine it will become a “housing collapse” right about the time some of them start receiving pink slips.
Your friends are correct. This is a “housing correction.” A really, really, really, really gigantic “housing correction.”
A recession is when your neighbor loses his job, a dpression when youlose yours.
A housing correction is when your neighbor is underwater/can’t sell and a collapse is when YOU are underwater/can’t sell.
“Owner and developer William Barrett already dropped his asking price from $929,000 to $799,900 for the house on a sprawling, well-manicured property with a stone wall and brick walkway. Even so, the two-story, 3,700-square-foot, yellow-and-white four-bedroom home with a two-car garage has been sitting idle on the market for 15 months.”
He thinks he has problems. Check out from top down homes 2,4,6,7. There are 5 on a little cul-de-sac.
http://homes.realtor.com/search/searchresults.aspx?ctid=71553&ml=3&mnp=43&typ=7
#5 is screwed. He’s got more bedrooms than bathrooms!
Report from yesterday’s bike ride through the central part of Tucson:
1. Am starting to see quite a few new “For Sale” signs in the midst of the oldie-moldy signs.
2. At one intersection in the oh-so-desirable Sam Hughes neighborhood, three out of four houses were for sale. So, I turned to the lone house without a sign and asked, “When’s it gonna be your turn?” No reply from the house. BTW, two of the other houses had “Owner/Agent” signs.
3. Spent quite a bit of time in El Con Mall Home Depot. Was pricing out a few things for an upcoming project at the Arizona Slim Ranch. Since I know a thing or two about lumber and construction, I went through quite a search to find pieces that were straight. Didn’t find a single one. (I think I’ll try another lumber yard, TYVM.) Oh, did I mention that the store traffic was miniscule at best? Nothing like what it was back in ‘05.
And that’s the Arizona Slim report from Tucson.
Thanks, I appreciate your reports.
I can personally confirm that the tsunami is far from over. There was an informal convocation of Northern Virginia foreclosure attorneys at a local jurisdiction this morning - we were all there for sales or related proceedings by coincidence. Between the counsel gathered, there were over 70 foreclosure sales going forward in Northern Virginia *today*. There were bidders present, but no bids submitted that I saw.
These were some of the biggest players, but I know of two who were not there, and they probably would have taken the total for *today* over 100.
If we’re being hit with 100 sales *per day* in NOVA, with zero bids, there’s going to be more than “pain” felt within a few months. Lenders are going to be in absolute anguish and despair by year-end, and inventory will be unbelievable.
Stay tuned…
That’s especially telling because the DC area currently has one of the lower foreclosure rates in the country (although it’s increasing faster than the national average).
homes selling in my hood 22151
05 prices since summer 06
big gov still getting bigger
A house across from my parents in Northern VA is going into foreclosure. The family bought the same time my parents did (1998) for about 300-320K. They have had their house listed at 600K+ for the past several months and will be foreclosed upon next week.
It is a divorce situation so it is kind of sad. Makes you wonder what they did with their 280K+ equity. At the height of the bubble their house would have been over 700K.
Yep, with all the money being spent on divorce attorneys, nobody can agree on who pays for the house => foreclosure.
Now I’d make an educated guess and suggest that those folks probably took out a HELOC or second trust of some kind and ate up a bunch of that equity. As for the rest? Paper equity is not wealth unless it is realized, and prices are moving down fast.
The lenders at the sales this morning were marking loans down by $100k. One of my colleagues said he did a sale in Fairfax yesterday where the principle was marked down by $197k, and there were no takers. The professional-grade investors will not try to catch this falling knife. They will wait it out on the sidelines until the lenders get desperate.
Saw a CFC foreclosure and thought I’d pull a chain or two.
Asked what kind of deal they would give me.
25 - 30% down, no closing help, 8.5% on a 5 yr ARM.
I told they guy that that “deal” worked out to about a 5% ROI. And that MM were paying 4.5%, munies at 3.5%, etc etc. Why would I take on the hassle of property mgmt for basically the same return as a MM? They needed to drop the price by half, lower the down payment requirement by half, lower rates, etc etc if they expect anyone would buy it. So, I guess CFC has a long way to go before they realize the hole they’re in. (Denial ain’t just a river, I guess)
RE: Lenders are going to be in absolute anguish and despair by year-end, and inventory will be unbelievable.
Who the fook wants a house today with all the attendant expenses which have no where to go but up and up.
We’ve discussed the rain tax.
Next up will be the environmental tax on the piles of dog doo-doo in your yard.
Can’t have all those nasties runnin’ off into the storm drains and then funnelling out into who knows where.
The municipal Animal Control Officer will do the tally.
Eventually, because of the attendant bitching for the ACO having to actually work, a formula will be worked out, where a statistical analysis of the level of poo from various breeds will be fed into a computer to determine your assessment.
St. Bernard owners will be totally screwed.
Does anyone have a link where I can watch all of Greenspan’s 60 minute interview?
Click on the link:
http://www.cbsnews.com/sections/60minutes/main3415.shtml
Mr. Magoo will never admit that he held rates down for too long. Like the gentle wind of the proverbial butterfly’s wings in Africa starting a hurricane in the Caribbean, Greenspan’s failure to raise rates has lead to this credit crunch. He left Bernanke with a steaming pile.
If Bernanke eases tomorrow it will not have the desired effect. Methinks he will hold for now but he should raise 1/4. Stop punishing the saver and killing the dollar.
WOW, Greenspan says they have no control over housing and even if they lower interest rates, it doesn’t mean lower mortgage rates.
I think them cutting rates creates inflation and will force yields to go up for foreigners to buy our debt. Why buy a depreciating asset?
Anyone who thinks that lowering the Fed rate will lower mortgage rates has just not been paying attention. The Greenspan “conundrum” was: he kept raising rates and long-term rates stayed put.
The two rates have been disjointed for several years now.
“WOW, Greenspan says they have no control over housing and even if they lower interest rates, it doesn’t mean lower mortgage rates.”
Yep, Fed Fund controls credit card rates, car loans, HELOC’s, etc. I believe most long-term fixed mortgages, which is what they want the FB’s to get into, are tied to the 10-Year TBill, which I think will go up if the Fed lowers rates on Tuesday…and the Fed doesn’t control that, that’s the global bond market and they’re clearly spooked as hell at our economy right now.
I believe most long-term fixed mortgages, which is what they want the FB’s to get into, are tied to the 10-Year TBill
Not “tied”. There’s a little something called a “risk premium” which has been in hibernation and is now coming out for something to eat.
He’s absolutely right. Besides, it wasn’t so much rates, as TERMS, that got us into this mess.
Low down, no down, no doc, interest only, teaser rate, adjustable exploding mortgages did this. Fact is, median income in my neck of the woods would not cover the nut on a 30-year mortgage at ZERO PERCENT interest.
No Fed rate cut, no matter how drastic, is going to bring these whacky loans back. The financial memory is short, but not that short.
“No Fed rate cut, no matter how drastic, is going to bring these whacky loans back.”
Amen. Bond holders don’t want our mortgage junk anymore. Game’s up.
The only question is how long it takes the FB’s to figure out that nothing can save them. Ditto, the manic stock market.
The FED cut would just be for show, They have already pumped billions into the market to keep the big boys solvent. The cut would only be the headline for J6P to see and feel better about the economy and therefore stop the run on the bank, like last week in England and last month at CFC.
http://money.cnn.com/2007/09/17/news/companies/bc.apfn.nationalcity.gui.ap/index.htm?postversion=2007091707
National City sees $160M loss on mortgages
The regional bank projects a loss on the high end of its forecast on loans it gave to customers with minor credit problems.
OT, anyone seem this in their area. Here in KC, It looks as if a few weeks ago most of the realtor signs from the main roads disappeared that had been sitting there for some time. Interestingly enough, many of those have the signs back along with many others. Looking at the MLS, very little has sold. It seems to me that there was a coordinated effort to make it look as if things had been sold by removing those signs for a period of time from the main streets. What is even more intersting is the amount of signs I see this time of year after school is in session.
Greenspan will be on CNBC tonight at 9pm EST.
He was on this morning…. and the one tonight was pre-recorded and much of it has already been shown in commercials and teasers.
1) We didn’t see the trouble with sub-prime coming.
PLEASE GO BUY MY BOOK!!!!!!!!!
2) We did see a problem with house prices coming, and we tried to lean against it, but it didn’t work because finaicial is no global.
3) Our bubble will crash and it will be painful.
4) A dozen other countries have bubbles as bad as ours, but it has yet to be seen if they will crash as hard as us since their builders didn’t keep building into the bubble as ours have.
5) 1/3rd risk of recession has gotten “slighlty worse”.
6) Bush Jr. tied economic policy to politics much more than other presidents.
7) He did most of his writing in the bath tub (hit that in this book he is “coming clean” about what was really going on).
That about sums it up, form what I’ve heard on CNBC, Today Show, 60-Minutes, 20-20, etc.
Connecticut Trip report—
Backroads through Litchfield, Bantaam, Morris, Thomaston on our way to Wolcott Saturday afternoon. Loads of signs in what I believe to be desirable areas. I noticed scores of sneaker-wearing fools driving Euro-Trash with NJ plates or NYC dealer plate frames. With that area overrun with that kind of ilk, I’d say it’s no longer desirable.
‘And if I make no money, at least I won’t have the monthly payment.’
Note here - what I read is that at the present (lower) price, he still has a small profit…better wait until he’s in the 25% - 40% loss range before thinking of buying.
Look, I see the housing problem as a scheme that was sold on a mass level to the public which involved taking out toxic loans for a short term investment in real estate . Those toxic adjustables and IO loans were not sold because they were good long term loans ,but they were sold for low down and easy underwriting ,so people who didn’t really qualify long term could get into the mania .Borrowers were sold on the idea that they could sell or refinance to a better loan once they house went up in value .REIC myths about real estate always going up and running out of land fueled the mania .The public believed all the myths becaue there wasn’t alot of feedback or balanced reporting disputing these myths and we owe that to the advertising dollars .
When you add fraud and unsupported appraisals to these toxic loans ,not to forget overbuilding ,it was a set up for a big fall .
Everything the powers that be are trying to do now is a after the fact ,to late ,horse out of the barn type actions.
They already have laws against fraud in lending ,so I don’t know what kind of laws can go on the book that would of prevented this mania .
“Borrowers were sold on the idea that they could sell or refinance to a better loan once they house went up in value.”
Nope.
Greedy, stupid, lazy, something for nothing lowlifes who wanted to live beyond their means latched onto the idea that they could refinance into a better loan (and extract some cash while they were at it) once the house went up in value. Eventually, they need never work - just refi every two years for cash for living expenses.
Now we get to listen to these same lying jacka$$es crying how they were ‘misled and ripped off.’
There is no fraud in lending - if the contract doesn’t state the terms you agree to - don’t sign it. If you’re too dumb to understand the contract - hire someone who can. If you’re too stupid and lazy to do even that - you deserve to get ripped off.
I agree with what your saying about the greed and I’m saying that there was fraud on the part of borrowers and lenders alike . It was a whole scheme in which the parties were willing .
I’m with you and I really don’t think for most part that the borrowers didn’t know what they were doing . If I was unclear in my post , than sorry .
Concurrence. People weren’t fooled…they were being foolish and irresponsible. A home is the single largest thing you will ever buy. Those who did not do their homework and due diligence bought at the wrong time. Everyone knew it but were in denial.
Pointing fingers does not impress anyone. A little “mea culpa” does because it shows personal responsibility for ones own actions.
The Fed, lenders, RE, etc. did pave the way and are guilty of their own transgressions but debt is personal. How many of those self-proclaimed geniuses who “made” money on their homes a few years ago are crying now? Now they naturally are asking Dodd and Dubya for a bailout. What a turn of events.
Word to those more wise than I: Don’t listen to Dubya. He can’t bail you out, he is just trying to get votes for his party by making you think he cares.
Standby for heavy rolls while the ship moves about.
Too bad about The Monarch in Lawrence. It was a good idea, which probably would have done really well a few years ago. Those mill buildings are gorgeous. Lawrence, MA has potential, but right now it is a pit. About three weeks ago I stopped by the sales office and toured the project (they made me sit through some laughable 10 minute video about how ‘perfect’ and ‘forward-thinking’ the project was. I guess I found out where all the .COM ad agencies went. I worked for a company in 2000 which had a very similar video to show prospective employees. I think the gym was the same in both films). The salesman was swearing up and down that occupancy would be in January. Now it seems like there is a possibility it won’t even be completed. Hope buyers put any down payment they had into escrow.
On a side note, I decided to rent in Lexington for a year or two while the market shakes out. $800,000 property for $3000 a month. Taxes alone on the place were $8400 a year. Seemed like a better deal to rent than buy it - not to mention the fact that they take care of lawn and snow removal.
As for the traffic in and around Boston… Well, anyone who has lived on the West Coast (I just moved here from Seattle), will find the ability to pull on to a highway on a Saturday afternoon at 3pm and not hit bumper to bumper traffic… refreshing. Though I have to say, the potholes here are the biggest I have seen outside the five boroughs.
Taxachusetts does not have pot holes, it has mini grand canyons.
In the winter, the snow plows push little cars into the holes to fill them in and then the state paves over the car in the spring.
“hobo in mass: I disagree….I have the 100K but I want a 350K property..then again I might be in the minority”
I disagree… I have the $150k but I want a $150K property. I might be in the minority too!
So, it was the BLOGGERS who stole Christmas! Bloggers had no effect on the housing market. This all happened for a reason, starting with years of irresponsible government spending. That had nothing to do with it? We are trillions of dollars in debt. Sure, a little debt is good, but not that much.
The Asbury Park Press from New Jersey. “A state official told a state Senate committee Monday that New Jersey may finally launch a $30 million rescue program for homeowners facing possible foreclosure, but hours later a state spokesman said the program was not yet ready.”
“Jerry Keelen, an official at the New Jersey Housing and Mortgage Finance Agency, told the committee the program is expected to help 150 to 200 homeowners. However, Keelen said, some 1,600 residents have already contacted the state about signing up for the program, which was initially announced in May.”
Wow, that’s giving $150,000 to $200,000 away to each homeowner. Where can I sign up?