Everywhere The Story’s The Same
The Boston Globe reports from Massachusetts. “The explosion in home foreclosures and a tightening in mortgage lending dragged down real estate prices in Massachusetts in August, a real estate research and publishing firm reported. Warren Group in Boston said median single-family home prices last month fell 4.9 percent, to $314,000, from August 2006 - the 16th consecutive month in which prices have declined.”
“‘Everywhere the story’s the same,’ said Patrick Newport, US economist for Global Insight. ‘You’re having more foreclosures, and they’re adding to inventory, and they’re putting more pressure on prices to drop.’”
“One longtime home shopper, Louis Rivers, reports the market ‘feels very weak’ and is ‘getting slower and slower.’ At open houses, he said, ‘very often I’m the only person there.’”
“Rivers expresses no rush to buy now. ‘I don’t feel the prices are going to go up,’ Rivers said.”
“Randy Wilburn, a real estate agent and homebuyer counselor in Boston and Milton, called the mortgage tightening the ‘X-factor’ in the market. Some buyers have pulled out of sales agreements in recent weeks, he said, ‘because they didn’t know what was happening.’”
The Boston Herald. “‘The market is stuck in a rut - (and) I think we probably have more of the same to look forward to for a while,’ Warren Group chief Tim Warren said.”
“Economist John Bitner of Boston-based Eastern Bank blamed the continued weakness on too many unsold homes clogging the market. ‘When you have a big supply of unsold inventory, the way you move it is to drop the price,’ he said. ‘So, what we’re seeing is a gradual erosion of price that I think will continue until the inventory clears.’”
“Boston developer Joseph Fallon will break ground today on Fan Pier - a $1 billion-plus bet on Boston’s waterfront that comes even as the local real estate and financial landscape is shifting.”
“In Charlestown, a major Navy Yard condo project recently flopped. After efforts to sell units fizzled, the developers of the new Harborview II complex opted to put the entire building on the market as a rental project.”
“Meanwhile, in East Boston, a long-anticipated remake of the neighborhood’s waterfront is still pending, despite years of planning and discussion. One big project, East Pier, will move into construction next month, but as apartments, not condos, a spokeswoman said.”
The Daily Times from Massachusetts. “The popping of the real-estate bubble isn’t going to have much effect on local property valuations or tax revenues this fiscal year, according to the town assessor. But fiscal 2009, which starts July 1, 2008, could be a whole different story.”
“Assessor Cheryl Gillespie said that’s because the valuations used to compute fiscal 2008’s tax rates were based on real-estate sales for 2006, before the national slump in housing sales and decline in prices.” “Condominiums were the one part of the real-estate market where things weren’t quite as bright in 2006, however.”
“‘The condo market was stable at the beginning of 2006,’ Gillespie said. ‘My final evaluation may show some depreciation because we have such an abundant supply of condos.’”
“The poor condo market is to blame for the recent auction of the site of the first million-dollar-per-unit luxury condo project approved for Salisbury Beach Center, said 2 Broadway’s former owner Peter Carbone.”
“‘Everything in this business is about timing,’ Carbone said at last week’s public auction held by Carbone’s mortgage holder, Provident Bank.”
“Carbone needed to pre-sell at least eight condos priced at from $500,000 to $1 million to get the financing package to build, he said. After spending a year beating the bushes, he only had pre-sell agreements on four. That wasn’t enough to get the five-story, 24-unit, residential/commercial project built or maintain the $1.4 million mortgage on the Broadway lot he paid $1.5 million for in 2006.”
The New York Post. “Manhattan alone appears to be weathering the latest housing storm that’s driving prices to 16-year lows across the nation’s suburbs and cities.”
“But the Big Apple could get cooked. Foreclosures on homes in the five boroughs surged 97 percent in August from a year earlier, according to RealtyTrac data.”
“In the New York metropolitan area, homebuilders have slashed prices of some new homes in the suburbs by as much as 23 percent to prod sluggish sales. Condo asking prices in the outer boroughs have also declined as much as 5 percent in some areas.”
“But in Manhattan, where a one-bedroom condo on the Upper West Side sells for up to $1.5 million, sellers apparently aren’t budging on their asking prices.”
“‘I’ve discussed it with some sellers about adjusting their prices, but there’s a standoff - they think the [Federal Reserve's] rate cut was their reprieve,’ said broker Rick Kelly.”
“Kelly believes the widening housing stagnation will ‘”take a while - months - to soak in’ with Manhattan sellers. He predicted Manhattan’s first price drops will hit in the $800,000-$1.5 million co-ops and condos on the East Side and Upper West Side.”
“Meanwhile, the Standard & Poor’s/Case-Shiller index of prices of existing homes in the 10 largest metropolitan areas yesterday posted a 4.5 percent drop in July from a year earlier. That’s the index’s largest drop since the recession of 1991.” “In the New York City area index, prices slid 3.8 percent.”
The Financial News. “Credit Suisse is cutting approximately 150 jobs in its mortgage-backed securities business in New York and London in the wake of redundancies by rivals in similar businesses that have been hit by the fallout from the sub-prime crisis in the US.”
“A spokeswoman for the bank confirmed close to 150 jobs are to be cut, but that the redundancies would predominantly come in the New York office with only a very small proportion in London.”
“A structured credit banker at a European bank in London said: ‘There is inevitably going to be a degree of retrenchment within investment banks as some scale back operations this year because of losses or a fall in demand for structured products.’”
“He added: ‘Bonuses will also almost certainly be down this year, provoking a lot of movement between the major participants.’”
From Newsday in New York. “Come next November, Kathryn Clejan’s adjustable rate mortgage will get a whole lot more expensive. In fact, she estimates, it could rise by $1,986 a month, which the single mother of two boys can’t afford.”
“Clejan is carrying a $496,000 interest-only mortgage on her Manhasset home with monthly payments of $1,760. Though she says she knew when she took out the loan in 2003 that the payments would balloon at the end of five years, she had no choice. She needed the lowest possible rate or faced losing her home.”
“‘Having an interest-only loan kept me in my house during the divorce,’ said Clejan, a loan officer at Americana Mortgage Group.”
“Like many people with ARMs, Clejan is facing a difficult decision. She has to figure out how long to keep her current mortgage, which carries a 4.25 percent interest rate, before refinancing to a rate that would likely be in the 6-percent range. If she refinanced now to another interest-only mortgage, Clejan estimates her monthly tab would go up to $2,746.”
“That would put a greater strain on her monthly budget at a time when her income is suffering from the turmoil in the mortgage market.”
“Many homeowners with checkered financial backgrounds who obtained subprime mortgages are really stuck, real estate experts said. ‘If your credit is pathetic, so are your chances of getting a loan,’ said Keith Gumbinger, VP at HSH Associates.”
“Some 35 percent of the loans made in 2004 carried adjustable rates, according to the Federal Housing Finance Board. Tens of thousands of Long Islanders have such loans.”
“Among first-time homebuyers the estimates are as high as 50 percent, real estate experts said.”
“Many of these homeowners thought — or were told — they could simply refinance to more favorable terms once the teaser rates were up. But they are now finding this isn’t the case.”
“‘They played the market and they played it wrong,’ said Don Romano, president of a Lake Success-based mortgage broker.”
“The stagnation — and even decline — of housing prices has hurt some homeowners’ chances of refinancing. Some are carrying mortgages worth more than their homes. ‘A lot of people don’t have a way out,’ said Mike McHugh, mortgage banker in Melville.”
“Richard of Hewlett, who asked that his last name not be used, is struggling to find a new mortgage before the monthly payments on his ARM become unaffordable. The rate, pegged at 8.25 percent for the first two years, will soar to 11.6 percent come Jan. 1.”
“Richard and his wife decided to buy a home in 2005 after their landlady sold the house they were renting. They knew the $2,830 monthly payments would be a stretch, but figured they could make it work for two years while they improved their credit profiles. That would allow them to qualify for a better rate once the reset came.”
“To their dismay, they have not been able to raise their scores enough…At the same time, they are seeing the value of their home decline as the market slips — despite thousands of dollars of repairs they are doing.’”
“At this point, they are just hoping rates drop a little more so they can find a mortgage they can better afford, at least temporarily. Otherwise, Richard said he is hoping he can work more overtime.”
“‘It’s nerve-wracking,’ said Richard. ‘The last thing anyone wants to do is lose their house.’”
FYI, we put in a limit on posting. One every 60 seconds, please. The good news is it seems to have beat the spammers. Ha! Good work Jason.
Good Work BEN! Might be a little annoying to us but it might work : )… I hate seeing my posts get stuck as SPAM and then waiting for you to approve them.
This is outrageous! I demand my constitutional right to post every 38 seconds!
Just joking.
“But in Manhattan, where a one-bedroom condo on the Upper West Side sells for up to $1.5 million, sellers apparently aren’t budging on their asking prices.”
this problem is solved after the christmas bonus. I have a feeling that it is not nearly as good as last year. Seller should wise up and sell before Christmas.
oh.. is that all it is.. i thought i had only 60 seconds to compose my masterpieces.
Implementation of a CAPTCHA would help here. They are not difficult to implement.
Google it. Learn it. Love it.
60 seconds is plenty of time, in fact more than enough . . .
just ask my wife !!
used to be you only saw luxury cars around manhasset and great neck. in the last 2 years i’ve been noticing a lot more regular cars including a bunch of civics. i guess this is the reason why. people bought into a good area and skimped on the car.
Hey, don’t you go revealing my parents’ secret, DBA! They’ve driven VWs in a Cadillac/BMW neighborhood for decades.
In Santa Cruz, CA for years you could easily identify the homeowners. They were the ones driving the beater cars.
If it wasn’t for the amateur shopping shills, who would show up?
“One longtime home shopper, Louis Rivers, reports the market ‘feels very weak’ and is ‘getting slower and slower.’ At open houses, he said, ‘very often I’m the only person there.’”
I’m calling November 15, 2007 Capitulation Day…This is 90 days from the Aug 15 tightening of lending standards. I figure the homeowners who couldn’t afford the higher adustable rates and could qulaify for new financing, would live off their credit cards for 90 days. That means Nov 15. Capitualaion means that everyone, everywhere will become the cheapest listing on the block. In the age of instant news, the race to the bottom will be the fastest of any down cycle everywhere.
Circulation of the news may be instataneous, but not the reporting to the general public. People in general are just beginning to hear what seemed obvious to you six months ago. You are in the minority. I think your Capitulation Day needs to be rescheduled nine to twelve months out at least. Two year ARM resets peak when, March 08?
There will no doubt be a capitulation day, but I’m betting on it being the dead of winter. I’ll take Feb 15th, 2008.
Hello,
I am Lawrence Yun of the National Association of Capitulators. I forsee a strong rebound in capitulation this fall with an upward trend of 10% increase through 2008. Capitulate now or be capitulated out forever
I get a daily email from InvestorWords.com…it’s helpful, cause I’m trying to learn various mysterious words..anyway, here’s today’s word of the day….we talk a lot about this….
Term of the Day
_____________________________________________________________________
hard landing
“When the economy goes directly from a period of expansion to a
recession. This might happen if a government or monetary authority is more restrictive in its fiscal or monetary policy than what is
appropriate for the economy. opposite of soft landing.”
Now, is it just me, or has our “monetary authority” been LESS restrictive lately?
Sometimes the plane is going down so fast that nothing can help.
It’s not a hard landing, by virtue of the fact that the plane didn’t stop immediately when it hit the ground. Instead it made a crater and went further down.
“if a government or monetary authority is more restrictive in its fiscal or monetary policy than what is appropriate for the economy”
That seems to assume that there is an appropriate rate for the central bank to use for every possible economy. That a severe downturn is always avoidable if the right rate is used. I think I disagree.
Also, and this is a real question, isn’t it supposed to take at least 18 months for the full effect of a rate cut to be felt in the economy, even assuming it has the power to help?
Applying a firm definition to a colloquialism or argot is a problem. The term is meant to evoke a picture or emotion. ‘Hard Landing’ could mean different things to different people or groups, or in different contexts. RE ‘professionals’ might think that a hard landing is one where they can’t get a sale. An economist might apply the text book definition. The guy at the steel mill might find being laid off is a hard landing.
If this definition is to be literally applied, then ALL recent recessions are hard landings. In all cases we have gone from an expanding economy to a contracting one. I don’t remember when we might have had zero growth for an extended period of time.
“At this point, they are just hoping rates drop a little more so they can find a mortgage they can better afford, at least temporarily.”
Leapfrog from teaser rate to teaser rate for thirty or more years? What a way to face up to the problem.
It’s the next logical step up from moving credit card balances back and forth to keep them on teaser rates. Nobody ever told them that was a problem, everyone told them they were smart.
“‘Having an interest-only loan kept me in my house during the divorce,’ said Clejan, a loan officer at Americana Mortgage Group.”
The article left off the part where she surely complained “but I didn’t understand what I was signing. I promised myself that I could refinance into another loan in 2 years. I was lied to!”
Exactly.
This is what is amazing about the story. She is a loan officer. She knew fixed rates were at historic lows. She knew in five years she was toast. She took the ARM anyway.
And what the heck is a single mortgage broker doing with a $500K loan anyway? Even if she had the $170K income theoretically required based on traditional metrics at the time, that clearly wasn’t an income to be counted on.
Its all about image. If she lived in a modest house it would imply that she was a “loser”. Ditto on dumping the Escalade/Hummer for a plain ordinary car (not a BMW/Audio/MB/Lexus etc.)
On a related note: where I work I have noticed that the people in Marketing all drive “winner” (i.e. expensive) cars, while the R&D staff drive cars that probably only cost 20K when new (and they drive them into the ground). Yet we are paid similar salaries.
“Ditto on dumping the Escalade/Hummer for a plain ordinary car (not a BMW/Audio/MB/Lexus etc.)”
And that is why we should TAX THE SNOT OUT OF GARGANTUAN SUV’S.
Well I’m glad someone else noticed that little fact! What on earth was this woman thinking, and why didn’t she save some money while she had that incredibly low rate?
Well I’m glad someone else noticed that little fact! What on earth was this woman thinking, and why didn’t she save some money while she had that incredibly low rate?
She’s divorced… she got the kids and the house, and hubby’s got a hot new girlfriend. My guess is, he made the bux, she planned herself a little stress-free life of shopping at Bergdorf Goodman, “working” in real estate part time. She just didn’t realize that after the $100K fairy-tale wedding, reality sets in. Fast forward a few years, his secretary’s head is banging the desk like a screen door in a hurricane and she’s writing herself a fraudulent Alt-A and borrowing money to put the gas in the Land Rover.
Sorry loser, cut off some of your fake highlighted hair and throw it in the Rover with your $500 Coach bag, the giant designer sunglasses, 20 pairs of shoes and the last 20 outfits you bought, and set the whole thing on fire… and KYAGB.
/vitriol off
Drowing Pool
EXCELLENT post re the real estate loser mom !!
When I drop off my daughter for her gymnastics lessons here in Roseville Ca at Byers, there is line of Huge SUVs driven by same status seeking soccer moms. Youve described em accurately.
WHY DOES A 9-PERSON SUV NEED TO TRANSPORT ONLY MOM & DAUGHTER ?!! answer; IMAGE. IMAGE. !!!
I laugh so hard at these posers as I pull away in my average Isuzu Rodeo or Corolla. And whats worse is their snotty air of superiority as they drive like azzholes, tires squeeling in U-turns to drop off Tiffany, Tiffanee, Tiffani, or Brianna. If I hear one more kid named “Hunter” I’m going to throw a cell phone.
Do these YUppie posers take classes in pretension or what?
I mean, they all think they are so unique but fail to realize that following a trend (like the jennifer aniston hair syle) that 100 milliion OTHER YUPPIES do is not unique. Changing tiffany to an ” i ” IS NOT UNIQUE !!
God these posers just SLAY ME! Like the Montelongo ho-bag in FLip This House or whatever series. tiny little whack at a countertop , whew such work, then off to designer hut flashing her rack. HA. HA HA!
Notice armando doesnt talk smack to workers that would kick his ass in a new york minute. what a loud mouthed punk he is.
ok my vitriol is spent also hehe
Clejan is carrying a $496,000 interest-only mortgage on her Manhasset home with monthly payments of $1,760. Though she says she knew when she took out the loan in 2003 that the payments would balloon at the end of five years, she had no choice. She needed the lowest possible rate or faced losing her home.”
“‘Having an interest-only loan kept me in my house during the divorce,’ said Clejan, a loan officer at Americana Mortgage Group.”
I know that you know, WT, but for anyone not familiar, Manhasset is a very ritzy neighborhood- that is where the tony upscale shops, Whole Paycheck, etc. are located. If finances does not involve calling your trust fund manager and telling him/her to pay for something, you DON’T BELONG IN THE FRAKING NEIGHBORHOOD.
Same thing with Hewlett, for wealthy people only. Subprime rats have no business even to be living under the porches.
This is the email i just sent her about the story:
Why cant anyone face reality: Kathyrn:
INTEREST ONLY LOANS MEANS YOU ARE RENTING THE MONEY FROM THE BANK….
You could have rented from a Landlord for LESS $$$$
Plus when she gets laid off from her Mortgage flipping job, whats next? ……. And a Scary thought:
How many loan applications did she falsify just to make her commissions? She will be looking for work, do you really want to hire such dishonest people……..?
Reading the complaint again reminds me of the meaning of ‘Kool-Aid”. She ‘didn’t understand what she was signing’…’I promised myself’ …’I was lied to’. Lying to yourself and then complaining about it is strange. Very strange.
Not any more apparently.
As much a I enjoy a good pile-on, maybe this woman’s situation is understandable in the context of a divorce. I know women who have made the same “mistake” of buying out their ex-husband’s half of the house so the kids could stay in their home and continue to go to the same school.
If the alimony and child support checks arrive on time, along with some employment income, maybe they can make it. More often, not. How many of you, faced with the collapse of your family, wouldn’t grab at a loan that gives you and your kids 5 years of breathing room?
This article in the NYT describes the plight of the would-be owners who think that a loan is free money - complete with pictures of the doom and gloom - http://www.nytimes.com/2007/09/25/business/25broker.html
“‘Everywhere the story’s the same,’ said Patrick Newport, US economist for Global Insight. ‘You’re having more foreclosures, and they’re adding to inventory, and they’re putting more pressure on prices to drop.’”
Geez… a gee whiz economist tells us capitalism is about offer and demand.
Thanks to you I now know that prices don’t go up when inventory increase. What a dummy I was!!!
Nice hurricane fence in front of their half-million dollar home.
I’m sure the photographer cut out the dog chained to the tree in the side yard.
What people will pay for a piece of the “American Dream” is astounding. You couldn’t pay ME to live there and let my kids ride their bikes through that neighborhood.
I’d wager that compared to wherever he came from it looks pretty good. Of course, for 600K he could probably buy half the village he came from.
Ya gotta love it. An obvious illegal alien who can’t speak English buys a 600K house in Clownifornia, only to figure out that he can’t afford it on his construction worker salary.
Amazing, isn’t it? They got some big guns on their side, Greenberg-Traurig taking this one on pro-bono. Hmmm…
And, he now has a high-powered law firm suing on his behalf.
How nice.
How nice of that law firm to be so considerate and fight for the underdog for $500/hr like that plus a percentage of settlement. Lawyers really are decent people. LOL
“It was no fair.”
Illiteracy + entitlement.
What beer goes well with a recession?
Skip the beer. Try Thunderbird or Night Train wine.
I did MD20 when I was a teen once. Years later I was amazed to see it still available on shelves, but that soon passed. Recessions were made for MD20.
How about some “Chateau Skid Row”?
Don’t all beers go well with a recession?
LOL. Yeah, come to think of it, they do.
How about cheap beer?
natural light comes to mind.
That being said I predict Natural Light will be one of the expensive beers 15 years from now, kind of like Rolling Rock and Yuengling used to be cheap beers 15 years ago. Surprised Ortlieb’s didn’t make the cut too.
Any beer with a weak body and all head. Like warm Coors with 6 inches of foam.
It’s “froth”, not “foam”.
“Any” beer.
Milwaukee’s Best (aka “The Beast”) or any other cheaper beer or malt liquor.
Red, White and Blue
(not to be confused with Pabst Blue Ribbon)
Ahh, Red, White and Spew. Every broke college kid’s best friend. I last had some in the mid 80s, and haven’t seen it for awhile. Maybe it, like so many other vomit inducing trends from the 80s, will be making a comeback.
Me too, only early 80’s. Plus the beer with “BEER” in black letters on a white can. Pure rockgut.
Blatz
Maybe it, like so many other vomit inducing trends from the 80s,
You must have read my mind.
I just got a promo for an outlet sale. The only thing the models are missing is “tutta” big hair.
I have previously urged HBBers to obtain what is arguably the most valuable skillset ever–that of brewing your own beer. You simply cannot go wrong. If there is a recession, hooray! If there is not a recession, hooray! There are neverending hoorays involved in brewing your own beer.
–You can brew precisely to your own tastes.
–It’s very inexpensive. A kit for 5 gallons is about 20 bucks, and if you make your own kits, even less.
–It’s surpassingly easy. Even a realtor could do it. Well–your smarter realtors could, anyway. Maybe.
–You can do it anywhere. I brew in my laundry room. That way 5 gallons of beer is handy whenever I want it.
There are neverending hoorays involved in brewing your own beer.
LOL. You’ve convinced me.
I brew in my laundry room.
I hope you have labels, something like:
Dirty Laundry Ale
Homebrewing is a lot of fun.
I’ve done that a number of times and thoroughly enjoy it. Made some fairly potent stuff too.
Just wait until beer makers start using the 11.5 ounce can to boost profits.
Don’t ya just hate that?! I think Frito-Lay is the worst about doing that. It’s like you pay for a bag of chips and you get a balloon.
No, instead they’ll use a 16 oz can and double the price.
16oz cans tend to be for the paper bag in the park set. Which makes it perfect for realtors and mortgage brokers, come to think of it.
A beer fit for the housing market. A cold one.
“But the Big Apple could get cooked. Foreclosures on homes in the five boroughs surged 97 percent in August from a year earlier, according to RealtyTrac data.”
Would anyone care for some Thanksgiving Big Apple pie?
97 PERCENT in ONE YEAR!
And he thinks the “Big Apple could get cooked”???
Stick a fork in that turkey…it’s done.
Then give them some pie.
Just a small observation, but there are a lot of small, empty storefronts along Broadway, and I live in the mid 80s–the heart of the Upper West Side. Some of the big chains have closed recently–a Baby Gap and Talbots.And two twonhouses have now been sitting with for sale signs for nearly 2 years–both have Corcoran signage.
i just heard on the news that the uws, from 97th to 110th, rsd to cpw has been rezoned with limited height — 14 stories on the aves, and 6 (or 7) stories on the side streets. this is in response to the fevered (and ineffective) opposition to the ariel double barrel 31/37 storey new construction, just completed, on bway bet. 99 & 100 (which i sort of actually like, as these glass/mirrored columns give just a bit of a shot in the arm to this formerly slightly ossified neighborhood). just enough — but not too much — of a good thing, imho.
i find this interesting, and . a successful effort to maintain the quaint, relatively uncrowded neighborhood bet. the massive construction that’s gone on just south, and more recently, to the north with columbia u expansion….
Greedy landlords kick out existing firms that steadily pay modest rents, replacing them with chains at high rents. The chains pull out when they can’t make enough to justify the rent, leaving the greedy landlords with vacancies.
Today the retail market, tomorrow the housing market?
Really? Damn. I got some really cute rubber mocasins at that Talbots. End of season over 50% off sale.
I got so much use out of them, they now have holes. Not very waterproof. Sigh. I hate throwing out useful shoes.
“‘I’ve discussed it with some sellers [NYC condos] about adjusting their prices, but there’s a standoff - they think the [Federal Reserve’s] rate cut was their reprieve,’ said broker Rick Kelly.”
******
Cognitive dissonance. What? Are they going to wait until 2018?
The longer they wait to lower prices, the bigger the reduction when they finally do sell it.
Good luck to them!
That quote is really interesting. HBBers discussed the ramifications of the rate cut as it pertains to buyers, but I haven’t seen too much discussion of how sellers would react.
Well now we know.
I posted this on bits and buckets but I though it might be of interest since it’s getting late;
According to the NAR one in five realtors report having sold a home to an international client in the past year. With the falling dollar and ample inventory this is the mortgage underwriters dream come true especially in FL.,CA.. This could be the answer to the Feds rate cut, the cure for housing crisis and a step closer to globalization. The light has come on.
Source: Secondary Marketing Executive by Paul Decoff
Great, I am going to be the only fired at the nuclear power plant now.
I dunno, unless those international buyers are paying cash, how would it be determined if they are creditworthy or not? If banks now have puckerbutt, wouldn’t they feel squeamish about lending to someone from abroad, who could be out of their reach in the case of a foreclosure? I just don’t see how that would work.
Now, last month’s Vanity Fair had a great article about all the Russian money trying to buy up homes in Lake Como, Italy. So maybe places like West Palm Beach, parts of Miami and Sarasota/Naples could see this happen, but I doubt if moneyed foreigners are going to want Mc$hitboxes in some HOA here. And that’s another thing, if I’m in a HOA, I’m really going to be leery of foreign buyers. What happens if they don’t make their HOA payments?
Anyway, if the money has run out here in the US in terms of buyers, wouldn’t it also be the case that foreign buyers also have shot their wad already as well?
Back before banks got stupid, I was in my first job after law school. We shared offices for the first year or two. My roommate was the Italian foreign associate. He never bought, but he talked to some banks about loans. They told him the only way they would lend him $x was if he maintained an account at the bank with at least $x in it. Might have been $x plus a little more. This was about 1994.
In times of tight money (and wavering real estate values), foreigners buy with cash, from a bank back home that will take foreign (US) real estate as collateral or not at all.
Also, the co-ops will have their own very strict rules about funding for the co-op fees for a person who won’t be around much.
The article said that the international borrower would have to have at least the cost of 12 months of principal payments and interest in an American bank account. Also Foreign investors may be predisposed to finacing more expensive properties with the goal of deversifying thie portfolios.
I can see wealthy foreigners buying more expensive properties, like luxury properties in places like Palm Beach (NOT West Palm), Sarasota, even Miami and other places as well. Don’t know if it will happen, but it is possible. But like I said, I don’t see wealthy foreigners buying in Mc$hitbox developments. In other words, I don’t think the Inland Empire in CA, or Polk and Pasco Counties in FLA are going to see a whole lot of foreign buying. I’m basing this on what dimedropped wrote about the appraisals he was doing in some of the Central Florida developments, where indeed foreigners (mostly England and South America) had already purchased and in fact some claimed homestead exemptions.
Anyway, it’s a mess, for sure. I was just cruising the internet looking at various complaints from all over the country against builders. Wowie-wow-wow-wow! How’d you like to get stuck in one of those places? Homeowner hell.
“In times of tight money (and wavering real estate values), foreigners buy with cash, from a bank back home that will take foreign (US) real estate as collateral or not at all.”
Thanks, polly. I find many of your posts valuable when it comes to matters of this nature. You just answered my question: foreigners will have to buy with money from a bank back home that will accept the US property as collateral, or not at all.
I’m guessing, given the nature of our reputation abroad in financial markets at the moment, there will be a lot of “not at all”.
You are very welcome. I’m glad to share what I can.
I remember that day very clearly. Nico was completely stunned when he actually understood what the banker was saying. He was more than willing to open an account at the bank, but he expected to deposit a few thousand dollars in it.
Just goes to show that there really was a time when banks only really wanted to lend to people who didn’t need it.
the super-rich can pay in cash. in many of the best manhattan co-op’s, buyers must have multi-millions in liquid assets.
and then they still have to pass the board interview.
it was no accident that richard nixon moved from the white house to saddle river, nj. he couldn’t find a manhattan co-op board to approve his purchase.
It amazes me to no end that people would even submit to stooping to being “interviewed” to live somewhere. No place is worth that, I don’t care where you’re at.
… which just goes to show how badly some people want to live in the best neighborhoods of manhattan!
Most places in Europe require a reasonable down payment, so these people will have that. They also have a strong currency, which means buying in $$ is an xmas party for them. Isn’t it great that we live in a country with 3rd world money now?
That’s definitely not true in the bubble countries. I did a search for Danish subprime lenders and sure enough there are firms offering 108% LTV, bad credit no problem.
Maybe in Germany but they have not had the appreciation. You need to get the ball rolling and then the idea is that 10-20++% appreciation enables the crappy loans to be written.
Ultimately, if foreigners really wanted to buy US properties, they would have continued buying mortgage back securities via T-bills. Apparently that’s not happening. LOL
I think this argument is kind of going down the “The rich snow-birds and boomers will arrive soon” mentality that kept FL deluded for a long time.
“Ultimately, if foreigners really wanted to buy US properties, they would have continued buying mortgage back securities via T-bills. Apparently that’s not happening.”
really??? i’ve never seen a t-bill with a park view … or much closet space, either.
What do you think mortgage back securities are? They’re debt obligations back by real estate that foreigners USED to buy from us. They don’t anymore. If they don’t want US MBSs back by mortgages because they’re worthless, why would they want the worthless property these things represent? How many foreigners are really going to be jumping on an airplane on a regular basis to come and ‘enjoy’ NY. For Manhattanites, this is going to come as a shock, but the large majority of Americans, as well as foreigners, think New York City is a sh!thole.
“According to the NAR one in five realtors report having sold a home to an international client in the past year.”
******
A local rag was trumpeting this for the NAR recently. At the time, I was not clear about the “1 in 5″ figure - is it locally? Nationally? In any case, it was more NAR propaganda, hoping to prop the market up.
The thing I find interesting in the propaganda is the idea that buyers will be unaffected in their home markets by a floundering US economy and housing market. Not to mention their local housing market - in most rich nations there are significant bubbles that will begin (if not already) unwinding.
Ben Bernanke and the Fed are certainly working in their favor, however.
It’s been well documented that International strawberry pickers and lettuce pickers favor purchasing $500,000 houses in the US.
Yeah, hadn’t though about it, there’s you ‘international’ buyers right there. LOL
Lettuce give you a loan…
Please fog this mirror for us
International client: translation = illegal immigrant using zero down, negative financing and probably a government grant for furniture. The NAR will say anything to fool the public; most of members don’t even know what “international” means.
Spot on you two, I’m glad I read all comments before adding since this is exactly what I thought.
If a buyer is using a “matricula consular”, (foreign ID obtained at the consulate of your country of origen) to open a bank account, obtain a drivers license etc. then they essentially are operating in the US as foreign nationals. There are a gazillion of these in socal alone and far too many of them have no down lo doc triple mocca grande loans.
Foreign buyers my arse.
And we take the NAR seriously because …? LOL. Maybe they did, so what? One out of five realturds, big deal. That’s not 1 out of 5 transactions, that one out of five real-turds made a transaction to a foreighner. Even so, what’s so impressive about that? It’s not like we didn’t know that some foreigners bought some property over here. In bulk, I’d still have to say that any foreigners main interest in the US is buying our industries and natural resources, not our depreciating useless oversupply of housing. Sh!t, even if you looked at housing as an industry (RIETs) the numbers suck. Lot’s of overhead for very little payoff. When the US was doing well you didn’t hear about Wall Street fat cats making it big buying REO in Bangalore and renting it out.
But will Manhattan prices really decline? I had assumed so. I moved from Northern CA to NYC. Prices in California were out of wack with income. But is that true of NYC? The top 20% of households here have an average income of 300k. That’s a lot of money to keep prices sky high. Whereas in SF I could imagine buying in 24 months, I’m not sure that will be true for Manhattan.
Careful with “average” income, especially in Manhattan. Look for the median numbers. FWIW, Manhattan got crushed in the last RE downturn. Outer boroughs will go (are going) down ahead of Manhattan. The weakest fall first.
One of my relatives picked up a penthouse (trashed) cheap in the last downturn.
Upper east side.
Got popcorn?
Neil
there’s gonna be a zillion sweet deals .. i can taste it.
That “average income” will drop when Wall St bonuses get paid out this year.
True, in the late 80s Manhattan prices collapsed. How much of that was corporate real estate — which I know was devastasted — and how much of that was residential?
Very good point on median numbers. When you have significant numbers pulling seven figures (and all because of the emergence of hedge funds and new ways of distributing risk in housing market loans), it’s true that a. average income doesn’t necessarily reveal everything, and b. even that house of cards could soon collapse.
But then I imagine those buying in pounds and euros might still keep prices significantly elevated. All I mean to say is that there are many factors in play here that weren’t apparent in SF/Northern CA.
Residential and commercial both took heavy hits. Morgan Stanley was induced to move into a building on West 49th, Times Square, that had been built, and then sat empty for years, by tax incentives given by the city, eager to remake Times Square. It was quite a deal.
Residential was also slammed hard. Financial biz has been shifting to City in London. If Wall Street starts with big layoffs, and residential starts to tank,why would foreign investors buy a depreciating asset here?
Because it is always greener on the other side. Remember most foreigners (put yourself in the position of buying foreign stock) don’t have as much information as the locals do (internet included).
Cinch
although even the prime neighborhoods of manhattan will take somewhat of a hit, here are several reasons why i think the best areas of manhattan will remain resistant to the worst of the worst to come in this r/e bust (although i still predict a 20%-25% drop over the next 5+ years):
1. rich europeans, cheap dollar;
2. peak oil/expensive gas will make the lack of any commute (or need for a car) that much more attractive;
3. the continuing insanely low rental vacancy rate (1%!);
4. insanely high rents: $2,000/mo for a studio, $3,500/mo for a 1-bedroom in prime neighborhoods;
5. very high financial standards for buyers maintained by co-ops, generally requiring a 20% downpayment;
6. much better financial status of the city (under mayor bloomberg) compared with the 70s or 80s or 90s;
6. flight to quality in prime manhattan neighborhoods for anyone who wants to live in nyc.
7. there is only one manhattan!
“there is only one manhattan!”
Thank God for that.
agreed! that’s why it’s such valuable r/e.
but it will nonetheless take a hit, if that’s any comfort to you.
although even the prime neighborhoods of manhattan will take somewhat of a hit, here are several reasons why i think the best areas of manhattan will remain resistant to the worst of the worst to come in this r/e bust (although i still predict a 20%-25% drop over the next 5+ years):
I think you have cause and effect confused. New York has become chic because the Doucheliani administration implemented a “zero tolerance” policy to crime (read “drag squeegee ment and people selling newspapers down to the police station and put their head through a plate glass window”). 9/11 kept the City in the news, and suburban (read “bored”) America decided they were going to be like Sarah Jessica Parker and live next door to Newman, filling Manhattan and Brooklyn with hundreds of thousands of “domestic foreigners”. That’s how Park Slope became the tourist attraction it is today. Mix in some CDO booty from Wall Street, and voila, you have the exclusive buildings, draconian co-op standards, etc. If Manhattan will stay the “exclusive” place it is, it will lose the character that attracted everyone in the first place.
Sorry for the long post.
couldn’t agree more. don’t confuse observation with endorsement.
Here is some food for thought: It was significantly cheaper to buy residential property than it was to rent it during the early to mid-’90’s. That means the monthly cost of rent was HIGHER than mortgages, co-op fees and taxes. So, crunch some rent vs. buy numbers in Manhattan - that may help give some perspective on where this may be headed.
Oh, and during most of the 1970’s, you could not give real estate away in Manhattan or the rest of NYC. I’ve noted before that people used to just set it on fire for the insurance money. That is why old timers at FDNY call the ’70’s “The War Years.”
In 1991 I was offerred a 2 br condo on the promenade in Columbia Heights for 110. It had a little balcony facing lower Manhattan. The seller was willing to assist with financing. You know that today I am kicking myself for being a young stupido.
Yes, Manhattan and closer in burbs do crash.
in 1986 several apts in my bldg sold for $135K.
in 1995-96 the same apts sold for $100K, $119K —– and $90K.
if i appear somewhat schizophrenic about manhattan r/e, it’s because i am. but i don’t think conditions are quite the same now (or generally in this coming bust) as they were then.
in the 90s you had to step over and around at least 10 [potentially violent] panhandlers just to make it to bway. the city’s been considerably cleaned up since then, and i don’t anticipate the new super rich residents will allow it to fall back onto those pre-gentrified times — at least not in the most desirable neighborhoods.
So I guess those bums are now permanently cleaned up off the streets, right? No chance of bums (who lost their house and their job in a housing bubble lead recession/depression) ever coming back. Yup, got that one taken care of permanently. LOL
“in 1986 several apts in my bldg sold for $135K.
in 1995-96 the same apts sold for $100K, $119K —– and $90K.”
yes, this is obviously the statement of a troll!
i can see that you didn’t do much walking around manhattan in the 90s.
idiot!
and for the record: YOU called them bums. i called them panhandlers.
and for you to think that “they lost their houses in the housing recession…” is sheer fantasy.
the kind of fantasy that bounced dinkins out of the mayoralty in ‘92 and replaced him with giuliani, and now bloomberg.
one doesn’t have to judge the good, bad or pitiable quotient of these misfortunates to simply observe that the PTB have decided that they will no longer be allowed to crowd the pavement of valuable real estate.
i sense that most californians on this blog wish they could only be so fortunate as to have PTB in their locales that felt the same way.
ed koch happened to be abrasive — but perfectly right — when he said, “no one has a god given right to live [even on the streets] in manhattan.”
I’m going to take the liberty of saying it first… troll.
“in 1986 several apts in my bldg sold for $135K.
in 1995-96 the same apts sold for $100K, $119K —– and $90K.”
yes, this is obviously the statement of a troll!
i can see that you didn’t do much walking around manhattan in the 90s.
idiot!
What I was getting at was that you seemed to think that only lower end real estate will be hit. Not the case. There’s tons of high end stuff in FL that’s getting slammed right now, and their lawns are growing long too. So to say that certain gentrified areas of NY will be immune is pure fantasy. It sounds like a plug high-end NY real estate to me.
Manhattanite,
I spend a lot of time in Riverside Park walking my dogs, and there are now permanent encampments of Hispanics in the park. There’s a crowd who sleep overnight in the bathrooms in the children’s park at 83rd, and another group that lives under the trees on the backside of the hill. Uptown, there’s a another hard-drinking crew behind the playground at 98th st.
and another that is near the walls of the soccer fields at 104th.
All of these guys have been dug in for a year or more, but they used to clear out in the morning. Now you see them drinking beer and hanging around on the benches and under the trees during the daytime. And there’s more of them.
We are not stepping on crack vials or stepping over drugged out bodies in the bank’s ATMs yet, I remember how spooky that was, but things have changed in the last 2 years. We might be at another tipping point in the city.
And no, I do not think manhattanite is a troll…just another opinion here. A lot of Manhattan, especially on the West Side, looks damn prosperous. But to my eyes, it’s changing.
“Meanwhile, in East Boston, a long-anticipated remake of the neighborhood’s waterfront is still pending, despite years of planning and discussion. One big project, East Pier, will move into construction next month, but as apartments, not condos, a spokeswoman said.”
so here wa are
apartdos or condoments
‘Bonuses will also almost certainly be down this year, provoking a lot of movement between the major participants.’
Does this mean they will be sh!tting all over each other?
Great news all round, what a difference a year makes.
Can’t wait for the ‘08 post-Superbowl panic.
Stocking up on the Orville Redenbacher now.
I have previously urged HBBers to obtain what is arguably the most valuable skillset ever–that of brewing your own beer. You simply cannot go wrong. If there is a recession; hooray! If there is not a recession; hooray! There are neverending hoorays involved in brewing your own beer.
–You can brew precisely to your own tastes.
–It’s very inexpensive. A kit for 5 gallons is about 20 bucks, and if you make your own kits, even less.
–It’s surpassingly easy. Even a realtor could do it. Well–your smarter realtors could, anyway.
–You can do it anywhere. I brew in my laundry room. That way 5 gallons of beer is handy whenever I want it.
Ooops, sorry, repost.
But now you have two chances to hear how great brewing your own beer is. And what a recession proof skill, too.
(You simply cannot go wrong.)
Exploding bottles? Maybe you couldn’t to wrong. Not sure about me.
I’ve never had a bottle explode. That happens if you get hasty and bottle before it’s fully fermented, but you can measure that. If you fear exploding bottles, try a keg system.
Hey, and then you don’t have to mess with caps and stuff. You could just take your keg and attach a tube with a nipple on the end of it. Huh? Huh? Yeah! That’d be a pretty coffee table ornament, as well.
no - you do it in a keg
Alas, all the good women are taken.
Stupid-Ass Home Builder cheat on their home buyers again. When will this irresponsibility and blind-eyes ever stop ? Is this what this country, the great U.S of A is all about ? One cheats on another so that another then has no choice but to cheat on another-another to get even ? Where is morality, honesty, professionalism and obligation as an individual human being or as a collection of human-beings, a corp. ?
http://www.news8austin.com/content/top_stories/default.asp?ArID=192534
A prediction.
I am saddened and almost physically ill as I watch this country I love “Enroned”. It is eerie to watch events unfold.
Enron started to come apart in August and September and by December was done. Look for the same timetable and the same results except on a massive, empire-ending scale.
As the Fed drops dollars from helicopters to rescue Wall Street, our once great and beloved nation - engulfed in denial, greed, debt, war, no-leadership and energy dependency - is headed for the abyss.
Our disgrace and pain will be profound.
Help me recall a time when there was other than denial, greed, debt, war, no-leadership and energy dependency.
Thank you. After two thousand years, you’d think “The End is Nigh” would have become tedious.
Chuck is talking about the US, which, as far as I know, hasn’t been around for 2000 years, at least not as a country. You might find it somewhat “tedious” when you can no longer travel safely through the streets without some gangbanger hitting you up for your ATM card, which is what happens in Brazil with a fair amount of frequency.
Every generation thinks things are terrible compared to the previous. I think the drug stuff of the ’70s and ’80s turned the entire country on its head, but those who grew up from birth with this going on don’t seem to find it at all strange. Who would have believed kids would be posting nude pictures of themselves on the internet just ten years ago? As for gangs hitting one up for ATM cards in Brazil, this has been going on in Miami since the ’80s (thank you Jimmy Carter for your boat lift). The problem is that the love of money really is the root of MOST evil, and the love of power and attention seems to take up the slack.
Christopher Hitchens devotes a lot of space in his new book to people who think the end is coming, especially those who relish the idea. Apparently, such people have always been around, and always think themselves somehow protected from the outcome.
I agree without you about globalization, but 99% of the public couldn’t care less; things are what they are. I heard on the news that the Consumer Product Safety Commission consists of ONE “scientist” testing various products. If this is what or government thinks is protecting the public, anything goes.
Chuck, I feel the same way you do, I really love this country and some days I feel the deep grief of watching a good friend die, because the US has been good to me, I’ve had a good life and some wonderful times as a result of living here. I feel very powerless sometimes. I don’t feel the contempt that others sometimes express toward our fellow citizens. Some may be misguided and yes, I’m angry at those who idiotically contributed to the bubble by getting caught in the the three card monte ponzi scheme, but I don’t condemn them. My contempt is reserved for those in the media, in government, the heads of corporations who participated in all of this and encouraged this, for it is to many of those people, rightly or wrongly, that many of the citizens of the US look for example. May they rot in a hell of their own making, for the misery that is about to descend upon us. And may they remember, that even if it seems they are insulated, what goes around, comes around, sometimes in the most astonishing and unexpected ways.
Hi Palmetto,
How do you know they aren’t already suffering? So many obnoxious people who seem to be thriving have endless personal problems: far more, I think, than most nice people. I happen to believe in–and no I cannot explain why–reincarnation, and I can’t help wonder what the next go-around has in store for hedge-fund managers. Probably, life in Tampa, which I’ve always considered a punishment for something.
First prize, a week in Tampa, second prize, two weeks in Tampa.
Exactly. Many years ago there was a television program called “The Dating Game,” and one day the lucky couple won a trip to Tampa’s “Ybor City!” This was when Ybor City was utterly dead and falling down, but the couple was jumping up and down, thrilled about something so exotic. I was laughing so hard, I couldn’t stop. I can’t even imagine their faces as they were driven from the airport through the slums to Ybor City, where they may have shopped at Goodwill, the largest store there at the time.
Years later, Tampa is actually worse, but with five times the population.
That reminds me of the young Italian yuppie girl who told me she and her husband went to Yemen on their honeymoon.
Yemen.
Tampa’s worse.
As I look thru the various news outlets and the clipettes I’m still seeing lots and lots of denial.
Not to worry the politicians are in charge!!! Secret plans to make it all work again, news reports have it that the rethugs and demofools are furiously rubbing brass lamps recently recovered from a babylonian tomb with Ali Baba’s name on it. Success is just around the corner, which we are turning as this goes to press. See, all fixed now.
Maybe the Federal Reserve should take a few pointers from the US mint and issue ‘Limited Edition’ Federal Reserve Notes to help keep the value of the dollar up. Apparently I can buy (limit of 5 per customer) Morgan dollars (there were so many minted it’s not even funny) a .9/ounce, grubby, smudged, official Morgan Dollar for only $19.95.
“‘Having an interest-only loan kept me in my house during the divorce,’ said Clejan, a loan officer at Americana Mortgage Group.”
Talk about burning the candle at both ends. As a dealer, you’re not supposed to become a junkie too. Then again, that’s probably how they got into that situation in the first place. Vicious cycle. “Just say no to drugs and toxic loans.”
People pulling out of new homes continue to lose some serious money, just last week three buyers didn’t close and they lost between 90k -166k in earnest money and upgrades. This lost of money will have a affect on goods and purchases, this whole thing really is snowballing but the media although reporting it doesn’t have the fervor for it like OJ getting arrested in Vegas?
“the media although reporting it doesn’t have the fervor for it like OJ getting arrested in Vegas?”
I was just over at Charles Hugh Smith’s website and indeed, he commented on the fact that we haven’t seen headlines about the Israeli bombing of a Syrian nuke site. Now, that’s BIG news, isn’t it? But where are the headlines, the nightly news reports on the networks? His theory is that if it were reported, there would be panic over the oil disruptions and Wall Street would suffer. So, apparently, the media lays low to coddle Wall Street. Wow, could there be this much of a conspiracy of silence, or a general widespread policy in the media of “Don’t Disturb the Grazing Sheep”? Sheesh.
I have to admit, I myself am surprised by the dead silence on what should be a major news story.
I’ve seen a few headlines through Drudge Report, but not anywhere else. And those links were to places like the Jerusalem Post.
Here’s my theory on the pseudo-silence: 1) Syria got caught with something they shouldn’t have; nonstop complaining about their territory being violated would only make folks ask why; 2) Israel got wind of it and knocked the crap out of it, and maybe even got their hands on something; 3) Israel doesn’t blab about hitting really big targets; they’ll talk about going into Gaza or the West Bank, because they do that all the time….but Syria?? Even the Israeli’s know they better have a darn good reason for operating in Syria, and methinks they did. Syrians and North Koreans together can never be a good mix. Just my .02.
Your favorite, Fox News, has headlines about it:
http://www.foxnews.com/story/0,2933,298149,00.html
The man who reads nothing at all is better educated than the man who reads nothing but newspapers. -Thomas Jefferson
good one! but to thomas jefferson i’d respond, “one can be well educated without being well informed.”
Buffett supposedly in talks to buy up to 20% of Bear Stearns.
As mentioned a week or two ago, that panic bottom in August looks like a hell of a buy. Too bad for me I didn’t hold.
I thought some English guy was suppose to purchase a chunk of BSC a couple weeks ago. How many times are they going to sell those shares?
maybe i’m ignorant.. scared.. or both, but alls i see is dead cats bouncing around and fragile bubbles.
“‘Having an interest-only loan kept me in my house during the divorce,’ said Clejan, a loan officer at Americana Mortgage Group.”
BWHAHAHAHAHAHAHA!
I/O loans and other ‘Exotic’ or ‘Toxic’ loans are like all other tools: great when applied correctly, but useless or potentially dangerous when misapplied.
However, the uses for an I/O loan do not extend to destroying your financial future.
The only time an i/o loan is a good idea is
1. You’re not sure how long you need to stay there
2. You have enough $$$ in the bank to simply purchase the home in case you decide to stay there and interest rates are at a level that makes getting a mortgage not a good value.
So, for example, if you’re a rich movie star who gets a lot of work in NY and decides to get a Manhattan apartment, you may want to get an i/o loan (effectively renting the place) until you decide if you want to put down roots there.
However, for “Harry Howmuchamonth” to get an i/o loan because it’s the only loan with payments he can afford is simply idiotic. And for the government to expect me to bail him out is criminal.
Sometimes it’s Sally Specuvestor who got the i/o loan because she knows that real estate only goes up, and “it’s different here.” She too, expects me to bail her out when she can’t pay and “loses everything.”
precisely. these far-fetched i/o mortgage instruments were designed for the very rich, and conveniently perverted/downscaled to fleece greedy [and/or] unsavvy j6ps.
“‘It’s nerve-wracking,’ said Richard. ‘The last thing anyone wants to do is lose their house.’”
Well maybe, Richard, if you had paid attention in grade school English class you’d know that “the last thing anyone wants to do is lose his house.”
That being said, please explain to me how Richard is losing anything? Did he put any money down? Did he ever have any equity in the house? Sounds to me like he got a free ride at the expense of a foolish investor behind the ARM.