The Bursting Real Estate Bubble Is A Fact Of Life
The News & Observer reports from North Carolina. “Wendy Gilbert had high hopes for her University Park house. Buoyed by rapid sales and rising prices in the West Raleigh neighborhood, she and her husband paid $252,000 for the three-bedroom home in December. They planned for profit. They fixed it up and listed it in July for $429,000. It lingered unsold, even after a $14,000 price cut.”
“‘There were several people interested,’ said Gilbert. ‘But either they couldn’t sell their house, or they couldn’t get financing.’”
“So last month, she started courting another kind of house hunter: the renter. Gilbert is among a growing number of would-be sellers offering properties for rent, conceding to a glut of unsold homes and the prospect of cooling prices. ‘We weren’t planning to hold it for this long,’ she said.”
“The practice is creating a shadow market that masks the true inventory of unsold homes, which in the year that ended Sept. 30 climbed 22 percent to a four-year high of 17,929.” “‘You really have no idea of what supply will be hitting the market and at what time,’ said analyst Brian Reece.”
“This shadow is pressuring the rental market, because apartment owners had been expecting a surge of new business. There were 3,102 apartments built in the year that ended Sept. 30, according to the apartment association. That’s 86 percent more than the annual average in the previous four years. About 3,000 units are under construction.”
“‘I don’t really remember a time when our inventory has popped up like it has this year,’ said Sharon Schovain in Raleigh, who has been managing rentals for 23 years.”
“The new business comes from sellers who ‘got disgusted with the soft sales market’ and independent builders who have given up on selling some homes, turning to the rental market to soften the blow, she said. They are joining out-of-state investors who are ‘buying up houses like crazy’ in the Triangle, banking on the long-term prospect of rising values.”
“‘If you were living on the West Coast, imagine how cheap the real estate looks here,’ Schovain said.”
“At 5628 Keowee Way in northeast Raleigh, a ‘for sale’ sign and a ‘for rent’ sign compete for attention outside a three-bedroom home. Homeowner Mike Yoquelet expected the value of the five-year-old home to appreciate handsomely with the extension of Interstate 540. He paid $180,000 for the home in February 2006. He wants to sell it for $229,900 but would settle for a renter paying $1,295 a month.”
“‘At this point, I’m trying to do either so I can make my mortgage payment,’ said Yoquelet, a broker at Northside Realty.”
The Atlanta Journal Constitution from Georgia. “More than 6,800 properties in the 13 core counties of metro Atlanta were advertised for auction Tuesday — a record setting number, up 49 percent from the same month last year. From Gwinnett to Fulton to Bartow counties, an auctioneer reading from a sheet on courthouse steps became the public endpoint for private tales like the Smiths’.”
“‘We just wanted to find out how long we’ve got before we have to get out,’ said Amy Smith’s husband, who asked not to be identified.”
“Georgia’s foreclosure system rolls forward with the unemotional efficiency of a threshing machine mowing down wheat.”
“At the Fulton County courthouse, seven criers from MR Default Services read out bids simultaneously. Each crier from that firm, which represented 596 properties in Fulton alone, was assigned a chunk of the alphabet based on the names of those in foreclosure.”
“Dylon Ross, a veteran investor, was not shy about what he wanted. ‘I’m not looking for great deals. Now we are looking for steals.’”
“In the previous weeks, Ross and his partners drove by maybe 300 houses. ‘First thing, we have to make sure there really is a house there,’ he said.”
“Usually, the lender’s bid went unanswered and the lenders took back the house, looking to sell it again down the road, almost assuredly at a large loss. Most properties up for foreclosure these days have little or no equity — almost 75 percent of the loans being foreclosed in Fulton were made since the start of 2005.”
“Subprime loans are about 10 times more likely to fail than prime loans. ‘This is a crisis,’ says William Brennan, director of Atlanta Legal Aid’s Home Defense Program for the last 19 years and one of the first consumer advocates to warn Congress of the coming meltdown.”
“‘In metro Atlanta, every month thousands of families are losing their homes to foreclosure. On the courthouse steps today, more than 6,000 homeowners were facing foreclosure,’ says Brennan.”
“Nessia Jones lives on a small pension and disability income in the DeKalb County home she’s owned for 26 years. Combined, she and her daughter make $1,266 a month. Yet a mortgage broker doctored refinancing documents to reflect that Jones drew nearly $4,000 in Social Security disability income each month.”
“‘If I made that much money, I wouldn’t have needed to refinance to repair my house,’ says Jones. Instead of a single mortgage, Jones discovered later that the refinancing had saddled her with two mortgage loans and monthly payments of $1,500.”
“Before the refinancing, Jones had a credit score of 700; now it’s down to 400. ‘I can’t get credit from anyone now,’ she said.”
From ABC Action News in Florida. “Foreclosures are hitting every housing sector in the bay area, even high end zip codes are in trouble, creating opportunities for families to upsize or invest.”
“Jamie Rand is an investor and hard money lender in Tampa who says he has bought and sold more than one thousand properties in the Bay area. Jamie sold off his inventory during the boom of 2005. He says there are good deals in desirable neighborhoods adding, ‘between now and probably the end of 2008 you’re going to have some ideal times for the picking.’”
“For example, in the Enclave at Citrus Park, zip code 33626…a prime neighborhood. says this four bedroom, two and a half bath, 25-hundred square foot home, was purchased by an investor for 382-thousand dollars in 2006. Now, its on the market for 280-thousand dollars, more than a 100-thousand dollar price drop. And the seller may deal for less.”
“In the Carriage Point subdivision, a lot of investors came in here and got in trouble when the market turned so there are dozens of foreclosures. There are about 31 homes in foreclosure in this Gibsonton neighborhood alone.”
“‘That’s the best thing that you can have, with the homes that the grass is up to your waist, with the holes and the graffiti, those are the kind of properties that I salivate over,’ he said.”
“But, Jamie also has a warning for investors who get too emotional about the property saying, ‘people overpay, they buy a piece of property with the anticipation of appreciation, never do that, it’s the biggest mistake especially a young rookie investor can make.’”
The University of Florida News. “Florida’s population growth slowed considerably last year as the housing boom went bust, but it remained relatively strong and likely will stay that way for the next few years, the latest estimates from the University of Florida show.”
“‘There have been a number of news articles lately focusing on the idea that population growth has fallen off the table top in Florida and practically come to a standstill, and that simply isn’t true,’ said Stan Smith, director of the UF’s Bureau of Economic and Business Research, who led the research.”
“‘The housing boom certainly contributed to Florida’s growth in those earlier years, and the housing bust contributed to the slowdown this last year,’ he said. ‘It’s much harder for people to sell their homes in New York, Ohio, Michigan or some other state and move to Florida.’”
The News Press from Florida. “First Home Builders of Fort Myers had 1,200 employees two years ago. As of last week, it is down to 50 on the payroll. That’s 1,150 fewer people able to buy a car, finance a house, send their kids to college.”
“The trickle-down is devastating to the community. The loss of buying power ultimately means there will be even more lost jobs in other businesses and industries. It is all a part of the bursting real estate bubble, a fact of life Southwest Florida must deal with by adjusting and surviving.”
The Palm Beach Post. “Home builder WCI Communities said Wednesday it will cut 575 workers in six states, including about 30 in Palm Beach County. Two years ago, residential real estate was the high-octane fuel of Florida’s economic engine. Now, it’s the gunk gumming up the works.”
“Statewide, the construction industry lost 22,300 jobs between September 2006 and September 2007, the Florida Agency for Workforce Innovation said. And this year, for the first time since the 1992 recession, Florida has seen seven consecutive months of over-the-year declines in construction jobs.”
“‘The builders are cutting back because the last thing we need now is new housing,’ said Antonio Villamil of Washington Economics Group in Coral Gables.”
The Daily Business Review from Florida. “Miami-based mFm Construction’s financing offer is a new tactic to find buyers for three condominium projects it built in Little Havana west of downtown Miami.”
“Developers like mFm are reacting to declining sales and the prospect of projects plagued with unsold homes. Some people are holding out in anticipation of prices dropping more than they have.”
“‘We have contracts that were signed in 2005 and 2006 at below-market prices, and still some buyers are having problems with their lenders,’ said Daniel Kaskel, general counsel of Boca Raton-based E.B. Developers.”
“Architect Osman Ramos said he is considering moving from Fort Lauderdale close to his job in Coral Gables. But he would rather wait to see if prices in Miami drop some more before considering mFm’s proposal.”
“‘This plan is good for the buyer, but prices are still high to buy now,’ he said.”
The Bradenton Herald from Florida. “With a record number of foreclosures facing real estate agents, it wasn’t surprising that much of the focus of the Real Estate and Law Summit was helping them navigate the difficult environment.”
“‘Prices aren’t where they were and that has reflected on the courthouse steps,’ Michelle Gilbert told attendees Tuesday at the Sarasota Hyatt. ‘The whole state of Florida is backed up.’”
“At the end of October, 307 foreclosure cases had been filed in Manatee County, bringing the year’s total to 1,881, an all-time record.”
“Gilbert’s firm recently foreclosed on a $750,000 loan where the house is now appraised at $560,000. ‘It’s just amazing these loans were made,’ Gilbert said.”
“‘I wish I could be a bearer of good news and tell you there is light at the end of the tunnel, but I can’t,’ said Doug Pollock, president and founder of Information Data Services. Pollock, who specializes in mortgage fraud and forgery, said the crisis was caused by the explosion of subprime loans and greed.”
“‘Mortgage lenders set the stage for what has happened,’ Pollock said. ‘Mortgage fraud is going to be an increasing caseload for attorneys and lenders because we’re uncovering more of it.’”
“The industry, which helped keep the United States afloat in the post 9/11 confusion, has run out of time, Pollock said. ‘The only way we’re going to recover from this mess is for prices to return to 2003 levels,’ Pollock said.”
“As market values of homes and sales prices continue their descent, many homeowners have turned to short sales. Agents often end up having to settle for less commission for a sale that requires a lot more paperwork and red tape.”
“‘You have to decide if you like lemonade. Some people don’t, some people do,’ Golden Norris advised those considering joining the growing number of agents who are doing short sales.”
The main ingreedient in this batch of unsweetened lemonade, is houses.
“‘You have to decide if you like lemonade. Some people don’t, some people do,’ Golden Norris advised those considering joining the growing number of agents who are doing short sales.”
‘between now and probably the end of 2008 you’re going to have some ideal times for the picking.’
This guy is probably right…except the between now and part. Yes, you can buy right now and pick up homes priced at 2001 and 2002 levels if you look hard enough. I think at the end of 2008 you won’t have to look very hard at all.
A house in my neighborhood just sold for $125K (cash buyer if you can imagine). Needs a new roof and exterior paint. The same house would have sold for $350K in prime condition or $275K as-is at the peak of the boom. My fear is that we’ll get specuvestors picking these types of deals up instead of families who really want to live in the homes between now and the end of ‘08.
House across the street from me sold for $100k cash in April 2006. Owner bought it to fix up for his daughter and her boyfriend. I met the daughter and boyfriend shortly after the purchase, and they both seemed like the quiet, responsible people we neighbors would like to have.
But I was wrong. Late this summer, the owner had an open house. Reason: Daughter had a) quit school and b) run off to Hawaii. No buyers materialized from the open house. The property sprouted a For Sale sign late last month.
I’ve been trying to locate the asking price in the local MLS, but haven’t found anything yet. Will have to ask my fellow neighbor-spies if they know anything.
“I’ve been trying to locate the asking price in the local MLS, but haven’t found anything yet. Will have to ask my fellow neighbor-spies if they know anything.”
I always call when I see a new sign. The FSBO’s and real estate agents always ask if I’m in the market to buy and I always tell them that it depends on the price. Frankly I’m taking a bath on my house as it is and I wouldn’t buy another house on speculation unless we were talking about a 1/2 off 1999 price.
In this case, the owner is also the seller (through his real estate agency). And the owner knows who I am. So, that’s why I’m turning to the neighbor-spies. Gotta be discreet.
“In this case, the owner is also the seller…”
I’m very active in my community. A lot of people know me. Unfortunately even the FSBO’s don’t know who I am because the vast majority bought on speculation and now are trying to ditch their poor investment.
My little sister decided to avoid college for a year and go hang out in Hawaii with her boyfriend, so she did, ignoring my and eveybody else’s wise advice and admonitions. So she hangs out surfing and sitting on the beach all day, plays guitar by bonfires at night, when she needs money for food or recreational substances or just ’cause she’s bored of lying in the sun, she makes a couple bead necklaces and sells them for outrageous prices to tourists enchanted by the cute little surfer chick. She finally came home, after more than a year, tanned, happy, with a higher quality boyfriend, and richer than when she went.
Really, really annoying.
It’s all about the looks! As long as she is cute she can get away with most anything. BUT with those looks better go brains or “better boyfriend” will get dulled real quick.
Well, fairly decent brains run in the clan–with a few notable exceptions–so I’m hoping that hers comes online after a bit. Meanwhile, as you say: ‘As long as she is cute she can get away with most anything.’
I’m relying on that fact to keep her out of jail.
Good for her! That’s the time to do it. She’ll never regret it. I’ve pulled a few of those ill-advised pull up stakes and see the world moves in my life, and I’m glad I did. Now I have a wife and kid and we’re thinking about moving to Japan for a while just cause.
It’s never too late to enjoy life. If you’re willing to do without the trappings of material success, and you have an education, then you can have some real fun before you die.
The poor sod thinks this will end in 2008? Hahaha… nope - way too soon! Now, if he means, “Buy in 2008 because by 2009 we’ll be in a Depression and you’ll want a place to eat the food you got at the soup lines.” I’d say that has a higher chance of being true than a return to absurd real estate prices in 2009.
Bought in December 2006 for $252,000 and put it back on the market after fixing it up for $429,000. That’s just one level below the, “I bought a lotto ticket so I can win 1 million dollars,” mentality.
It’s amazing that people do not get what has happened. ALL valuations in the majority of states from 2000 onward are 100% fake and based on realtor and mortgage broker fraud who blackmailed (either you agree on our price or you don’t work) appraisers. ALL of that fraud has to be wrung out of the property market to get back to normal and that’s a long way off. As for that stupid couple who were convinced they were going to win the property lotto because they bought a house, did some fixing and thought they could almost double their money, we can only hope they get a “renter from hell” so they learn their lesson.
“renter from hell”
Although this happened before the bubble, my wife and I decided to rent my dad’s and her mom’s house (both inherited). Both rental experiences turned out to be total disasters–my wife’s mom’s former house ended up having its walls decorated with the phone numbers of the local meth dealers; the renter staying in my dad’s house skipped out on the rent, stealing most of the furniture (including the fridge), and leaving his dog tied up to the fence in the middle of summer (luckily I found it before it died, and turned it over to the pound). We immediately sold the houses and vowed never again to become landlords/landladies.
Doug, I think your family’s experience is going to be shared by a lot of the people who can’t sell their houses and decide to “just rent it out until the market improves.”
They’re going to get head-bopped by the realities of landlording, which leads to my next prediction: A lot of those houses will be dumped back on the market in about a year.
And if the renters are F’d buyers themselves who lost their house, imagine how much fun that’ll be! Let’s see, we’ll have angry landlords who don’t want the job and who are underwater on their McDoomshacks renting to angry F’d buyers who have already lost their own McDoomshacks. Yeah, that’s a recipe for a pleasant business relationship!
When my grandmother died, my stepfather rented her house to some people that seemed quite nice. But itt was a very cold winter in Texas, and the renters couldn’t pay their gas bills or electric bills, and after they finally decamped, we found that they had chopped up Meemaw’s furniture for firewood. Only there was no fireplace! They built a little camp fire in the middle of the living room….
It sounds like they both watched a few too many “Flip That House” episodes. Either that or they attended one of these fly-by-night seminars on how to build wealth through real estate.
Has anyone seen “Flipping Out”? The flipper is a real piece of work. Total as*. I see it on the CNBC channel on weekends. He has blessings for houses he is trying to sell and rides his employees mercilessly. It’s a great window into the bubble (bursting).
I have seen the show…he does nice work..although all of homes are high end flips..buys for 1.2mill…flips for 2.1 after putting in $200k…It all seems so fake..he just finds buyers at the last min crap…..I wonder when the new season starts, if it does happen, wil it keep showcasing his “perfect” little flipping world…
It’s a fictional show.
A lot of those flip this house episodes were faked. It was on the news one night. Also faked were the houses where they toured 3 and picked one. One couple said they were approached at closing to do an episode and 2 fake houses were shown to them.
Quote:
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Bought in December 2006 for $252,000 and put it back on the market after fixing it up for $429,000. That’s just one level below the, “I bought a lotto ticket so I can win 1 million dollars,” mentality.
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That is the mentality of most people in this country. They want to have money but they do not want to work for it or earn it the hard way. With that kind of attitude and mentality, you wonder why the U.S dollar is trashed every day !!!
Sad, sad society… Sad, sad people
$429k for a 3 bedroom in North Carolina? Hahahahahah!
But it’s Cary
Actually, Cary, NC has the highest concentration of Ph. D. scientists in the country. Still, they don’t pay ‘em enough to live that well off.
Yo Momma,
I’m curious where you heard that statistic, because I’ve heard it multiple times about multiple places. I’ve always wondered about where that info came from.
Cary is highly overrated. Nothing more than a bedroom community for those who work in RTP. I like to think of it as a city without a soul, as there is NOTHING culture-wise - one must go to Raleigh. Except for a few high-end developments and whatever decent houses were there before development exploded, Cary is just lot after lot of ugly vinyl boxes, with a few shopping centers mixed in.
A former boss of mine lived in Apex. As Cary grew and moved out his way, he received and declined numerous offers to buy his house & ~10 acres of land, so they could lot his property for more houses. He finally gave in once he had become completely surrounded by those ugly vinyl boxes - he just could not stand it any more. He made something north of $1,000,000 on the deal.
The Cary statistic is from the US Census. There are a lot of Ph.Ds here because it is a nice, safe area, there are three world class universities nearby (UNC, NCSU, and Duke) and Research Triangle Park has a lot of biotech and information technology firms. The comment about one needing to go to Raleigh for culture is quite true, but Cary is closer to downtown Raleigh than most of the population centers in North Raleigh proper (it’s a 10 min drive). It is also true that the pay is less than in California, but not much less. The median home price to medium income ratio is Cary is about 3, which isn’t far off the rent-saver value. It will probably continue to stall out, but I would be very surprised if it crashed.
I have a Ph.D., I live in Cary, and I own a 4000 sq-ft home in one of the nicer areas for a mortgage that is only 2X my income.
Thanks, I’ll have to check that out.
I am working on my Ph. D. and my boss, my boss’s boss, and my tech lead all have Ph. D.s. They give them out like candy here.
C.A.R.Y., NC
Containment Area for Relocated Yankees, NC
“Since 2000″ is an interesting choice. When did the property bubble start? I look at the composite Case Schiller and say 1997 — the Wall Street Journal says somewhat later. Clearly, the no-money-down interest-only liar loans were a failure in regulation intended to push the inevitable devaluing onto the backs of the poor, and that took off in 2001, but we otherwise would have been nearing the end of the bubble that started in 1997.
It’s significant that the national (and, eventually, global) real property bubble started under Clinton. Certainly, Bush 43 didn’t help, but he didn’t start the initial problem, which is what I think the “since 2000″ phraseology implies.
“from 2000 onward” is an interesting choice. When did the property bubble start? I look at the composite Case Schiller and say 1997 — the Wall Street Journal says somewhat later. Clearly, the no-money-down interest-only liar loans were a failure in regulation intended to push the inevitable devaluing onto the backs of the poor, and that took off in 2001, but we otherwise would have been nearing the end of the bubble that started in 1997.
It’s significant that the national (and, eventually, global) real property bubble started under Clinton. Certainly, Bush 43 didn’t help, but he didn’t start the initial problem, which is what I think the “from 2000 onward” phraseology implies.
–
““Usually, the lender’s bid went unanswered and the lenders took back the house, looking to sell it again down the road, almost assuredly at a large loss.”
It is called falling behind the curve, a very common problem during bear markets, be it stocks or houses. Tomorrow is another day but most likely a day that brings lower prices.
Jas
“‘The housing boom certainly contributed to Florida’s growth in those earlier years, and the housing bust contributed to the slowdown this last year,’ he said. ‘It’s much harder for people to sell their homes in New York, Ohio, Michigan or some other state and move to Florida.’”
It’s also harder to people to sell their houses in FL and move somewhere else where they don’t get r@ped in the a$$ with the insane property taxes and insurance. I’m sure the SOHers will stay.
This guy is nuts if he thinks there is population growth in Florida..tell him to go spend 48 hours on the Fl/GA border…count how many Uhauls going out and how many going in…that tells the story…
We’ve had offers on our house in Ohio, even though it’s not for sale, but we won’t pay the FL prices or the taxes and insurance.
Bernanke comments were not market friendly.
Every time (triple-bbb rated) opens his yap, it’s very friendly to my market…
Bad Santa?
Gas hits $5 a gallon in California.
http://www.theksbwchannel.com/news/14536489/detail.html
True story: A couple of years ago, one of Tucson’s more popular bike shops posted a sign on the wall in the mechanics’ work area. It was a prediction of when the various employees thought that gas would hit 5-a-gallon. They were about a year off.
I don’t think we’ve hit the pain threshold yet. When we see all the big bulbous SLOBurbans on the frontlawn with a 4 sale sign on them, we’re getting somewhere.
That’s already happening here in Tucson.
Bicycles: The next bubble market?
Veloblues
I told myself that when gas hits 5 bucks a gallon, I’m going to start riding my horse to town. Unfortunately, I sold the horse a couple of years ago. I want my horse back!
I am buying a electric Bike…..
5 bucks a gallon for an H2 owner works out to $160 to fill the tank (32 gal capacity). Here in L.A. you would be lucky to get 10 mpg around the city, so that works out to $0.50 per mile just for gas. Add insurance, the monthly lease payment (it’s very “L.A.” to lease vs. buy) and normal maintenance costs and that is one expensive form of transportation.
But, as my “spend beyond your means” brother-in-law always tells me “It’s just dirty paper, you’ll make more”. He also pulls the “all I have is a hundred…” line on me when it’s time to pick up the tab for a couple pints…the weasel.
I hope we stay above the pain threshold long enough to see all the enormous pigmobiles loaded onto the scrap barge to south america.
Explain to me, who is the smarter guy in this tale?
BIL: “all I have is a hundred…”
Blano: “That should cover it.”
A Hummer of a digit fest:
http://www.fuh2.com/index.php
We had our crooked jeweler in town that used to carry a wad of cash, that, if he wasn’t so fat would have hurt his butt to sit on. Always had it folded in a money clip with a hundred dollar bill on top and bottom. One day I was in the pizza shop when he was, and he pulled out his wad like always and said, “I only have a hundred so I’ll just charge it.” (His standard line) The wad opened a little and I could see the middle was just a bunch of ones. It’s a wonder the jerk didn’t get mugged and robbed the way he flashed his cash around.
The classic Michigan roll!
Rock and a hard place for Big Ben. From here on out, Ben Dover (Bernanke) isn’t going to have much good news to talk about. He’s played all his cards and the game is lost.
I thought he had 475 cards left?
He’s a bit of a Mad Hatter, used em’ up building this…
http://pic.templetons.com/brad/photo/bm03/art/img_4690.jpg
LOL
I thought he had 475 cards left?
Heck, he prints the cards!
Big B is finally waking up!
Not only was it not market friendly, the inflation remarks were not friendly to us, the consumer.
“At 5628 Keowee Way in northeast Raleigh, a ‘for sale’ sign and a ‘for rent’ sign compete for attention outside a three-bedroom home. Homeowner Mike Yoquelet expected the value of the five-year-old home to appreciate handsomely with the extension of Interstate 540. He paid $180,000 for the home in February 2006. He wants to sell it for $229,900 but would settle for a renter paying $1,295 a month.”
“‘At this point, I’m trying to do either so I can make my mortgage payment,’ said Yoquelet, a broker at Northside Realty.”
________________________________________________
Seeing these real estate clowns sweat and burn is my favorite event in this entire saga. The greed of the RE CrimeSyndicate drove prices out of control and the panic of these same AssHats will tear it all apart again.
Sink motherf##kers.
See, exeter, this is why I enjoy your comments so much. Nice and vivid.
I have friends who bought in a suburb of Raleigh in 2005. The areas around Raleigh are filled with homes that have built in the last 3-5 years. New construction is everywhere, what was farmland is now subdivisions and the last time I was there (about 6 months ago) the construction was still going strong. All of those trying to sell existing homes will face the same problem we have been seeing in many other areas, they will be cometing with homebuilders who have to dump inventory and don’t have the luxury of taking their time to sell.
If someone is selling a used house a selling point may be that they are in a established neighborhood, the developers who are creating whole new neighborhoods out of farmland will sell to anyone which increases the chance of having neighbors from hell.
The same with condos, an older condo has a higher chance of having a working condo association while the new condo might not even get enough people to pay the bills.
I agree with you to a certain extent. I am seeing the problem you describe in the area that I live that is full of new condo towers. Many of the developers who have built these condos are unable to sell them and are turning them into a combination of sales/rentals. The potential for problems in buying in a building like this in my mind is huge. I would only consider it if the units were being sold at a tremendous discount. I think you will see the same issues in the new housing developments. People will only buy in at a large discount. This is bound to put tremendous pressure on the sellers of housing that is not new construction.
Cuomo’s got’em on the run…and when the denials come-everybody’s on this blog will know who the liars are.
http://www.boston.com/business/globe/articles/2007/11/08/subpoenas_issued_in_probe_of_appraisals
This was on NPR before 6 a.m. this morning. Almost startled me out of bed. The NPR business news usually doesn’t do that.
RE: The NPR business news usually doesn’t do that.
Personally, I think this is the biggest development in the housing debacle to come down the line.
Everything relative to the blackmail and coercion which evolved in the appraisal industry is going to be exposed.
Cuamo will have hordes of appraisers who were put of business by the number hitters ready and willing to testify to the enormous level of corruption which evolved in the appraisal profession.
No insurancers are going to pay up with these charges of rampant fraud ramping right up to the top players.
And what everybody needs to understand-an appraisal is a lot more than just a number.
It involves analysis of financial concessions; impact of interest rate buydowns; neighborhood compostion; constuction quality; design & appeal; depreciation; internal and external obsolescenses; et., el.
The Uniform Standards of Professional Appraisal Practice is a couple inches thick. The application of it’s contents require more than a high school degree.
As an example, FNMA won’t purchase loans of single family with surrounding commerical development in excess of 25%.
It’s only a small check box on the FNMA 1004 form, but it can have an enormous impact on residential value.
Fudge this analysis, and all the rest of your report is garbage.
This is one reason you have so many bad, bad projects and ugly houses out there.
Garbage in-garbage out. So here we are.
Scenerio: Bank heads set up secret meeting. They want to get rid of the competition and the scum(of course Bankers never see themselves as scum. They are well educated legal MAFIA…)
Step 1: No more buying from competition. Put mortgage companies out of business(no more Ameriquest, HomeBanc etc)
Step 2: Close up wholesale/correspondent lending channels. Squeeze the brokers…
Step 3: Regulation so tough most mortgage shops will not be able to stay open(look a MASS and HR 3915 and more to come) and consumers will have to shop retail(banks).
Step 4: Go after Appraisers to get them so regulated that they will have to go to the banks for jobs and the banks will tell them exactly what to do(we need the magic number…only this time it is the almightly bank telling you not the scum brokers and that makes all the difference)…
Step5: Buy the tan man..since he wants to play ball with us…hey funny his company was already suppose to fall apart yet CW posted the LEAST lossess among the big boys so far…Hmmm
Step 6: Show all the lossses and blame the mortgage brokers..”We will be profitable after we dump the scum and their products.. We promise our mortgages will be pure and clean since they are now handled by the Banks” they announce to the world..
Step 7: Another secret meeting to see if everthing is going as planned…
Disagree on one point — #4 — banks will have more skin in the game and will securitize fewer loans — or, buyers of loan-backed securities will be a lot choosier in terms of risk/quality of loans. So, I think banks will be happier with quality/honest appraisal work — only pressure will come realtors or sellers trying to hit a number — and, their influence is limited in this scenario.
I was researching Texas foreclosure law recently. Here a buyer takes without warranties, except title warranties, and is not a consumer. This may dampen banks’ abilities to resell their REOs, no? What does a bank do with a slew of unsellable houses?
Lower the price.
Hires a contractor like Amresco.
Been researching Texas foreclosure law lately. It seems that a recent change in 2003 made it that a buyer of a foreclosure takes without warranties, except as to title warranties, and is not considered a consumer. This may dampen the banks’ ability to resell their REOs, no?
oops double post
Thanks for the clarification.
“‘At this point, I’m trying to do either so I can make my mortgage payment,’ said Yoquelet, a broker at Northside Realty.”
Keep trying! You can do it!
The Yoquels are simple in them parts, aren’t they?
“‘There have been a number of news articles lately focusing on the idea that population growth has fallen off the table top in Florida and practically come to a standstill, and that simply isn’t true,’ said Stan Smith, director of the UF’s Bureau of Economic and Business Research, who led the research.”
Uh-huh. Lack of demand must be why the U-Hauls out of Florida are so expensive, as reported here. Good economic analysis there, Stan.
I call BS too.
Today is garbage day and I set out some large furniture. Within 5 minutes a contractor stopped and asked to take it. I made small talk with him while helping him…
He’s moving to N.C. and needs stuff to furnish his new digs.
He probably has to replace the high priced furniture he sold on ebay so he could buy food.
Today is garbage day and I set out some large furniture. Within 5 minutes a contractor stopped and asked to take it. I made small talk with him while helping him…
Contractor is no smarter about economics now than before.
The cost of transporting his free furniture to N.C. is more than it was worth. Even if he does the labor… space on a truck or weight on a truck eats of fuel.
“If you were living on the West Coast, imagine how cheap the real estate looks here.”
Yugo’s were cheap cars, but they were not inexpensive.
Many people know the price of everything, but nothing about it’s value…
After looking at the 10 day forecast, I might attribute more value to Florida RE. LOL
http://tinyurl.com/2dlm9m
Weather Channel
kearsarge, MI
Drat the blizzard earlier this week was fun!
Bingo. I’ve noticed that as well…
His report is total BS. Last school year there were something like 427 more students in Florida public schools than the year before. So this “expert” is saying 330,000 people moved to Florida last year and brought only a net of 427 kids?!!
I wasn’t aware that home-schooling was so prevalent in Florida.
Plus Fl was expecting 46,500 new students last year and only got 400+. This was discussed at a meeting I went to last night. That’s why school construction is getting scaled back and some teachers that were hired, were told they wouldn’t have a job.
Some of the economic “analysis” coming out of UF is breathtaking in its disconnection from reality. The sad thing is that my tax dollars help pay that guy.
Bernanke just stated he was “hoping” the property market would bottom out in the spring of 2008.
May I submit my resume for the position of Fed Chairman. I’ll even drive my own car to work and buy my own lunch and those invitations to attend cocktail parties attended by the other Washington Hacks where we can all pat each other on the back for doing a, “Heck of a job,” I promise to stick where the sun doesn’t shine.
What qualifies me for Fed Chairman? For starters, I never go into debt. However, my main qualification is to tell the truth. A very rare commodity in Washington. Here’s a few truths. The property market will NOT bottom out in the spring of 2008. A slight chance it might ease in late 2009. A better chance in 2010 but no real recovery until 2011/12 and that will be followed by a stagnant property market for many years. As far a a recession is concerned, we are already in the early stages. No comment on how bad it will get but it COULD get very bad. On the inflation level, I would also tell the truth. The current Fed Chairman states inflation is running at 2%. My model, which is based on how it affects the average American, is running at 7% to 10%.
Thank You
“I never go into debt.”
From the FED viewpoint, this just shows that you are a troublemaker. If you had bought a $1,000,000 house that you could not afford they could have kept the crazy RE bubble going for a while longer.
You have all the wrong qualifications for the Fed job. EGAD!! you are not going to go into debt? also you tell the truth? thats instant disqualification.
“However, my main qualification is to tell the truth. ”
Ok, you are definitely NOT qualified for the position!!!
No debt? You shouldn’t even call yourself an American.
We would make you Fed chairman but I think you’re a little over-qualified. As far as I can see, the only qualification is that the person can fog a mirror, just like for getting a mortgage. But we’ll all vote for you anyways.
I am seeing the renter thing in my part of the Netherlands too. Some homes that have lingered on the market for years at ridiculous wishing prices are now offered for rent (nearly all of them are empty). The rent is usually low relative to the asking prices, like yearly rent 3-4% of asking price, but still far higher than the local market will bear. Often these homes are both for sale and for rent, and inventory of both categories is increasing. The owners are still in denial, that’s for sure - but because of the sticky homeprices and very low carrying costs (thanks to the ECB) they don’t worry and stick to their lottery tickets.
The most funny thing is the conditions that apply to prospective renters: there are all kinds of requirements regarding income, occupation / job status, tax records, accountant verification etc. While I would probably quality to buy a whole street with the current Dutch downpayment / mortgage conditions, I’m not even allowed to rent one home. This market has a long way to go …
What’s amazing is that people who can’t sell their houses for the price they want think that there is a pool of renters out their who can afford to pay the same amount in rent as the mortgage. If they can’t find anyone for example who will pay a $2500 mortgage where are they going to find someone who will pay a $2500 rent?
My son lives in a blue collar area of Northridge. Most of this area is now latino blue collar but there are still pockets of white blue collar. Most are elderly (in their 70’s and 80’s and retired) but a lot of them have their older children still in the house. Someone bought a house (value in 1998 $135,000) recently, slapped some paint around and tried to sell it. Nothing happened. Now he’s trying to rent it. He wants $2,700 a month. My son pays (for the identical house on the same street) $1,400 a month. Of course, so far no takers. However, the guy is bitchin’ and moanin’ that people on the street need to cut their lawns more often and some need to paint their houses. He actually put notes in their mail-boxes! Obviously, the end result of this will be (for him) foreclosure OR he will rent to 2 or 3 latino families with 10 kids.
They figure the hotel parking lots are full at $100/night
Wow! What an admission from Big B (talking about China) “strengthen their social safety net so the consumer will spend more”
Ummm, didn’t we already try that one here in the West?
It went from a safety net to an entitlement program.
So, how did that one work out?
So what if the Chinese spend more, all that will mean is that they buy more Chinese made stuff. How is that suppose to help the US economy?
Oooh, my hero Ron Paul is on…..
Christ, these sob stories from the inner city are annoying. Then BB says it’s terrible for creditworthy people to lose a house. BUT THEY WERE NOT CREDITWORTHY!
Hinchey had a good read on where things are heading.
Hey Bruce….. “run to the hills” brother.
run to the hills…because it’s two minutes to midnight.
Saw that also….What a bunch of crap….
How do you know they wearn’t creditworthy?
That’s the definition of subprime….. are you kidding me. What kind of people do you think live in Elijah Cummings’ inner city district.
He-he, Loretta Sanchez’s insights were interesting, even though she has no idea what is the cause of this.
Wow, Trish Regan is hot, eh? But clueless like most CNBC bimbos.
Why don’t you tell me what kind of people live in Elijah Cummings’ inner city district–I’m not familiar with it. I do know that the “subprime” umbrella comprises all kinds of lending practices–including credit extended to people who have perfectly solid credit histories and were long-time homeowners, so the fact that you attach that label to them is not going to make me respond like most people get all of their “information from the MSM.
I also know that Ron Paul is a member of the Republican Party who has yet to disavow a single plank of their platform–so perhaps you could also explain to me how a Paul administration would be in any way distinguishable from a Bush administration?
TIA.
I have to agree. He’s like a lot of Reps - small government talk unless you’re talking about social issues, then he wants big governement to regulate our morality.
Apparently the trolls are out today.
You’re kidding, right?
Dear Pack: Not a troll and not kidding. I would suggest you look at whole candidate on ALL issues. Also, many people don’t understand the whole plank/platform issue that candidates are obligated to uphold. Whether I like RP or not won’t matter. He won’t make it through the primaries. You can not get elected without party support and the party doesn’t support what they perceive as outsiders.
quote: so perhaps you could also explain to me how a Paul administration would be in any way distinguishable from a Bush administration?
Well, the lack of torture chambers would be one distinction.
I’m starting to agree with you about Ron Paul. People need to give this guy a closer look.
I agree with you until he starts talking foreign policy then he loses me. He said the other day something to the effect we just need to be nice to Iran and they will be nice back. WTF? He would be a much better domestic advisor to a President than actually running the place.
Exactly. He sounds like a very nice guy to me, and I like what he says re: economics, but it only took about 3 minutes to figure out his isolationism would be a complete disaster for the US and A.
I donated $100 to his campaign yesterday - the first time I’ve ever donated to any pol. While I agree his foreign policy may not be optimal, I’m at the stage where I think we have a LOT more to fear by the establishment in our own government than the terrorists. First clean the inward vessel…
I’m not too worried about terrorists, if we’d close down the border half the problem would be solved. And it’s not like the establishment is actually keeping us safe from terrorists when they prosecute military personnel and border agents for doing their job.
Nope, the current pols are playing a shell game and using the terrorist card to keep us unwashed masses in line. Not that I don’t think terrorism isn’t a problem, it’s just that our governement isn’t really doing anything about them now.
My viewpoint on terrorists is the same as criminals - if you wait for the cops you’re gonna get slaughtered. It’s your responsibility to take care of matters yourself, which I’m prepared to do. ‘Course it sucks to only be packing a rifle in a nuke fight….
Well said Dog…. I find it very interesting that the fundies have completely dropped the abortion/gay fearing propaganda in lieu of the turrrrist fear card. I recall for the past 25 years that they would not budge on abortion so apparently it is politics over principle with these clowns. Also notice the NEVER ask Billy Graham or Franklin Graham. Only the crooked liars like Robertson, Dobson and Tony “I’m Alfred E. Neumann” Perkins seem to yammer on about the overstated turrrist threat.
I also dropped $100 in the mail to Ron Paul - first time contributor to any political campaign. This is the first politician that actually makes a little sense. I also get the impression he is not owned by any of the pig men, like the 434 other members of the House.
“When seconds count–cops arrive in minutes.”
Ron Paul rocks!
Folks we will have to agree to disagree on this one. Paks have 40 to 50 nukes. They are fighting in the streets there. Taliban is somewhat popular. Then you have Iran. Look I live in North Carolina but I really care what could happen to New York or DC if several of these nut jobs get hold of a nuke or two or three.
…and guess what: if we hadn’t been intervening, pissing them off, and sticking our noses into other peoples’ business, then we wouldn’t have to be afraid of a nutjob in Iran or Pakistan getting hold of a nuke and lobbing it on DC or NYC.
fear fear fear.
I agree with Novawatcher. There’s a good reason that the Paks are not trying to cause trouble for Paraguay or Switzerland or Namibia or Thailand (and the great majority of the rest of the rest). It’s because those countries’ politicians mind their own business relative to the Middle East.
OT
R.Paul just ass reamed BB on bloomberg radio.
http://www.bloomberg.com/audioplayers/playr_owm.html?clipName=Bloomberg%20Live%20Radio&clip=http://www.bloomberg.com/streams/audio/radio_live.asx
Yes he did….He is far more qualified to be Chair than BB…..BB looked like a deer in the headlights when Paul was finished…
(triple-bbb rated) reminds me of Paul Giamatti’s character in the movie “Sideways”, which means he’d rather drink kool-aid, than any stinking Merlot…
BB was right about the MZM, though. That’s the problem with Paul. He has the right instincts but they can shoot him down on a detail like that. Shadowstats estimates M3 but the Eurodollar deposit is a wild guess.
when i turned on the tube, sen. sanchez was trying to turn the focus to the war in irac?!? just how are the two related!?! she needs to be voted out of office in my opinion!!
sorry “iraq”
Yes. Anyone who speaks out on the lies associated with iraq should be voted out. How about just removing them from office? /sarcasm off.
i dont think that was the forum for that! she needed to focus more upon the role of the fed. how is telling him to talk to the prez. about iraq going to fix our inflation problem? it sound to me like a grandstand to try to get herself reelected!!
“How about just removing them from office?”
Good luck with that, though it would be nice. IIRC I’ve read that Congress traditionally has as high or higher reelection rate than the Communists did in the old Soviet Politburo. And our system is better???
I find that alot of Senators were bandstanding during the BB meeting . My take is they plan to use government backed loans to bail out the banks and they want to raise the limits .
Ron Paul blasted BB with the flaws in the system to begin with and how inflation is real and alive because of low interest rate policy .
Its clear to me that they want to solve the credit crunch by government insured loans ,but the loan amounts arent high enough . IMHO I don’t want taxpayers to back any loans for 5 years .
I find Paul appealing, and Osama’s mettle annealing…
One on matters fiscal, and One on matters of making this country less brittle.
Why not a co-Presidency?
Unity.
Wouldn’t ever happen aladin. The fundies want to wage ideological war with anyone they disagree with, including nation states.
The fundies are yesterday’s news…
I’m more interested in the future~
“The industry, which helped keep the United States afloat in the post 9/11 confusion, has run out of time, Pollock said. ‘The only way we’re going to recover from this mess is for prices to return to 2003 levels,’ Pollock said.”
I don’t know what the year is, but if Subprime, Alt A, Neg AM, IO, Pick-your-payment financing really is gone, then prices need to drop to a level that is affordable with traditional loan products.
Watched BB testify….Cuomo is under attack for his investigation into the whole appraisal mess. Not for doing it, but that the timing is terrible considering how shaky the housing market is right now. WTF???!!! Kill the messenger. BTW, it was a Republican who made this point. With the election in a year, they have to be terrified.
I’m convinced the Republicans will try to throw the 2008 election like they did the mid-term. That way the Dems can take all the blame. But I don’t think they’ll be able to prop this mess up for another year.
Jim Cramer was also mad at Cuomo. How dare he go after these people for committing fraud. How the heck is Jim going to make money!!?? How dare Cuomo. How dare he!
booooyaaaaaaaa!
“…$252,000 for the three-bedroom home in December. They planned for profit. They fixed it up and listed it in July for $429,000. It lingered unsold, even after a $14,000 price cut.”
You know what? Screw these people. They’re asking 200,000 more than what they paid a year ago? Are these people from California? I’m sorry, but NC is nowhere near to being CA nor does it make sense to ask East Coast/West Coast prices in an area that still has plenty of homes under 150k. I hope they fail to even find renters.
Rent an American Dream!
Sorry we don’t say rent anymore, “Its pre-owned!”
And these numbers are per 100K, so you can compare them directly
Next thing you know your on the roof tops with your assault rifle defending the neighboorhood.
“paid $252,000 for the three-bedroom home in December. They planned for profit. They fixed it up and listed it in July for $429,000.”
Is she completely NUTS?? What in the hell did she do to add $177,000 in value? That is the equivalent of adding 885 sq ft ($200 a sq ft) to 1777 sq ft ($100 a sq ft.) If it was just redecorating with countertops paint and similar stuff, not even Scalamandre wallpaper could add that much in value.
And for all those wanna-be real estate moguls who now need to rent the property, they are going to meet up with reality real fast. The rent will not be determined by what their mortgage and taxes are for their over-priced box but by what the market can pay. Want to figure out what the market will bear? Pull the income data for the community and look at the income levels between the 25th to 50th percentile, and then divide the incomes by 12 and multiply that .30. And there is the rent (and most likely no way will it cover the mortgage on that place.)
you have to be careful renting now, too. There’s a good chance the guy you’re renting from will foreclose! I wouldn’t want to rent this palace from these idiots.
If you have a lease, they new owner (including the bank) may be obligated to keep you as a tenant, but that’s not to say they won’t make life hell for you.
This is exactly what worries me. Of course, I rent. It’s great. I’m saving a ton of money and found a place that has everything I could get with buying for less money. However, I do worry about my landlord going under. On another housing bubble blog (or maybe it was this one) I read about a guy who talked about how he ended up moving 4 times in the last 2 years because of landlords going under (and the ARM resets haven’t even gotten under way yet). This is the one thing that makes me think about buying before 2011/2012. I still won’t do it unless I get 50% off peak and it passes a solid home inspection (maybe 2 or 3 inspections), but even if I lose a little bit of money it may be worth it to not have to deal with a succession of landlords going bankrupt and all of the hassle that goes with it.
Exactly, your time has value as does peace of mind.
BBP — might help to run a credit check on the landlord before you rent. Also look up what other properties he/she owns in the area. And I doubt that age discrimination applies “backwards” — I would never rent from a 20-something in these times.
I can assure you in the Netherlands that would be a modest profit; I have seen homes with nothing more than a paint job and new kitchen (cost 20-25K euro) sell for 300-400K euros extra within a few months after the previous sale. And I know several realtors in the area who simply list a home for twice the price of two years ago, without any updates. Sometimes there is an idiot who pays asking price (money is still free here if you have no capital of your own, government assumes all the downside risk, so why worry about prices).
I don’t know about owning property in the Netherlands, except maybe Maastricht…… Based on the Goreian global warming mythology, someone made a map of Belgium after the sea levels rise entitled “Le Reve Wallonne”. Conveniently, Wallonia is high country and apparently Brussels is also elevated, so they had the “Le preque-isle de Bruxelles” going into the North Sea. A few islands remain in what was formerly Flanders. What about the Netherlands. Also, all that’s left is Maastricht.
Sorry, you probably don’t find this funny…….
You know,
I’ll admit that I’m sort of a bear when it comes to Wall Street ( for obvious reasons that it could indicate lower housing prices) but yesterday and today actually has me worrying just a tad. Things do not look good out there. Looks that indeed- a recession is knocking on the door.
“‘In metro Atlanta, every month thousands of families are losing their homes to foreclosure.”
———————————————————-
No, they are losing their homes to Not Paying Their D@mn Mortgage. These people are deadbeats, liars, and bank robbers who stole money from banks they never intended to repay.
When the MSM portrays these people correctly in this way, then we will be making progress towards a recovery.
Update on my 2,600 Adopt-a-Bubble for Sale in Encinitas Ranch:
Wish Price: $924,950
Zillow Estimate (10/25/07): 984,876
Zillow Estimate (11/7/07): $867,980
Drop in Market Value: Priceless
Yeah, priceless in more ways than one. Price less.
“‘We just wanted to find out how long we’ve got before we have to get out,’ said Amy Smith’s husband, who asked not to be identified.”
I get the feeling that sarcasm is all reporters have left, after they’ve heard the 326th sob story about somebody getting foreclosed on…
I thought I was only one who caught that little journalistic gem. Priceless. I’ll bet the stenographers are just starting to roll up their creative sleeves.
“The only way we’re going to recover from this mess is for prices to return to 2003 levels,’ Pollock said.”
I doubt it. Try 2000 or 1999 or 1998 prices.
The best part of this post, something not mentioned by any other poster, this far. Note: I copied from the original source, ABC Action News of Tampa:
But, Jamie also has a warning for investors who get too emotional about the property saying, “people overpay, they buy a piece of property with the anticipation of appreciation, never do that, it’s the biggest mistake especially a young rookie investor can make. if you do it right and buy it right you’ve made your money.”
Jamie sounds like a professional, not an amateur. His comment reminds me of something I remember hearing many, many years ago. “In real estate, you make your money when you buy, not when you sell.” In other words, by make money buying at a below market price, then by selling at regular, conservative market price. In the bubble era, of course it was different–buy high, then sell higher….this strategy is unsustainable, which brings us back to Jamie’s smart, old-fashioned advice…