Dealing With An Overabundance Of Homes
Chicago Business reports from Illinois. “Home sales in the Chicago area plunged 20.1%, according to the Illinois Assn. of Realtors, the 17th straight monthly decline. Statewide, sales dropped 17.9% to 14,349 homes. Separately, a gauge of home prices in the Chicago-area declined from a year ago. Home values in the Chicago region fell 0.9% in the 12 months through July, based on Standard & Poor’s/Case-Schiller Home Price Index.”
The Chicago Tribune. “Locally, the wincing was even more pronounced: The Illinois Association of Realtors said Chicago-area home sales, year over year, were down more than 20 percent.”
“‘While buyers with good credit have options’ for financing, said Illinois Association President Kay Wirth, ‘the credit crunch combined with more hesitant buyers waiting out all the mixed messages on the housing market took a toll on sales in August.’”
The News Democrat. “Metro-east home builders are dealing with an overabundance of homes as mortgage defaults have hurt the market, but home inventories are even higher elsewhere.”
“Statistics from the National Association of Home Builders in Washington, D.C., show that the greater St. Louis metropolitan area witnessed a 19 percent decrease in new single-family housing starts between the first six months of the year and the same period in 2006.”
“In that span, that number was higher in other Midwestern metropolitan areas. The greater Chicago metropolitan area witnessed a 34 percent drop, a 28 percent decline was reported in Indianapolis and a 30 percent drop in Kansas City.”
“Statistically, housing starts in St. Clair County have declined in the last two years and dropped over the last three years in Madison and Monroe counties. According to Market Graphics, the highest monthly number of housing starts this year in St. Clair County was 115 in May. In comparison, the county had a monthly high of 175 in August 2005.”
“Madison County had 168 housing starts in May 2004, but hasn’t exceeded 100 this year.”
“Monroe County witnessed 44 and then 35 housing starts in April 2004 and April 2005, respectively, but hasn’t seen more than 27 in a month this year.”
“Taylor-Morley Homes, of Creve Coeur, Mo., has built its share of subdivisions in the metro-east, but has recently decided to scale back its projects and has laid off 40 percent of its staff over the past 12 months. CEO Bill Taylor said the company has had to downsize in response to the shifting market.”
“‘Taylor-Morley is working through this downturn,’ Taylor said. ‘The only thing that will change is we will be a different-sized company and may be building 150 to 200 homes, instead of 300 or 400 homes, a year.’”
“‘We had a good run for several years, from 2001 to early 2005,’ he said. ‘But in 2004 and 2005, we overbuilt, and in 2006, we saw demand slacked, and it become very clear that we had excess supply. What we’re dealing with now is there are more homeowners out there looking for more homes than there are buyers at the moment.’”
The Joplin Globe from Missouri. “Joplin’s housing market has been largely insulated from the highs and lows of the national market, but that may be changing, said Ed August, a Realtor (in)Joplin. Lately, August said, local housing signs aren’t good. Home foreclosures are up, banks are getting cautious, and the growth rate of a home’s value has slowed.”
“‘As our economy becomes more diversified, and more people are living in a smaller area, we are becoming like other areas, and we’re not as well insulated from the dips and spikes,’ he said.”
“August also finds some local trends disturbing. According to data from the local Board of Realtors MLS, new-home sales through August 2007 lagged behind the previous year’s by 22 percent and were down 41 percent from the figure for 2005.”
“Sales of existing homes are doing better, August said, with the number of sales for the first half of 2007 coming in close to the total for the year before. But he said those numbers are still 21 percent below the 2005 sales figures.”
“August said his office also is seeing more foreclosures in the Joplin area, and banks are being more careful about lending, so fewer people are in the position to buy homes.”
“‘Last year, if you had a couple of dings in your credit, you could still walk into a bank and get a 100 percent loan; that’s hard now,’ he said.”
The Star Tribune from Minnesota. “The number of homeowners who are carrying the riskiest type of mortgages more than doubled over the past three years in the Twin Cities area.”
“The increases weren’t just in low-income communities. The percentage of subprime mortgages grew rapidly in wealthier areas, too. Overall, subprime first and second mortgages rose from 11 percent in 2004 to 26 percent last year, according to the Federal Home Mortgage Disclosure Act. That jump means the foreclosure crisis likely won’t end anytime soon.”
“The data suggest ‘that people are certainly stretching to afford houses in those areas,’ said Michael Grover, community affairs project director for the Federal Reserve Bank of Minneapolis.”
“In Carver County, one of the wealthiest counties in the metro area, the number of homes purchased with a subprime mortgage increased from 7 percent in 2004 to 17 percent in 2006. Even though Carver County had the lowest percentage among the 11 counties in 2006, it was a shocking number considering the suburb’s relative wealth.”
“‘It makes me more pessimistic,’ said Prentiss Cox, a University of Minnesota professor and former assistant attorney general who has been tracking the foreclosure problem. ‘That makes me think that the foreclosure problem is going to continue to be more geographically dispersed.’”
“‘I’m … very concerned about the impact that foreclosures have on the broader community,’ said Julie Gugin, executive director of the Minnesota Home Ownership Center. ‘We’ll continue to deal with this foreclosure crisis for several years to come.’”
The Detroit Free Press from Michigan. “The number of home foreclosures in Wayne County has caused a flood of complaints from residents about high grass at vacant homes and forced some communities to contract with landscape companies to keep the lawns cut.”
“‘It’s a new problem to Canton,’ said Tim Faas, director of Canton Municipal Services. ‘It affects property values.’”
“In Garden City, Jack Barnes, director of the Department of Public Services, said that up through May alone, they had 125 complaints about tall grass. For all of 2006, they only had 70, he said.”
“In Westland, officials were forced to take action because of numerous complaints. Kevin Buford, Westland director of public services, said there were 304 complaints so far this year. Normally, there are 50 to 75 complaints for the whole year, he said.”
“‘This spring that was the No. 1 grievance being called into the mayor’s office,’ said Westland Deputy Mayor Courtney Conover.”
The Cresent News from Ohio. “Just over 300 houses are for sale in Defiance County, a number that is higher than average, making real estate in northwest Ohio a buyer’s market. However, sellers are still keeping their eye on the bottom dollar and many are not allowing buyers to ’steal’ their properties.”
“Despite the national news that housing markets are crashing and prices are dropping faster than flies, numerous local realtors have said that the market in northwest Ohio is holding steady.”
“‘Defiance has always been different than the national average,’ said A.J. Minton of Sam Switzer Realty.”
“The increase in foreclosures in the past few years has had the market feeling a bit volatile. In 2006, the Defiance County Sheriff’s Office had 122 foreclosure, or sheriff’s auction sales, averaging 10.2 a month. So far this year, there have been 103 sheriff’s auctions, averaging 11.5 a month. ‘All in all, the market is not as strong,’ said Defiance broke Brent Joost.”
“Personally, Joost said he believes more homes are on the market because ‘the banks and mortgage companies are making it too easy to get a loan. I see so many people who borrow 100 percent. Then, if they get behind (on their mortgage payment a month or two), they just walk away from the house.’”
“With about 60 more homes for sale than the average, Joost said the market has shifted to a buyer’s market, however, he warned: ‘Buyers are not able to steal properties.’”
“‘People try to offer (sellers) 20 percent less,’ Joost said, thinking that with the number of homes on the market the buyer can dominate a sale. Instead, Joost said the seller will simply reject the offer.”
“‘Often times, the seller still needs their equity to buy something else, so they’re just patient and wait for a good offer,’ he said.”
FYI, shortly we will be limiting posts to one every 60 seconds in order to fight off the spammers.
Ben,
Could you give us a quick answer to what goes on behind the scenes? Most of us never ran a blog or understand how many spam postings or spam e-mails you people really get. What are we in for if we have a successful website?
I send many people here to read and just learn, i know i have kept a few people from being FB.
‘What are we in for if we have a successful website?’
A lot of work
But if you can make a living in Flagstaff or other areas of Coconino County, it sounds like a fine life to me.
I have no complaints.
Hi there sweetie…dang…the computer gawds are having a field day with me!!!
Anywho…I’m a great fan *Ben Jones*!!!
Did manage to get a modest donation off to ya darling.
Dang…I’m slightly more than a hair savvy on the computer…the spammers REALLY don’t like *you, us, we*.
Big Hug,
Geo and Leigh
“‘People try to offer (sellers) 20 percent less,’ Joost said, thinking that with the number of homes on the market the buyer can dominate a sale. Instead, Joost said the seller will simply reject the offer.”
Money quote of the day. Funny, the house down the street from is 20% reduced from earlier this year. I wonder if his Realwhore rejected any earlier offers for more than that.
Funny you mention that - I’ve heard of realtorz recommending sellers NOT take a low first offer, only to eventually take LESS than that many months of heartache and sleepless nights later. I would put in my contract that the realtorz’s commission is reduced by any amount under the intial offers if the house sells for less, even if they “seem low” at the time. Or maybe the commission drops by 1% a week - $0 after 6 weeks. Or best yet - that the realtor has to personally buy the property for 95% of the original list price after 3 months.
This would be a great time to be a lawyer dealing with the NAR.
Oops, sorry, didn’t see this post. Anyway, like I said, nothing’s wrong with offering 20% less, I’ve always considered it part of standard negotiating procedure.
a test or two
Take 20% less now or 40% less this time next year.
And check out his subsequent claim that “‘Often times, the seller still needs their equity to buy something else, so they’re just patient and wait for a good offer,’ he said.”
Patient, as in waiting a decade to receive the same nominal sales price as the FB could have had two years ago? Or is it waiting until the foreclosure and eviction processes are completed?
“they’re just patient and wait for a good offer,’ -Joost
Joostie babee, that 20% less offer WAS a good offer! Probably the best offer most of your clients will see for, oh six to ten years. By all means, wait for something better……and wait….and wait.,…
I find it interesting that realtors are convinced that the homes in their neck of the woods are holding value, and yet the stockpile of homes keeps increasing.
Are they dense?
It seems pretty obvious to most of us knuckleheads that when you refuse to lower the price, people will decide not to buy. Ya think?
Supply vs Damnedemand
“‘We had a good run for several years, from 2001 to early 2005,’ he said. ‘But in 2004 and 2005, we overbuilt, and in 2006, we saw demand slacked, and it become very clear that we had excess supply. What we’re dealing with now is there are more homeowners out there looking for more homes than there are buyers at the moment.’”
“Statistics from the National Association of Home Builders in Washington, D.C., show that the greater St. Louis metropolitan area witnessed a 19 percent decrease in new single-family housing starts between the first six months of the year and the same period in 2006.”
“In that span, that number was higher in other Midwestern metropolitan areas. The greater Chicago metropolitan area witnessed a 34 percent drop, a 28 percent decline was reported in Indianapolis and a 30 percent drop in Kansas City.”
There is obviously no residential construction recession in the Midwest.
There are plenty of developments in the Cincy area that have unfinished homes, vacant homes, infrastructure, and a lot of vacant lots. I live in one of the fast growing counties in the metro area and that counties planning department has not seen a new subdivision plat for almost a year now. Local builders are going out of business, and some of the national builders like Ryan Homes have just walked away from several projects in the last week or so. The local NAR just released numbers for August and sales are now back to 2002 levels with the average price just above the August 2002 numbers. All of this and the downturn has only really started.
A friend of mine is on a local govmint Board of Trustees. He is also on the township Planning Commission. For 3 straight months they have had no meeting, because there was nothing to discuss….nobody, not a builder, developer, homeowner, business, nobody, had any building/development plans or revisions to present to the Commission. Absolutely nothing. He says that’s the first time that’s ever happened.
A couple years ago this was one of the fastest growing parts of the metro area.
Perhaps if they would have been smart enough to take Lonnie Anderson off WKRP and put her on the tube, Cincinnati would have had chance. Only Ohio would put that kind of “talent” on the radio.
testting
“‘People try to offer (sellers) 20 percent less,’ Joost said, thinking that with the number of homes on the market the buyer can dominate a sale. Instead, Joost said the seller will simply reject the offer.”
What’s wrong with offering 20% less, even in a normal market? That’s what I’ve always done and so far, have never offended anyone. It used to be normal negotiating procedure. What, now buying a house is like buying at a retail store? I’ll bet there are plenty of sellers who wouldn’t mind an offer at 20% off.
Because 20% or more off would be an “insult” to the seller’s self esteem, which is inextricably tied to the peak-bubble estimated value of their house. That would be “just giving it away” and sellers would rather die or saw off a limb than do that. REO/foreclosure servicers on the other hand…
When I offered 7.5% off on a house in 2000 in Tennessee, they pretty much laughed at me. I truly believe to this day that “my” realtor told the seller’s agent that they could play hardball with me. I got the last laugh by squeezing almost half out of the agents’ commissions by not budging after a counter offer. The agents were so desparate that they made up the difference when the seller also refused to budge.
Got to love it when that happens.
It’s amazing how everywhere is “different” than everywhere else.
“August said his office also is seeing more foreclosures in the Joplin area, and banks are being more careful about lending, so fewer people are in the position to buy homes.”
I’ll toss you a bouquet, Joplin…
http://www.youtube.com/watch?v=XKt8mkhbklM
On a neighborhood walk this past weekend I saw my first local evidence of some rather agressive price cutting on the part of condo developers. For those familiar with the market in this part of Chicago (Edgewater) - $154,900 for any kind of new construction on Sheridan Rd. is awfully low. It would undercut the prices on many existing units where 1 bedroom condos push $200k and studios have flirted with $150k.
Here’s some pictures I slapped together.
http://tinyurl.com/2scb9w
Some good pictures, edgewaterjohn.
I need to get my camera out and start documenting the areas I frequent.
On my way into work today (River North) I saw a big billboard announcing a “condo auction” downtown. From my office windows, I can see two big sales ads — one for the “grand opening” of a condo tower and one for “city lofts” — and a huge LEASE TODAY sign on a building I’m pretty sure was a condo conversion in ‘04 or ‘05.
Another thing I’ve noticed is the proliferation of for sale signs along the above-ground El routes and major city thoroughfares (Milwaukee Ave., Ashland, etc.).
WOW…my only condo experience was one we bought for our son in 03-4ish at…er…35-6ish. Dang! That was lot’s of money and we paid cash! (To be honest, it was more of an appartment, about 886 sq ft, nice area too, with pool and all that crap…excuse my language).
Great Photo’s…nice job on documenting the absurtity! I feel sorry for people suckered into these atrocitites (soft spot).
Best,
Leigh
And yet the Mandarin Oriental is doing pre-sales?
Whats up with that?
I’ll have to borrow a camera someday and ride up IL 12 (Rand Rd.) towards Wisconsin. I went up that way and the for sale signs got thicker the closer I got to nowhere. Mostly Mid 200’s.
Great pictures Edgewater John. I live downtown and I forget how many condo conversions are going on in the northern neighborhoods.
“In Carver County, one of the wealthiest counties in the metro area, the number of homes purchased with a subprime mortgage increased from 7 percent in 2004 to 17 percent in 2006. Even though Carver County had the lowest percentage among the 11 counties in 2006, it was a shocking number considering the suburb’s relative wealth.”
Everybody played fast and loose with their finances…
Wealth and social status, notwithstanding
I bought my first house in Bakersfield in 1973. It was listed at $45K for a custom built house. The owners were getting a divorce, he was a RE agent and she was a surgical nurse. I made of list of defects as I saw them and offered $27.5K which the RE agent didn’t want to present but did. After pouting they countered at $31K which I accepted ($205mo. payment on a 30 yr). I bought my second home in Bakersfield in 1986. It listed at $175K. The man transferred his job to Modesto and his wife was living in the property. I made and offer of $130K and they accept a GI billing on the property which effectly put the offer at $127,5K. They flatly refused so I told the RE agent to flag the property and I’d up the bid if they got a higher offer. Six months and many open houses later the RE agent called and said, ‘you got yourself a house’. In both cases I had the money ready and was willing to wait to get my price. I’ll be waiting now until I find the exact property I want and at a price that I find fair. They only difference is now I want a house in prime condition and the total monthly limiting outgo that I’m willing to spend will not only include PITI but a monthly maintenence fee figured in as well. Renting has shown me that I don’t care to go back spending time maintaining a piece of property; I see owning property now as a form of rent control.
“I see owning property now as a form of rent control.”
I am pretty sure part of the Fed’s bubble reflation plan is to make anyone who rents see owning as a form of rent control.
But wouldn’t the fed have to effect wage increases to accomplish that goal?
Rents are going down in most any area they are building new still. Rents won’t go down as much as prices, but perhaps about 1/2 way percentage wise. Only places rents will hold up is good convenient locations that are top quality. Those may actually see rents rise a little.
I need a good buyer agent, are you available?
I once knew a guy who would bargin (haggle) for everything in any store except 7-11.
I’ve lived in a number of places that looked like some of those buildings, when I lived in the Northeast (Boston, NY and Connecticut). They were called apartments. No granite counters back then. WTF? Why are granite counters such a draw?
Mother Earth is not making granite anymore. Didn’t you hear?
You know when you are in a Ponzi scheme, is when J6P put up $9000 for a granite countertop upgrade and turn around and jack the price of his flip by $100,000.
Some good pictures, edgewaterjohn.
I need to get my camera out and start documenting my area.
On my way into work today (River North) I saw a big billboard announcing another “condo auction.” From my office windows, I can see two big sales ads — one for the “grand opening” of a condo tower and one for “city lofts” — and a huge LEASE TODAY sign on a building I’m pretty sure was a condo conversion in ‘04 or ‘05.
Ooooooops, this was supposed to be in response to edgewaterjohn a little ways up ….
Thanks ET. I’ve been at it since summer 2005 - anytime a sign has a price I really try to snap it quick. Otherwise years from now no one might believe us - kinda like UFOs.
How right you are.
I’ve kicked myself a few times this past summer for missing Bubble Photo Ops.
The demise of the newspaper can’t be far away, based upon stellar reporting like this…
“Just over 300 houses are for sale in Defiance County, a number that is higher than average, making real estate in northwest Ohio a buyer’s market. However, sellers are still keeping their eye on the bottom dollar and many are not allowing buyers to ’steal’ their properties.”
I think the hiring practices of newspapers and the media in general have always been to hire those who have journalistic degrees. Maybe they should switch tactic to hiring experts from respective fields. Although, I must admit, the New York Times can potentially make a mistake by hiring Lawerence Yun to be their real estate economist editor.
Absolutely, yes. Journalism degrees - pffft. What a scam.
Regarding homes sitting empty: I mentioned to associates who were buying homes that a condo complex across the street with many unsold units could end up filling up with section-8 tenants, severely deceasing their quality of life.
They laughed at me when I mentioned this last year. Now, it’s happening (central Florida area).
It’s not just the builders who get hurt from unsold homes. It’s the people who have to live near them, too.
yes indeed….lot’s of this coming to an upper middle class suburb near you! and wait till the subdivide (they will eventually just to keep’em lived in).
“‘Once we get through these disruptions, we’ll get a better sense of where the actual market is in late fall as conditions begin to normalize,’ Yun said.”
Don’t you love it how he says that conditions will normalize in the fall as if it were a fact and then gives no evidence to back up his statement. I guess he can’t present any facts to support his statement because all the facts point to a disaster in the season that is aptly named fall. For instance, mortgage resets and forclosures are still increasing and will not peak until well into 2008. Maybe he ment NEXT fall.
He’s probably not that quick…but he said ‘late fall’ as in any late fall will do. Late fall 2012 is a fair bet.
A somewhat contrarian view:
Most of the transactions in the last few years were the same 5-10% of the houses in a particular neighborhood. Either flippers or people that traded up every few years, always borrowing 100%. Therefore, in reality prices were going up on that small fraction of houses, and therefore, prices will come down for those same houses until they are swallowed up by investors or other buyers. There will be no crash of prices since, as the article quoted stated, most sellers don’t have to sell so they will wait it out. I think many of the sales that happened in the last few years were people that wanted a quick buck. The long term owners will just tough it out.
The bottom line is that people that already own homes have the advantage, the vast majority don’t have 100% loans or resetting ARM’s. Most, in older neighborhoods, have no mortgages or fixed rate mortgages they got several years ago. Buyers who wait will simply watch their rents steadily go up as the people that lost their houses bid up the rents in their neighborhoods since their jobs are nearby. There will be no “crash” unless there is a significant rise in unemployment - which I haven’t seen anywhere.
Sounds good until you figure in all the Helocs that transpired in those homes that were owned, somewhat free and clear…
That is what is most shocking. You see people oweing $400K on a house that they bought 20 years ago for $25K. Alas, to a poor person, credit is wealth not assets.
One word “HELOC”
got cash?
Or, as a former neighbor likes to say, “Here’s the ultimate easy financing program: 100% down, no additional payments.”
100% down, no additional payments.
So, in that situation this is a form of getting free rent.
And if they get cash back on closing they are in essence getting paid to rent.
The part you’re forgetting is that property tax valuations rose for all the houses in the neighborhood, not just the flipped ones. And sadly, many long time owners felt that the equity was real, and HELOC’ed their way to a “better” life, assuming they could sell for a profit at any time. True, most houses will not be foreclosed on, but prices are set at the margin and all that “wealth” will just disappear. Given that home equity withdrawl was a large part of discretionary consumer spending over the last few years, this will have real effects on the economy.
Actually, the absolutely worse thing that could attack the national economy is a normal - 5 to 10% - savings rate. I doubt anything else would more quickly lead to widespread despair. That said, the loss of wealth effect dollars is a large problem over the horizon.
I agree that a wild card in all of this is the HELOC situation in that: 1) just how many HELOC’s were done on homes other than my 5-10%, and 2) what are the terms of those HELOC’s - are there major resets or will the rates simply float.
If the rates just float then you won’t have “distressed sellers” and not much more inventory coming on the market. ALso, if I am right about the 5-10% then the majority of sellers that need to move or want to retire will simply rent and because they purchased before the run up, any rent will cover the PITI.
I think there is pressure on prices, but except for some isolated areas, no “crash” coming with 40-50% price declines from 2003-2004 levels - at least in SoCal.
Hey John
I respect your polite tone. However it is not that way in the inland empire CA. I am seeing prices come down here as well in North Orange County. Prices compared to there tops are going down substantially.
“Therefore, in reality prices were going up on that small fraction of houses, and therefore, prices will come down for those same houses until they are swallowed up by investors or other buyers.”
Do you know what a comp is, and how it relates to future sale prices for homes in the area? To summarize, the 5-10% of homes selling in an area have a disproportionate effect on the market price of the 90-95% of homes not selling.
Your argument also relies on a fallacious assumption that there is something “different” about the homes that sold which makes their market values (as evidenced by sale prices) uncorrelated with the homes not selling.
One more point: Generally speaking, there can be a difference between the 5-10% of homes selling versus the 90-95% of homes not selling, but this difference works to undermine, not bolster your argument.
If half the homes in an area had market values which only fell by 5% and the other half had market values which fell by 50%, which group of homes would be selling and which would not sell because of owners’ unwillingness to test the rough waters of the market?
By the way, are you a real professor, or do you just play one on the blog?
If so, what is your discipline?
I always enjoy your comments.
As much as I love a contrarian perspective here’s the problem with your idea:
You know there is a record amount of inventory of houses for sale. You know that the record for homeownership was set at the peak of this bubble in 2006. Many, many of those last transactions from 04 to 06 were made under ludicrous lending conditions, right?
So there is record excess supply, demand is being eviscerated in record fashion as even the most marginal of buyers has already bought (under the old lending game). Those people are now vaporized from the market; they’re walking away from the properties they could never afford and will not be able to buy again until they’ve repaired their credit dramatically. There is no one to replace them as bidders.
In other words there is a gaping hole between supply and demand and its getting WIDER by the day. Yes, rents in some areas may go up but rents in places with tons of condos may just as likely go down. Worse is the change in market psychology. The notion that real estate is a good investment is about to undergo a mighty shock, one that surely will test the faith of the most ardent believer in this “asset”. Many potential buyers will revisit the quaint notion of “affordablity” and decide to continue to wait. Mostly, bankers, actually will insist on affordability come to think of it.
End result? Prices revert to the mean….as they do continously with all asset categories that get artificially pumped up. By the way, I live in an older neighborhood, don’t have any need to sell but have no delusions about what I could get for my property now or over the next few years….about 60% of the peak (absurd) value most likely (as its already 20% off peak prices around this old neighborhood in Boston).
Perhaps a couple more facts are in order…
(a) HALF of all mortgages have been originated since 2003.
(b) Despite the massive run up in values, owner’s equity has substantially DECREASED.
Almost everyone has been accessing the old housing ATM regularly.
“(a) HALF of all mortgages have been originated since 2003″
THAT is a scary statistic, I hadn’t heard that. Just to generalize a bit, that would mean that a huge proportion of loans were made at near-peak values. I suppose the question is, what was the average LTV on those mortgages and what percentage were purchase loans versus HELOCS. Purchase loans would have to have LTV’s between 75-95% and those people could have some problems. What do you think the average LTV on a HELOC is? And what percentage of those loans since 2003 are HELOC’s?
Not if you consider that there are people like me that refinanced after 2003 to take advantage of a 2% drop in rates (went from a 15 year fixed to a 10 year fixed so no more time on note)
Wow. That is scary. Do you recall where you found that stat, tj&bear? Thanks!
–Mike
Old news, I guess. Still makes me shudder.
“The American Housing Survey reports that 70 percent of outstanding loans have been originated since 2000, with the number lower for people over 65 and for African-Americans. Western homeowners have younger mortgages.”
“More mortgages were originated in 2003 than ever before — a total of $4 trillion, with $2.5 trillion in refinancing and the rest loans for purchase.”
http://realtytimes.com/rtcpages/20070111_monthmortg.htm
There was a crash in Austin TX in 1985-1990 with 3% umemployment (max) and declining interest rates. This due to speculative mania and overbuilding followed by a negative change in psychology and tax law changes in 1986 on rentals. This time is worse (mania, price/income, and toxic loans), except for the tax law changes.
56 acre compound for sale…
B.Y.O.M.
http://news.bbc.co.uk/2/hi/americas/7012020.stm
“The increases weren’t just in low-income communities. The percentage of subprime mortgages grew rapidly in wealthier areas, too. Overall, subprime first and second mortgages rose from 11 percent in 2004 to 26 percent last year, according to the Federal Home Mortgage Disclosure Act. That jump means the foreclosure crisis likely won’t end anytime soon.”
“The data suggest ‘that people are certainly stretching to afford houses in those areas,’ said Michael Grover, community affairs project director for the Federal Reserve Bank of Minneapolis.”
The data suggest that lending standards went out the window, unbeknownst to folks buying in wealthier areas who had no idea that lenders would willingly make loans without a reasonable expectation of ever getting the money back.
However, sellers are still keeping their eye on the bottom dollar and many are not allowing buyers to ’steal’ their properties.”
No, these sellers are just going to let Father Time steal their equity as it drops and drops and drops to below what who knows they owe on the HELOC.
“‘People try to offer (sellers) 20 percent less,’ Joost said, thinking that with the number of homes on the market the buyer can dominate a sale. Instead, Joost said the seller will simply reject the offer.”
Yes, wait for that next offer.
Have seen this happen many a times.
Agent told seller not to accept a $1.8M offer (listed a $1.85M). Final selling price = $1.5M.
Another would not accept anything less than $1M. Final selling price = $875K.
Yeah, just wait for the ‘right’ offer, seller…
“‘Often times, the seller still needs their equity to buy something else, so they’re just patient and wait for a good offer,’ he said.”
Cut the poor Realtor from NW Ohio a break, our bubble was 3% a year from 2000 to 2007. It’s not excatly bubble country. Different ? No, Bubble ? Ummm not so much either. Now we still have HELOCed FBs and a crappy local economy, but it’s a long way from Las Vegas (a recent visit left me a bit shocked at the scale of the problem despite being a regular reader of this blog)
Who is gonna buy all these advertised homes? Who?
this was funny to see Defiance, Ohio on here. I am originally from an even smaller town nearby. I think the statement that the town isn’t as affected by the housing meltdown may have some validity–this is a place where you can buy a gorgeous historic downtown building for around $80k.