Home Buyers Fell Prey To A Social Epidemic
Some housing bubble news from Wall Street and Washington. Bloomberg, “St. Joe Co., Florida’s largest private landowner, plans to eliminate more than 75 percent of its workforce, sell about 100,000 acres of land and scrap its dividend to contend with the worst housing slump in 16 years. ‘This is not a fire sale,’ CEO Peter Rummell said today on a conference call. ‘We are not dumping stuff on the market and we are not going to make stupid decisions but there are things that we believe have reached their height in pricing.’”
“‘We’re not selling land now,’ Rummell said. ‘We’re carving it out and identifying it and we’ll sell at an appropriate price at an appropriate time. We have been able to articulate 100,000 acres that we think over a reasonable time frame is close to its reasonable value and based on pure economics it doesn’t make sense to hold on to.’”
The Financial Times. “JPMorgan Chase and Bank of America are expected to reveal losses of about $3bn on holdings of mortgage securities and leveraged loans when they report third-quarter results this month.”
“This would take to more than $20bn the total writedowns announced by the world’s leading banks as a result of the credit market turmoil over the summer.”
“JPMorgan is likely to unveil mark-to-market losses on leveraged loans of about $1.4bn, in line with those reported by Citigroup last week, according to Howard Mason, analyst at Sanford Bernstein. He estimates it will suffer a further $700m of writedowns on mortgages and mortgage-backed securities, for a total of $2.1bn.”
“For Bank of America, he estimates leveraged loan losses will be $700m and the mortgage writedowns $300m. Merrill Lynch last week said it had suffered $5bn losses. UBS said it had $3.7bn of writedowns, Deutsche Bank $3.1bn and Citigroup $2.7bn.”
“ANZ, the Australian bank, has decided against selling its wholesale mortgage distribution business, saying on Monday that it had struggled to attract a fair price for the division due to the volatility in global debt markets.”
“While the failure to sell the business will have a negligible impact on ANZ’s bottom line, the move highlights the continuing fallout the US subprime lending crisis is having on the Australian market.”
“A key stumbling block to the sale of the business was finding a buyer willing to take on Origin’s existing loan book, which stood at A$5.7bn and NZ$1bn in July.”
“ANZ’s decision follows Westpac’s deal last week to buy Rams Home Loans, the troubled local mortgage lender, and comes as at least two other non-bank lenders have decided to postpone tentative plans to list on the local market.”
“‘ANZ has a clear view on the fair value of the Origin business and an acceptable price is unlikely in today’s volatile markets,’ the bank said.”
The New York Times. “In May 2005, NYSE Magazine featured an article titled ‘American Dream Builder’ – a glowing profile of Angelo Mozilo, the chairman and CEO of Countrywide Financial, the nation’s largest mortgage lender.”
“The article portrayed Mr. Mozilo as a heckuva guy, a man from a humble background determined to help other people, especially members of minority groups, achieve the American dream of homeownership.”
“These days, of course, Mr. Mozilo doesn’t look like such a wonderful guy, after all. So far, nobody has accused Mr. Mozilo of breaking the law. Still, what we’re learning from the housing mess is that the crisis of corporate governance, which made headlines in the early years of this decade, never went away.”
“As The New York Times’ Gretchen Morgenson reported in August, Countrywide often led customers to ‘high-cost and sometimes unfavorable loans’ that, among other things, generated ‘outsize fees to company affiliates providing services on the loans.’”
“Countrywide made more questionable loans than anyone else – and its postbubble behavior does stand out. As Ms. Morgenson reported in Sunday’s Times, Countrywide seems peculiarly unwilling to work out deals that might let borrowers hold on to their homes, even when such a deal, by avoiding the costs of foreclosure, would actually work to the benefit of both sides.”
“Why block mutually beneficial deals? Countrywide can make money from the fees it charges on foreclosures, while the losses from mortgages that could have been saved, but weren’t, are borne by others.”
“The U.S. housing bust is like a leaking ship. Will the home market continue to sink or is it just bobbing around waiting for buyers to rescue it?”
“In August, housing prices posted their biggest drop in almost 40 years and pending sales fell the most on record. New- home sales declined to a seven-year low. There are more than 5 million homes sitting unsold.”
“The behavioral economics of this market are tugging buyers to the sidelines for now. And with the possibility of 2 million more homes coming on the market due to foreclosures, the supply is outpacing demand.”
“Mass psychology anchored home buyers to the myth that homes were endlessly appreciating wealth vehicles. Now the sentiment has shifted.”
“As Yale University economist Robert Shiller wrote in a recent paper, home buyers fell prey to a ’social epidemic’ and a ‘widespread perception that houses are a great investment.’”
“Shiller found that ‘residential investment as a percentage of gross domestic product has had a prominent peak before almost every recession since 1950.’”
“In the last quarter of 2005, he notes, home investment rose to 6.3 percent of GDP, ‘the highest level since 1950.’”
“Will this downturn be like the 15 percent decline between the third quarter of 1989 to the fourth quarter of 1996 or the 42 percent rout in Los Angeles between December 1989 to March 1997?”
The Palm Beach Post. “The worst housing slump in 16 years has produced a subprime mortgage meltdown, widespread layoffs and record foreclosures. It also has produced Larry Leggett, a Vero Beach homeowner who wants to make his monthly payment — he just doesn’t know where to send it.”
“That’s because HomeBanc, his mortgage company, filed for Chapter 11 bankruptcy protection in August. As of Thursday, the only thing he had received was a form letter…and this: ‘As a reminder, effective Oct. 1, 2007, all checks will be made payable to the new mortgage company that will service your loan. If you have any questions about this transfer, please contact your new lender on all matters concerning your loan.’”
“Unfortunately, HomeBanc didn’t tell him who his new lender is. Or how to contact it. Or where to send his mortgage payment. So Leggett called its Palm Beach Gardens office. No answer. ‘It didn’t even ring,’ he said.”
“‘I’ve got really good credit, and I don’t want to damage it,’ he said. ‘It seems very weak for these large banks to expect everyone to chase them around to learn where to send money.’”
“Accounts said Freddie Mac wanted a $1 billion slice of HomeBanc’s loan portfolio. Others said Countrywide was the new lender.”
“Leggett tried to reach his mortgage broker, his builder and even his homeowners association. He left a message on the HomeBanc director’s cellphone.”
“He did hear from Chase again, speaking at length with Audie King, who ‘explained a few things, none of which put us at ease,’ he said. ‘We are not comfortable just sending Chase a check,’ Leggett said. ‘If they truly had control of our title, wouldn’t they be notifying us?’”
“That’s what Chase is doing. ‘We will be sending welcome letters to homeowners whose loans we will be servicing,’ Tom Kelly said by e-mail.”
“Leggett is waiting. ‘We were making it through this horrible, tough time,’ he said, ‘and then this happens. I am just trying to make my payment.’”
‘JPMorgan Chase and Bank of America are expected to reveal losses of about $3bn on holdings of mortgage securities and leveraged loans when they report third-quarter results this month. This would take to more than $20bn the total writedowns announced by the world’s leading banks as a result of the credit market turmoil over the summer.’
It’s worth noting that despite all the noise, there is still no bailout, even as the bubble deflates. And these are the fattest of the fat-cats.
Ben,
I think quite simply, our government is broke.
End of story.
not the fattest, mind you…there is one bank that made money and its graduates have been signing US dollar bills every now and then. i won’t call them by name to protect the innocent.
Goldman Sachs : )
Now running the US Treasury and the Bank of Canada.
Maybe I will send Legget a letter stating that he should send his check to the LIL Mortgage Servicing company. Then, he can send me checks until the mess is sorted out. As a service to the American economy, I will cash the checks and spend the money on myself.
You know such a scam will surface. It’s just a matter of time.
Ooops, if I send such a letter, I guess I better remember to spell his name correctly.
Long Island:
“The worst housing slump in 16 years has produced a subprime mortgage meltdown, widespread layoffs and record foreclosures. It also has produced Larry Leggett, a Vero Beach homeowner who wants to make his monthly payment — he just doesn’t know where to send it.”
“That’s because HomeBanc, his mortgage company, filed for Chapter 11 bankruptcy protection in August. As of Thursday, the only thing he had received was a form letter…and this: ‘As a reminder, effective Oct. 1, 2007, all checks will be made payable to the new mortgage company that will service your loan. If you have any questions about this transfer, please contact your new lender on all matters concerning your loan.’”
I agree, this has got scam written all over it. His only move is to contact a Lawyer and pay the payment to the Lawyer, with the Lawyer holding the money in escrow. This way he will be able to prove he made timely payments when, inevitably the entity entitled to the payments suddenly appears. If this happens to you, don’t think you don’t have to make payments anymore.
I had mentioned this type of situation a year ago. There will be cases where no one will know who owns what mortgage and some will never be figured out. There are legal ways to resolve this, but go to a Real Estate lawyer.
Again, chaos is happening in several segments of the market, similar to this. Mortgages are bundled and sold several times so if one or two of the links in the chain go belly up, it’s conceivable that the entity holding the bundle that your mort is in, will have no way of finding out which properties he holds the note on. Typically all that detail is supposed to be passed on, but Mr. Leggett’s case illustrates the breakdown.
This lends credibility to my theory that in some cases you will be able to buy a house for $100. What if no one knows who really owns that 400 house developement that has 300 vacant houses in it, after the builder vaporized and his financier went belly up? At some point the Governing entity can use the condemnation rule and own the property. Than, like what many large cities did in an effort to derelict areas with abandoned property, they may sell the houses for nothing just to get them occupied and revitalize the area.
This is a strange and wonderful time we live in guys. Entertaining as well.
Got Corona? Sorry, Neil, I couldn’t resist plagerizing.
Nah, a slight misspelling will look more authentic.
If you get caught and you’ve spend several hundred thousand dollars via fraud, you might get at least 30 days in jail - unless you can afford a good, well connected lawyer. Remember to put some big bucks to one side to pay them. “And Justice For All - As Long As You Can Afford To Pay For It.”
Contrast that with stealing a donut, and looking at 30 years in the calaboose (with a few priors)
“The U.S. housing bust is like a leaking ship. Will the home market continue to sink or is it just bobbing around waiting for buyers to rescue it?”
It may be waiting for a govt bailout to rescue it. And given the recent dearth of bailout news, after Congressional trial balloons that were floated in the MSM were pretty much shot down from the sky, it looks like the market may have to wait for a very long time.
buyers are not gonna bail this market out.. And what’s all this about buyers? Who are today’s buyers?
The real buyers are the loan companies. It is primarily buckets and barrels of their money that must tied to the sinking ship in hopes of providing enough bouyancy to keep it’s head above water
The days of J6Pk deciding what he will or won’t buy are over.
It’s a bucket of money and box of stupid.
I just finished reading a book that absolutely praised HomeBanc to the sky. It waxed ecstatic about how thorough the company’s training was, how satisfied its customers were, and how the combination of these things led to “good” profits, instead of the “bad” profits that were to be avoided.
Fat lotta good the training and satisfaction did ‘em.
Oops! Forgot to name the book! It’s called The Ultimate Question. Needless to say, it’s a bit dated.
Thanks for the info.
42
Interesting article on Bloomberg about homebuilder ‘desperation’.
Their costs to build are suprisingly high. Maybe they should cut out
some of the padding.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aUiIJ0tcL_OQ&refer=home
The average cost to build a 3,340-square-foot home in the U.S. is $403,925, according to the National Association of Home Builders in Washington. That includes $219,015 for construction costs, $45,507 for the price of undeveloped land, $65,969 to prepare the land for building, marketing expenses of $11,258 and a sales commission of $19,499.
BS. I can GC my own shack for 50 per square on any lot.
I second that as well. I custom designed and built a real nice home for $49/sqft just down the road from similar sized homes going for $110/sqft by a tract builder. The difference? My home cost $45/mo electric bill, while theirs were in the $400 range (it’s been a few years).
Don’t buy a tract home for any price if you can avoid it. Believe me, even the skeptics here have no idea how bad the construction can be.
It never ceases to amaze me how they scrimp on insulation, even on pricey houses.
I know what you mean. I know someone who is having a 3000 sq ft house being built in NC (Near Raleigh). Total cost: $215,000. Sure its pretty simple: No granite or Sub Zero appliances.
Another stupid idea brought up by the housing bubble.
That home cost 215K with no granite or high end applicances.. For 245K you could have granite everywhere a sub-zero, restraunt split oven; etc, etc etc.. People just think that these “high end” applicances are WORTH way more then they COST when placed a home. What’s a nice sub-zero cost? 10K? And the fridge it replaces is not free. These “upgrades” are a drop in the bucket, something that always pissed me off when I looked at 250K 800 sq/ft downtown apts without ALL the upgrades. It’s 800 sq/ft, for that price you could line the whole home in GOLD for the love of pete!!
I bought big slabs of granite off the old Sears building in Dallas when it was demolished. $10 each. Enough to do an entire house. You can have all that stuff at a nice price if you’re willing to get off your ass and do a little legwork.
Sub-Zeroes have a lot of problems, too. A co-worker of my husband just bought a new one to replace the one she bought 7 years ago, because it’s actually more cost-effective than repairing it. $10K! Meanwhile, my in-laws’ plain-vanilla Kenmore has been kicking for almost 20 years, and it costs very little to repair. I consult Consumer Reports, and for the most part, they’ve been pretty spot-on in recommending appliances and electronics, and they say to avoid Sub-Zero, Viking, etc. If you want high-end, buy Kenmore Elite. Another consideration: how many of these people shoehorning themselves into $300K one-bedroom condos could afford the repair or replacement costs when one of these “upgraded” appliances kicks the bucket?
Yeah, just like with Mercedes, what do you get? One of the most unreliable cars ever.
Better yet. Buy your appliances at Costco. They’re the only outfit with a warranty longer than 90’s and if you don’t like the washer/range/fridge you call’em up and tell them to come get it out of your house. No…. Costco doesn’t sell bullshit designer names with shiny skins but if you want a reasonable priced reliable product with a warranty, Costco is the place.
Tom… Add to that BMW/Vulva/Audi/RagRover and countless other overpriced pieces of EuroTrash.
I bought big slabs of granite off the old Sears building in Dallas when it was demolished. $10 each. Enough to do an entire house. You can have all that stuff at a nice price if you’re willing to get off your ass and do a little legwork.
Definitely.
I know lots of people in Chicago who’ve scavenged and re-purposed marble, granite, bricks, molding — you name it.
test
add to that most american POS cars
All of them are decaying junk but one would have to be a complete idiot to pay 3x for Eurotrash. No thanks.
Also, to follow up, in a non-bubbly area, brand new home by a big tract builder:
http://www.lennar.com/findhome/community.aspx?COMID=23903&DIVID=SJHLEN
3700 sq/ft from 330K. Under 100/sq/ft including the land. So, if all the idiots in FL could please stop telling me that 200/sq/ft is the LOWEST they can go (not including the land) I would really appreciate it.
that’s in jersey w high impact fees etc- go south young man
or towards the midwest
My dad just finished pulling his records on the adobe custom home he built (acted as GC) in 1999 –> $50/sq ft. And this was with a huge high end kitchen, radiant heat, top quality finishing, etc…
Construction costs have a long, LONG way to fall.
You probably can build for that price but you don’t have to pay 50 cents on every dollar you spend to support some high salary fat cat CEO and contribute to his multi-million dollar bonus at the end of the year.
Surely, you’re not implying that our wonderful executives don’t deserve to make more money in a year than a real worker will make in a lifetime while being paid to have press appearances, play golf, and go on yacht trips? Why… that’s almost un-American! Hehehe… (end sarcasm).
Some of those numbers look off. In particular the $66k to “prepare the land for building”. I’d have to have more info in order to debunk, but development costs aren’t anywhere close to that high on average. Now in some places with impact fees like Clownifornia, Nevada and Arizona the payout to the government can get pretty hefty. But still….
I don’t think that is out of line. I have heard 100-125/sqft for higher end construction; add in some cost for land (which is falling very quickly) and those costs don’t look crazy too me. Maybe 20% too high, but not totally out of line.
Now, someone please explain why my rental cost 511K and is 1950 sq/ft. Let me know how that math works out…
This is really interesting topic to me. Does anyone know where detailed information on building costs can be found? Many times, the price of something at first seems way out of whack until I sit down and work out the numbers.
RS Means. Some of their numbers are iffy too. But where I stated $50 per square, thats me doing all the coordination of trades, take offs, ordering and scheduling. RS Means will give you a price on a fully trimmed out shack(depending on whether you choose economy or fully fitted with overpriced stuff) by a builder(hacker).
Try building-cost.net You plug in all kinds of info and it spits out what it would cost. The only problem is that I don’t trust the price of materials — those might be bubble high too. and it depends on where you build it too.
Building a house for $50 sq ft is possible, but yes it would be a shack. I saw a figure of $135/ sq ft for an eco-house in CA. What would be the going rate on, say, a new well-built home with the same kind of quality and detail of, say, a Craftsman bungalow circle 1927 or so? At least $140, I’ll wager.
50 per square is 50 per square. It all depends on how many you want. Typically, a builder (not hackers and ham & eggers like KB or Pulte) will do a take off on materials, double it and add 10% to get your cost. I don’t give a flying rats ass where you’re building, materials aren’t anywhere near $70 a square.
a new well-built home with the same kind of quality and detail of, say, a Craftsman bungalow circle 1927 or so?
That type of quality might be pretty pricey…plaster walls and woodwork was extensive and high quality gumwoods or rosewoods. Tilework would also be difficult and expensive to replicate.
Good point. A lot of that handwork can’t be replicated at a reasonable cost these days. And finish woods of the same quality are hard to come by, too.
“$50 sq ft…would be a shack”
Not true. You’ve been programmed by the realtor-big builder complex. My custom home looked every bit as nice (if not nicer) than the big builder homes up the road that cost more than twice as much.
Now admittedly, there are high cost locations throughout the country, but it’s usually land and labor that go up significantly in price. Even so, $65-70/ sqft should more than cover it.
You can try the following link, put together by the building industry, but you can’t see the assumptions behind the calculations.
http://building-cost.net/
The industry standard is the Marshall & Swift cost estimating service. However, impact fees, especially in Florida, are having a huge runup. The Alachua County Commission (Gainesville) are currently considering an impact fee that runs as high as $30 per square foot for large big box retail centers.
M&S is someone doing it for you presumably or for site work estimating. RS Means in the standard in the engineering and construction biz.
That’s mostly because they don’t want Springhills to happen … and they’re probably right.
The developers should be thanking the planning board because I don’t see how they can’t lose money on the deal. Heck, University Corners can’t get financing, and that’s actual prime real estate (for Gainesville).
They might have been hoping for a quick flip to the retailers, but I have news for them: the commercial paper market is a mess and the retailers are hurting bad.
I still have itemized materials & labor costs per home model for Lennar Homes circa 2000 in Houston. A few months after I began my employment with them they stopped sending this info out in the start packs (and stopped putting the square footage on the plans too, that way they could cheat the subcontractors on price per sqft, as well as on the sqft area as well).
The labor/material costs for one 2100 sqft house that was selling for $150k (and is selling for just under $180k now) was under $90k. Understand this does not include land cost or fat cat bonus….
Sorry if this was posted earlier.
http://www.msnbc.msn.com/id/21151323/
Homeowners get slammed as builders slash prices.
Good PR job, Countrywide…
“That means her home may not be worth more than her outstanding mortgage, so she can’t easily refinance. Her lender, Countrywide, suggested selling the home at a loss or finding roommates, she says.”
“Our primary objective is to keep people in their homes,” says Jumana Bauwens, a Countrywide spokeswoman…
“Why block mutually beneficial deals? Countrywide can make money from the fees it charges on foreclosures, while the losses from mortgages that could have been saved, but weren’t, are borne by others.”
From the article;
“We try to make prudent decisions regarding pricing,” says Jim Widner, regional general manager for KB in Las Vegas. “Prices are going to rise and fall over the short term, but long term a home is one of the best investments.”
2 words. PROVE IT.
How long term are we talking here Jim…
“Shiller found that ‘residential investment as a percentage of gross domestic product has had a prominent peak before almost every recession since 1950.’”
And I found that every 25% residential construction recession since 1955 coincided with a GDP recession (seven out of seven times preceding the current 25%+ residential construction recession).
“A key stumbling block to the sale of the business was finding a buyer willing to take on Origin’s existing loan book, which stood at A$5.7bn and NZ$1bn in July.”
LOL, There were bids and IMHO realistic bids.
what’s happening here..
Nobody wants to overpay on a whole bunch of overpriced houses for sale, nor do they want to buy the company that loaned way too much money on all those houses… I wonder why this is. Might this company likely be an industrial sized package of falling knives?
just goes to show that the banks themselves are still in denial …
It’s too bad that St. Joe decided to bail AFTER so much beautiful land was plowed under in the Destin area, instead of before. There is a corridor so wide there that it looks like an intergalactic landing strip.
Oh, I feel your pain. I really do. DR Whoreton leveled a lovely forest, large firs, good wetlands–they got variances so they could kill those–called in their liars,er, I mean, their ‘consultants’ to claim that the stormwater would not be a problem…about 400 houses planned. The market has been resilient here in the PNW, to my dismay, but it can’t hold out forever, and now the funny munny has left…Well. What a difference a few months make. Too late for that forest, but I’m getting more hopeful by the day for other areas.
I would simply love to see DR fall, and hard.
Is this the development on Mud Bay Road or one (of many) in Lacey?
RARRRRRRGH! RARRRRGH! RARRR…oh, sorry…pant, pant…must…control…rage…
Why, yes, it is those ones. All of those ones. Every single one of those ones.
And veloblues, your own views regarding these projects are?
(I don’t want to just assume you don’t approve of the DR Horton building method. For all I know, you may looooove them. After all–’affordability is gooooood.’)
Nope, no love for the Whoreton (great one, btw) or SoundBuilt or similar ilk. I’m a Tacoma native that has lived in Olympia for 25 years. Definitely changing around here. Can’t say it’s for the better.
“DR Whoreton leveled a lovely forest”
Olympia, you took me totally by surprise with that one, hope my boss didn’t hear me laughing out loud!
“Countrywide seems peculiarly unwilling to work out deals that might let borrowers hold on to their homes, even when such a deal, by avoiding the costs of foreclosure, would actually work to the benefit of both sides.”
Is the MSM missing the boat on this one?? My guess is that Countrywide dumped these loans onto the secondary market, so they don’t hold the paper anymore, so they can’t modify the terms of the mortgage at will without permission from the investor…therein lies the rub, who knows where an individual mortgage ended up, since everything was sliced & diced within the MBS pool.
Yeah seems like their hands are tied.
Exactly. The “both sides” they are referring to are the home-debtors, and the MBS/CDO holders. However, there is a 3rd side, Countrywide the loan processor. If they work out a deal, they buy back the loan from the MBS/CDO. They not only lose the fees for processing the loan, they take a big hit buying back the loan they can’t resell.
Countrywide simply doesn’t have incentive to work out deals on loands they’ve resold. Oh, they’ll do workouts on the ones they got stuck with when the MBS/CDO marekts shut down. They ones they are on the hook for. But, they will not do workouts on the ones they were able to sell before the marekts froze.
FASB will NOT let them do workouts according to the definitions of special purpose vehicles used to service the notes after the profits have already been booked due to the sell in the secondary market.
http://www.msnbc.msn.com/id/21085808/
“Employees in the mortgage sector have been going through an out-of-control roller-coaster ride of job insecurity thanks to the housing slump and the subprime lending mess. To date, approximately 40,000 jobs have been lost, and economists expect more fallout in the months ahead.”
“Now might be a good time for career mortgage folks to think about trying something new.
Some possibilities:”
Teller, Life Insurance sales, real estate flipping, franchisng…. go to school to get medical skills.
Looks like they forgot to mention that these new possibilities pay about 1/5th what they were making in the mortgage industry, require huge lump sum cash and time investments, and/or are more risky than just trying to look for another mortgage job.
“Many workers who were dumped en masse from the telecommunications industry several years ago thought there was no place for them to go, Robertson points out. But there was life after telecom, and people found work in everything from consulting to web development.”
And, they forget to mention that people in TelComm had college degrees in computer science, elelctrical engineering, MIS, etc, while people in the mortgage industry had a street degree in how to screw people over.
Reading this article I couldn’t help but feel it could be summed up like this: “Hey all you 60,000+ kids that jumped into the mortgage industry…. Get the HECK out of this field so that I can keep my job, or find another. I’m 61 and it is too late for me to change fields and I need to keep my 6 figure income. Where else am I going to make 6 figures without even an associates degree?”
DinPHX
RE: Where else am I going to make 6 figures without even an associates degree?”
I knew one guy who came into the appraisal profession pretty much as a johnny-come-lately during the numbers onslaught brought on by state licensing.
He was a former minimum security guard with a HS degree who had an uncle who sat on an advisory board for a mid-sized local bank.
With the relative providing the work source to get started, he along with his wife developed an insider reputation as a pretty proficient number hitter.
I remember his comment to me one time at a continuing education class, when my biz was goin’ down the proverbial shitter- “I’m making so much money, I’m embarrassed…”
So your 6 figures without even an associate degree has more vaidlity to it than you might think.
May all these mortgage biz connected sleazebags rot in hell.
“So your 6 figures without even an associate degree has more vaidlity to it than you might think.”
Oh… I think it is VERY valid. I know a lady that was a web master for a realty company that specialized in the Scottsdale market. The Realtors we’re raking in $10K-20K comissions at a rate of 1-2 a month or so during 2004. They had to pay a cut to the broker, but still they were taking home (after self-employment taxes) an average of $200K a year… With nothing but a high school degree, a couple months of night school, and willingness to believe and repeat the lie that real estate only goes up.
hd74;
If it’s any consolation, the connection between the Bank and your appraiser pal, as you describe it, is highly unethical and is most likely in violation of Federal Regulations. It would not be considered an “arms length” business relationship, for very obvious reasons.
There is a small bank just north of Orlando where the guy who owned the company that did the majority of their appraisals also was partners with two of the board members in many real estate deals funded by the same bank.
Presently, the regulators are raking all parties over the coals and the situation has been handed over to who ever, States Attorney, Fed’s for prosecution. I don’t know whose jurisdiction it is, as the Bank is only in Florida. It was blatant. I don’t know how these guys ever figured they’d get away with it.
If I was a realtor/mort broker/appraiser/ banker who was in collusion with anyone to fudge deals to get houses sold, I’d be looking over my shoulder about now. Your pal sounds like the poster child for fraud.
RE: Your pal sounds like the poster child for fraud.
Everybody loves the number hitter…’cause the deals always go thru.
I saw so much collusion, coercion, conflict of interest, and direct violation of federal appraisal ethics standards during my unfortunate tenure in the appraisal biz that I’ll be a jaded pessimist of the human condition for life.
There are a great many unskilled or semi skilled people who are in denial that the easy money is gone. Case in point:
Our house is due for a paint job. We asked for some references and had a few people bid on the job. All were mom and pop run businesses (no “starving students” BS bidders). Most showed up in fancy cars or trucks, and had business cards with their pictures on them (maybe they are ex realtors). Long story short, all but one bid about $6,000 to paint a 3000 sq ft house that is in otherwise good shape (no scraping needed). The only reasonable bidder came in at $3500. His truck was older, and his references are good (people we know).
What kills me is that I know people who will pay the 6K to have their houses painted. I have watched the expensive crews paint neighbors houses, and it takes two guys 4-5 days to do the job. Assuming materials are $1000, then they are charging $50-60/hr per guy to do the job (and I am certain that the hired help is only paid 15-20/hr).
Nice post> another case in point, wanted to paver about 800 sq ft, the people who pulled up in Hummer’s or expensive SUV’s to bid the job wanted 6 to 9k, the actual owners who drove pick-up trucks and would help in doing the job wanted 3 to 4k. I’m getting the job done for $3250, i can’t imagine who the heck hires these people for 3 times the rate?
I had dinner with some friends at a restaurant this weekend. One of their friends joined us, as she had just come from orientation to start working at the same restaurant.
While we were eating and talking about her new job, she mentioned that “a lot of the new hires are coming from real estate, now that business is so slow”. I smiled quietly to myself…
One glance from any of the realwhores I worked with would give a customer a case of instant ptomaine. None of those biatches will be working in the food industry once that coven busts up.
As long as the new waitresses don’t tell me I need to raise my bid for the appetizer because she got some other offers in at the last minute.
while people in the mortgage industry had a street degree in how to screw people over
One word: collections.
“St. Joe Co., Florida’s largest private landowner, plans to eliminate more than 75 percent of its workforce, sell about 100,000 acres of land and scrap its dividend to contend with the worst housing slump in 16 years. ‘This is not a fire sale,’ CEO Peter Rummell said today on a conference call.”
Sure its not. Wink, wink!
Cutting your dividend is always a sign of great things to come.
I am in ‘Sales’ and I felt a little dizzy after I read this. This guy must be a ‘Giant’ in the sales community - he spun the hell out of me.
Retrenching 75 pct of the workforce is stunning.
It says housing is not going to bottom soon and St. Joe is throwing in the towel.
What fraction of those 75 percent drank the coolaide and bought RE? Hmmm???
Got popcorn?
Neil
I always thought that a “fire sale” was when you cleared out otherwise unsellable inventory by lowering the price to where the market finds it acceptable.
But this is not that, dontcherknow. Pay attention. This is..umm…well…ummm…well, it’s certainly NOT a firesale!
I have met with Chaiman Rummell, extremely bright guy which is the reason the DuPont family put him in charge of JOE. A little history on JOE:
“Ball used duPont’s fortune and his access to the banks to acquire an additional 240,000 acres of land in 1933. This included properties in Gulf, Bay, Liberty, and Franklin Counties and the city of St. Joe, a dying fishing community of 500 people on St. Joseph Bay, about 150 miles east of Pensacola. Included in this transaction was a sawmill, the Apalachicola Northern Railroad Company, the St. Joseph Telephone & Telegraph Company, the Port St. Joe Dock & Terminal Company, and several other land and development companies.”
“Alfred duPont acquired St. Joe at the bottom of the Depression and, in effect, took over a huge collection of declining properties at extremely low prices. His initial aim was to revitalize St. Joe and its paper industry. He began by lining the city’s streets with trees, building houses and a new business district, and improving the town’s schools and playgrounds.”
There’s a nice “shot between the eyes” story over at msnbc right now
http://www.msnbc.msn.com/id/21151323/
And an excellent reason why bailouts will not work. Why pay mortgage when it is cheaper to rent and the property is worth less than owing?
some interesting lots for sale on ebay- wonder how low it will all go
land is the lever in RE
“…And with the possibility of 2 million more homes coming on the market due to foreclosures, the supply is outpacing demand.”
Daffy: “Bugsy…the boxes of bullets are piling up…what are we going to do?’
Bugs: “eh Daffy, see if you can help Yosemite Sam reload his pistol’s…This ACME single shot rifle has a sticky trigger…I’m firing as fast as I can pull the trigger…and see if ACME has a Gatling gun”
Daffy: ” Here’s some more boxes of bullets…geez Bugsy, I never realized they came in so many different shapes & sizes.”
“Le Grande Orange”
“These days, of course, Mr. Mozilo doesn’t look like such a wonderful guy, after all. So far, nobody has accused Mr. Mozilo of breaking the law. Still, what we’re learning from the housing mess is that the crisis of corporate governance, which made headlines in the early years of this decade, never went away.”
Nearly 100 years ago to the day, J.P. Morgan personally bailed out Wall Street, during the Panic of ‘07…
His namesake is heading the other direction
“JPMorgan is likely to unveil mark-to-market losses on leveraged loans of about $1.4bn, in line with those reported by Citigroup last week, according to Howard Mason, analyst at Sanford Bernstein. He estimates it will suffer a further $700m of writedowns on mortgages and mortgage-backed securities, for a total of $2.1bn.”
what is $1.4bn to MPMorgan - maybe the years end bonus for the CEO? I guess it is pocket change for them, if the real loss is limited to that amount they must be extremely clever (or extremely well connected).
“If the banks are bad, they will certainly continue bad and will probably become worse if the government sustains and encourages them. The cardinal maxim is, that any aid to a present bad bank is the surest mode of preventing the establishment of a future good bank.”
Walter Bagehot
Editor of The Economist
from his book “Lombard Street” 1873
“Mass psychology anchored home buyers to the myth that homes were endlessly appreciating wealth vehicles.
However, if you factor in all of the costs of ownership, i.e. lawncare, maintenance, special projects, etc., most people are lucky to break even when they sell. People only hear about the $100,000 that someone received when they sold their house, but they never hear about the expenses.
Fuzzy — I never realized how true that is until I stopped owning and started renting.
About how many St. Joseph statues would be required, to get rid of 100,000 acres?
“‘We’re not selling land now,’ Rummell said. ‘We’re carving it out and identifying it and we’ll sell at an appropriate price at an appropriate time. We have been able to articulate 100,000 acres that we think over a reasonable time frame is close to its reasonable value and based on pure economics it doesn’t make sense to hold on to.’”
Sounds like trailer-park Greenspanese.
The trouble with “reasonable” is the buyer has to expect a reasonable PROFIT. Why should he buy at a flat “fair” price with no returns on capital?
About how many St. Joseph statues would be required, to get rid of 100,000 acres?
St. Joseph is on the warpath. He’s sick and tired of being buried alive at odd angles. Besides, does anyone else think this is swampland?
Got popcorn?
Neil
Maybe they should bury St. Francis (patron of animals and the environment). Perhaps then the gov’t would buy up the swampland and leave as is.
Psycho: The name’s Francis Soyer, but everybody calls me Psycho. Any of you guys call me Francis, and I’ll kill you.
“We have been able to articulate 100,000 acres that we think over a reasonable time frame is close to its reasonable value and based on pure economics it doesn’t make sense to hold on to.’”
Wins my vote for the best double speak sentence of the month. Gets extra points for the innovative use of the word “articulate”.
Is there a way to track land prices, I wonder? We may want to retire near my husband’s family in DeLand. We want a tiny house and enough land (5 acres or so) to raise chickens and have a real garden. I wouldn’t mind taking a few properly-zoned acres off some developers hands at 1990’s prices.
St Joe Company. Well, well. No, they aren’t having a fire sale. No, they truly aren’t giving it away. They want to make towns! Gee! What a NEAT IDEA! We can’t sell houses, so we’ll build and sell towns!
They couldn’t just keep making paper, lumber, and forestry products. NOOOOOOO, they wanted to have bling and sexy. Now they don’t have a pot or a window. They can’t make paper anymore. The expertise in that has gone away. It was terrible to read the realitors attitudes about the people who got canned in Port St. Joe, Fl. when these idiots took over. It was like, “Oh well, we’ll miss the old neighbors. Now, screw ‘em. Missing is over with. Who wants to buy a new house! Pant Pant.”
I knew this was a disaster the very minute I heard about St Joe Co morphing from St Joe Paper Co.
Like Ron White says: “You can’t fix stupid.”
Roidy,
P.S. I will NEVER rant off about St Joe Co. The rant lamp is lit. Bitch if ya got em.
Roidy,
about 4-5 years ago, St. Joe, with its REIT structure and ownership of so much land in Florida, was an investor’s darling. Jonathan Litt,
Green Street, and Greg Whyte at Morgan Stanley couldn’t push this stock enough. And a lot of investors made green. But when they started to develop “fishing communities” selling lots at 250k on swampy rivers, the jig was clearly up. They spent a ton on marketing, but couldn’t move them. Truly, these were the guys who believed Florida “was working off a totally new economic paradigm”.
No kidding! All you ever heard about was “Water Color” west of Apalachicola. You never heard of all the weird stuff they were trying to turn. Those rivers you mentioned are filled with the most huuuungry mosquitoes, heat, they flood easily, hurricanes every year or so, snakes, remote locations. They don’t call it “Tate’s Hell” for nothing.
I loved that area. They had a sustainable economy if you didn’t need to get rich, but not any more.
Water color. All that for ONE beach community that worked. Nothing else did. Why couldn’t they have put their energy toward better paper or “greener” technologies, or new market products for their paper.
Darn, go with what you know. Ok, so when the car was invented they didn’t need buggy whips. One has choices: leather car upholstery, “Adult Bookshop” leather playthings, or a million other products that need leather. Does one start doing something you know zip about? House building? Developments? What did they know about that? They needed to get a dose of reality … and did.
Jeez,
Roidy
I tried to go fishing in Tate’s Hell several years ago. I never even left the boat ramp. The mosquitoes we’re so bad that over a dozen got in the truck in the couple of seconds it took in get in. This was in the middle of the day in the middle of a large parking lot.
“He estimates it will suffer a further $700m of writedowns on mortgages and mortgage-backed securities, for a total of $2.1bn.” ”
And you can take that to the bank!
Rummell Rumage Sale
“St. Joe Co., Florida’s largest private landowner, plans to eliminate more than 75 percent of its workforce, sell about 100,000 acres of land and scrap its dividend to contend with the worst housing slump in 16 years. ‘This is not a fire sale,’ CEO Peter Rummell said today on a conference call. ‘We are not dumping stuff on the market and we are not going to make stupid decisions but there are things that we believe have reached their height in pricing.’”
“In the last quarter of 2005, he notes, home investment rose to 6.3 percent of GDP, ‘the highest level since 1950.’”
“Will this downturn be like the 15 percent decline between the third quarter of 1989 to the fourth quarter of 1996 or the 42 percent rout in Los Angeles between December 1989 to March 1997?”
Or will 42% turn out to be pie in the sky?
enron, revisited
“Countrywide made more questionable loans than anyone else – and its postbubble behavior does stand out. As Ms. Morgenson reported in Sunday’s Times, Countrywide seems peculiarly unwilling to work out deals that might let borrowers hold on to their homes, even when such a deal, by avoiding the costs of foreclosure, would actually work to the benefit of both sides.”
Im suprised the fed hasnt instructed banks/lending institutions to sell! sell! sell! to capable long-term buyers. i just finished my low-ball offer and it got roundly rejected by the bank…. oh well.. I assure you it is a reasonable offer… just no dream price…. does anyone now how to look for auction listings… maybe I can catch it at auction… I just dont know where to look..
. thank you.
Detroit many years ago played its hand, the American car buyers will always buy American so why make a better car or sevice. Homebuilders and even private sellers are still saying behind closed doors the buyers they will come back they will pay for overprice houses and we will be in the drivers seat.
It took many a years for Detroit to see the light now they are trying to do better but they lost a whole generation of folks to stubborn thought, i wonder the longer this keeps going and it seems that now at least the public is turned off completely if the homebuilders and resale market will go down in flames and this time there is know foreign houses like cars to save the ecomony?
“Leggett is waiting. ‘We were making it through this horrible, tough time,’ he said, ‘and then this happens. I am just trying to make my payment.’”
If your lender goes out of business and nobody else comes forward to make a claim on the mortgage payment, shouldn’t the home owner be able to just own the home free and clear? IMHO, there should be a law passed to this very effect. Why should the a home owner’s credit rating be at risk because the note holder does not have their act together?
I’m guessing that cash money, as in foldable Dollars, represent only 10% of transactions done in this country, currently
If all of the sudden paper money showed up in spades…
Cagey B might be up to something?
Tannie, you’re doing a heckuva job
“The article portrayed Mr. Mozilo as a heckuva guy, a man from a humble background determined to help other people, especially members of minority groups, achieve the American dream of homeownership.”
the Mi$$iles of October
Let’s say Chase doesn’t actually have proof that they actually own Leggett’s loan. Is it incumbent on Leggett to figure out what he owes and where to send it? Is it incumbent on Chase to prove ownership first? Will Leggett ruin his credit and possibly accumulate compounding interest and late fees in the meantime? Does it just depend on how good a lawyer Leggett has?
And in a chaotic market of burgeoning lender and financial instrument/fund insolvencies, could this proliferate out of countrol? (I’d say “Free Houses for all FBer’s, WHEEEEEE!”…but our household wouldn’t be “in” on this gravy train.)
I had a mortgage sold to TBW and didn’t receive notice of where to send payments for 60 days. One payment was returned to me. I called the original mort. company and they gave me info for the new owner of my mortgage. It was explained to me that the first three payments after the sale of the mortgage can not get recorded as late. There is a grace period……from my experience.
Heard from a Bay of Islands Realt-whore yesterday, “It’s different here, our real estate never goes down.” Maybe not, I heard another looker ream him a new one, including a lecture on peak oil! The media has stopped selling kool aid. Social epidemic over:
“Housing price slide could kill wealth effect”
http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10468497
“Property value growth dips”
http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10468491
don’t get enthusiastic too soon … the growth dips, not the prices themselves. As far as I can see the average home price for the whole country is again an all-time high. With wages surging (this is quite unlike the US and Europe) and unemployment extremely low, it is likely that prices keep rising - although maybe slower than before (maybe a bit like Europe that went from double-digit appreciation to 5-10% appreciation in the last five years). I can imagine some economic fallout for NZ from slower houseprice growth, but for prices to come down we probably need the carry trade to end or a severe economic crash.
@nhz
I dearly hope you are wrong. If the RE value in NZ for my gold bullion savings doesn’t start to improve within a year, I’m leaving the country. I refuse to cough up forty kilos of gold for the type of house that my public school teacher aunt bought in the 1960s when she was in her early 30s. it was a serious pain moving here, it will be a serious pain to move away. But good grief, one can buy an actual waterfront mansion in Argentina for under a million, and a pristine south pacific tropical island (yes, the whole thing) for a quarter million. Yet NZ wants 1.3 million for aging middle class homes with steel roofs in a climate with months of rain and cool weather. Not to mention the complete lack of access to modern health care. If, God forbid, you need a serious operation quickly, you have to fly to Thailand and pay for it yourself. This is a bloody third world country with Club Med prices.
RE: This is a bloody third world country with Club Med prices.
Man, this blog is just a wealth of “straight from the horse’s mouth world info!
I suspect just a touch of hyperbole. I’ve lived in Third World countries, and almost nothing in NZ can be compared to those places. Health care is far from state-of-the-art and there are tremendous problems keeping staff here, but the health care outcomes are pretty damned good.
NZ is not such a bad place to be a renter. All those people mortgaged up to their eyeballs at relatively-high rates to lower their personal tax bills are giving renters a nice subsidy. If it comes to pass that they can no longer afford to do so - no longer believing in unlimited capital appreciation - prices will fall.
Meanwhile, imports are up, there is a shortage of workers rather than work, and it remains the easiest place to set up a business I’ve ever seen. And perhaps we can look forward to less obsession with the rugby in months ahead….
mortgaged up to their eyeballs at relatively-high rates to lower their personal tax bills
are you sure? I thought NZ has no HMD at all …
and I agree that NZ may be a terrific place to be a renter in the years to come.
In NZ you can reduce your personal income tax with adjustments from losses from rental property. This works fabulously well when property values are rising (the capital gain is not taxed, and the ongoing operating loss lowers your tax bill). Doesn’t work quite as well when values are stagnant or declining, as now. It’s been very common for high-income families to be small-time landlords to get this tax benefit (and who don’t need rents to cover all of the mortgage/rates/etc.)
What this means for renters is a larger supply of rental stock than would otherwise be available without this government intrusion. Unfortunately, the quality of almost all housing stock here is poor; quality homes are hard to locate for purchase and even harder for rental.
It’s a classic affordability issue as discussed elsewhere on this blog. The cute house that can be bought for 700k might be rented for $500 per week. Why buy?
I think the housing situation in NZ is a little bit better than in the EU hotspots (UK, Ireland, Netherlands, Spain etc.) and probably worse than the rest of Europe and the US. The healthcare waiting lists in most of Europe are at least as long as those in NZ, although elderly people are probably much better off in the EU. It is always difficult to compare. I have been to NZ and have some remote friends there, and in many ways it looks like paradise to someone from Europe. Yes, Argentina is many times cheaper than NZ but comparing with them is not realistic, so shortly after a crash of historic proportions. NZ is definitely a first world country with excellent prospects in the long run (soft resources etc.) and it is priced for it …
‘This is not a fire sale,’ CEO Peter Rummell said today on a conference call.
Bring marshmallows anyway.
And the graham crackers and Hershey bars. S’mores anyone?
S’more lies
She’s taking on water!
http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/100907dnbusresales.14e85729c.html
Sounds just like a California story 6 months ago.
But prices are still positive! Kind of like the stern of the Titanic reared up 6 stories before plunging into the abyss.
They said the same thing in Orange County before it cratered. It’s only the trailer trash segment that’s not doing well. All the Richie Riches are just fine. Yeah, right!
“We have been able to articulate 100,000 acres that we think over a reasonable time frame is close to its reasonable value and based on pure economics it doesn’t make sense to hold on to.’”
With this prognosis as an endorsement from the seller, one must ask the question: ‘Who in the f*ck would buy it?!!!
St Joe sales pitch: ‘You should definitely invest in this land that we can certify has already peaked in value.’ What fool wouln’t buy it?
This car is the biggest piece of crap I have ever driven. No, I mean it really sucks. Anyone want to buy it?
I don’t work anymore. I own Apple stock. Every day is payday.
word pressboardbox, WORD.
Apple stock always goes up. Same for Google stock.
“The evil of the world is made possible by nothing but the sanction you give it.”
John Galt