It’s Now Clear Housing Prices Simply Rose Too Quickly
The St Petersburg Times reports from Florida. “A Tampa developer made the biggest land gain in its five-year history Friday, scooping up 8,300 home sites in seven counties from financially troubled Lennar Corp. Lennar’s apparent fire sale is the latest domino to fall for what once was the top builder in the Tampa Bay area.”
“On Friday, the same day it closed the Metro purchase, Lennar sold 11,000 home sites in a $525-million deal with the real estate arm of Morgan Stanley, for 40 cents on the dollar.”
“Metro officials wouldn’t disclose the sale price of its purchase, but spokesman Rob Ahrens said Lennar was driven to liquidate its holdings amid the residential market slowdown.”
“Another Metro spokesman said Tuesday it’s still unclear if buyers have already reserved any of the home sites, which includes Waterleaf, a 140-acre development in Riverview. ‘Right now, we’re still trying to digest a rather large meal,’ John Heagney said.”
The Palm Beach Post in Florida. “More big land grabs like the one Lennar Corp. and Morgan Stanley announced this week are in the cards for areas with a glut of home lots, and smaller investors should watch for opportunities, a national real estate expert said during a conference here Tuesday.”
“‘Don’t wait for Goldman Sachs to be announcing that they’ve done 12 deals in Florida,’ said Stephen Blank, a senior fellow at the Urban Land Institute.”
“Buying distressed loans looks like a savvy move for 2008, said Blank, a former investment banker and researcher for the institute. Blank’s advice resonated at the Tradition development during the institute’s conference in Port St. Lucie, where home prices have posted double-digit losses since the boom.”
“The ailing Fort Lauderdale-based builder Levitt and Sons got the go-ahead in bankruptcy court last week to turn over about 1,000 lots in the Tradition community to its lender.”
“Locally, it’s now clear that housing prices simply rose too quickly, said Hal Roberts, president of wholesale banking for National City Bank and a panelist at Tuesday’s conference.”
“Buyers aren’t happy unless they’re paying less than the previous buyer paid, said Jeff Chamberlin, president of the Stuart-based real estate firm, SLC Commercial.”
“‘The good news is, the same people that got us in trouble are the same people that are going to get us out,’ Chamberlin said. ‘Because there’s nowhere for South Florida to grow but this way.’”
“Workers probably will feel the pinch. More layoffs, lower bonuses and lifestyle changes are likely, especially for people in the financial services industry, Blank said.”
The News Journal from Florida. “The number of permits issued to build single-family homes in Cape Coral dropped to 12 in December, the lowest in memory and down from 153 in November 2006, according to the city.”
“Permits in unincorporated Lee County also dropped: 60 for single-family homes, down from 91 in October and 357 in November 2006, according to a county report issued Monday.”
“In the past year, actions have been filed on a record 11,700 Lee County foreclosures.”
“Meanwhile, the number of foreclosures filed on primary residences rose to 503 from 472 in October countywide, according to statistics compiled by the Southwest Florida Real Estate Investors Association.”
“‘That’s scary,’ said Ray Kest, an economics professor at Hodges University in Fort Myers. ‘It does not bode well for any type of turnaround in the economy. If homesteaders can’t make their mortgage, there might be an out-migration by some of these people. When people lose their jobs, they hang on, hang on, try to find another job. When they lose their house, they move.’”
“As for the primary residences going into foreclosure, mortgage broker Jeff Tumbarello said, ‘A lot are refis (refinancing) who took the cash out of the house.’”
“Hugh Bromma, CEO of The Entrust Group, said there are sometimes strategies for people to keep their houses even when they’re in desperate financial situations. ‘What you can do is indeed borrow up to $50,000 from a 401(K) if your plan allows it, and you can use that for any purpose,’ Bromma said, and pending federal legislation would increase that to $100,000.”
“The money has to be paid back to the 401(K) over a five-year period, Bromma said, so it’s a stopgap measure. ‘But at least it’ll give me some time to decide what to do.’”
“As the real estate market tanks, Bromma said the tactic is being used more and more by his clients. Entrust, which has an office in Fort Myers, provides services for self-directed retirement plans. ‘I’ve been through three of these (downturns) and this is by far the worst I’ve seen,’ Bromma said. ‘Our clients are investors, and they have self-directed IRA’s and 4019K)s.’”
“Many, he said, are finding themselves having to ride out a period of reduced property values and relatively low rental rates.”
From WFTV 9 in Florida. “Increasing foreclosures are creating eyesores in some upscale Seminole County neighborhoods. Code enforcement said it’s seeing more violations at homes in financial trouble. Channel 9 found one property in Longwood that may soon face nearly $14,000 in fines.”
“Some neighbors are skeptical that steep fines will make a difference.”
“‘Code enforcement can fine them all the want. If they’re in foreclosure, who’s gonna pay the lien? No one, so it’s just useless,’ said Al Moses, a homeowner.”
From 11 Alive in Georgia. “The first Tuesday of every month, foreclosed homes are auctioned off to the highest bidder on the steps of the Fulton County Courthouse. ‘I thought there’d be more order, that it would be more civilized. I’m very surprised,’ said Gary Branson.”
“He said he wanted to come to get a feel for it. What he didn’t expect was chaos, confusion, cacophony.”
“Trent Gaines is a closing attorney, but one day a month, he is a potential buyer. He does extensive research into the history of the properties and their owners, and that, even then, it can be a crap shoot. ‘This was a great job to have in 2001, 2002. There was a ton of equity in every house coming through. Now all the people have refinanced the equity out,’ Gaines said.”
“Gaines and about 60 others raced around the steps, running up and down, forming tight circles around the half-dozen attorneys reading off the lists of properties up for auction.”
“Down on the sidewalk, a dozen protestors carried signs that read ‘My Home is Being Sold on the Steps’ and ‘Stop Foreclosures
The News & Observer from North Carolina. “The Triangle housing market deteriorated further in October as sales of existing homes dropped 26.5 percent. It was the largest monthly decline since the housing slump began last year; it follows a 24 percent drop in September.”
“The Triangle’s biggest economic engine is likely to be wracked by more major declines, economists said. ‘It’s definitely going to get worse, compared to a year ago, for several more months,’ said Michael Helmar, an economist for Moody’s Economy.com. ‘The housing market isn’t at the bottom yet.’”
“Pending sales dropped 12 percent in October in Wake, Durham, Orange and Johnston compared with a year earlier. The inventory of unsold homes rose 23.4 percent to 13,534, and the number of homes on the market at reduced prices rose 49 percent.”
“Total closings, however, fell to 2,088 from 2,842 a year before. The Triangle MLS figures are mostly for existing homes, but some new-home sales are included in the report.”
“Lenders have tightened lending rules for nearly all borrowers, said Glen Astolfi, chief operating officer at DNJ Mortgage of Raleigh. ‘You can still get a loan, but the bottom line is it’s more expensive,’ Alstofi said.”
“In 2006, almost anyone could get a loan for 100 percent of a home’s price. Now lenders require at least a 5 percent down payment and a higher credit score, Astolfi said.”
“Ross Rhudy, general manager of one of the Triangle’s largest brokerages, said the easy mortgages have sapped demand. ‘We spent some demand in advance when … anybody in the world could get a loan,’ Rhudy said.” ‘Another problem that remains is the difficulty that transplants are having selling their homes in other markets, preventing many from buying in the Triangle.”
“Broker Shields Pittman had a sale fall apart two weeks ago over a $500 difference between the seller and buyer. ‘The buyer thinks there will be other opportunities at less price,’ Pittman said of the North Raleigh home priced at $225,000. ‘I think he’s mistaken, but people are waiting to see what the market will be.’”
“Dan Tingen is building homes in Raleigh, Cary and Holly Springs. But he’s starting to feel like he’s in Vegas. With the market for new homes in its steepest decline in years, Tingen is making big bets that he can find buyers for 15 homes he is building.”
“‘This is high stakes poker,’ Tingen said. ‘It will keep you awake some nights.’”
“Across the Triangle, hundreds of builders are rolling the dice to decide how many new homes and lots will be needed as a cooling economy and the national housing slump erode demand.”
“Builders are walking a fine line between meeting demand and overbuilding in a market that could shrink by the time homes are finished six months or a year from now.”
“‘It’s not like an engine you can just turn off,’ said Carl Van Horn, research analyst in Rocky Mount. ‘They have to continue building, because there is still demand for housing. People are still moving into this marketplace, and they have to live somewhere.’”
“Developers and builders aren’t expected to lose their shirts. If anything, most are taking reduced profits. Big price reductions by large national home builders this fall have jolted sales of excess inventory, too.”
“In the 12 months that ended Sept. 30, there were 15,125 new homes sold, and about half were spec homes.”
“‘The main thing is to be in business when the market turns,’ said Tingen, owner of Tingen Construction of Raleigh and past president of the Home Builders of Raleigh-Wake County. ‘You can’t just quit, you have your staff, your lot commitments, so you operate at lesser margins. Our biggest problem is their inability to sell on the other end. If we could eliminate that, our market would be pretty much normal.’”
“Tom Taylor and (his) wife moved this month from Laguna Beach, Calif., into a $1 million home in Hasentree in North Raleighn. The couple looked at dozens of houses across the Triangle but found that many builders were unwilling to deal.” “‘Most were not [willing] at all,’ Taylor said. ‘They had yesterday’s price and were proud of their house and are still sitting on it.’”
“The biggest discounts were offered this fall by large national builders to reduce year-end inventory; they control 36 percent of the new-home market. Some discounts were for tens of thousands of dollars, enough to lure buyers such as Rajesh Vallabhaneni, a real estate broker.”
“Vallabhaneni looked all summer, then contracted for a $229,000 home only after builder K. Hovnanian offered $28,800 in upgrades in September. ‘We’d still be looking,’ Vallabhaneni said, ‘if we hadn’t gotten the upgrades.’”
The Daily News from Tennessee. “The plat has been recorded and the first two builders have signed on. Now the developers of Oakland Cross Creek need the housing market to rebound after a dismal year.”
“Oakland Cross Creek, a 129-lot development…in Fayette County was the creation of partners Terry Pagliari, Terry Dan and Billy Perry - and Chuck Schadt. When they launched the development a couple of years ago, none of them imagined they’d be facing a slew of housing woes - from sagging sales to the credit crunch - as they prepare for the first homes to break ground.”
“‘At the time we started, the market was doing well,’ Pagliari said. ‘(Builders) were pulling probably 50, 60 permits a month in Fayette County, so it looked a little better than what it’s looking currently.’”
“But they also think this housing setback is temporary, just a down cycle that could turn around any day now. When it does, they agree that Oakland Cross Creek will be positioned to tap into Fayette County’s potential.”
“‘It’s slow everywhere - I don’t care if you’re in Midtown, Downtown or Fayette County,’ Pagliari said. ‘But there’s a lot of growth in Oakland, and as soon as the market comes back, more growth is going to be there.’”
“‘Things are slow, but we’re seeing signs of picking up,’ Pagliari said. ‘We’re getting better and better traffic, and we’ve got some buyers out there if some of the buyers could sell their own houses - some of them are having trouble selling their existing houses.’”
The articles today underline the fact that builders are natural optimists and will continue to build until forced by the market to stop. They will undercut the existing home market indefinitely. The only thing that can stop them is bankruptcy (cash flow, see the national builders) and lower prices. And even when a firm like Lennar or Levitt throw in the towl, their land goes right back on the market.
Price and market supports only make this situation worse. MSM and government; how bad do you want it to get?
‘The main thing is to be in business when the market turns,’ said Tingen, owner of Tingen Construction of Raleigh and past president of the Home Builders of Raleigh-Wake County. ‘You can’t just quit, you have your staff, your lot commitments, so you operate at lesser margins. Our biggest problem is their inability to sell on the other end. If we could eliminate that, our market would be pretty much normal.’
That’s a pretty big problem Mr. Tingen. You’ve set a wedding date and you’re not even dating anyone.
“Our biggest problem is their inability to sell on the other end. If we could eliminate that, our market would be pretty much normal.’”
Other than that Mrs. Lincoln how was the play…
Coming soon from Tingen: A hotdog stand on the moon.
LOL!! No kidding. And these people are “experts.”
That’s a pretty big problem Mr. Tingen. You’ve set a wedding date and you’re not even dating anyone.
He must have been the HS team quarterback. But as they say in the financial world: “Past performance is not an indicator of future success”
“Buying distressed loans looks like a savvy move for 2008, said Blank, a former investment banker and researcher for the institute. ”
And where was researcher Blank in 2006 with “selling into a bubble is a really great move”, since all bubbles come to an end. Another Monday morning quarterback who gets paid to tell you what happened yesterday.
MSM and government; how bad do you want it to get?
But practically Ben: Politico’s don’t get reelected by telling the public “This is a big mess and we have to clean it up. So a whole lot of you are going to be foreclosed on, and by the way, we’re cutting the hell out of the budget.”
So the question in my mind is: How to make it in the best interests of the PTB to take the strong medicine now?
Public hanging?
Water-board them…
A few years back we were in Calgary, @ a war museum there and one of the elderly docents was captured by the nazis in the disaster @ Dieppe in 1942.
http://en.wikipedia.org/wiki/Dieppe_Raid
The Canadians had ropes with which to shackle all the nazi prisoners they were going to be collecting, and it was in the official orders that were captured, so for his first 6 months of being a p.o.w., he and all captured in the raid gone wrong had their hands tied up in ropes most of the day, behind their back…
‘You can’t just quit, you have your staff, your lot commitments, so you operate at lesser margins. Our biggest problem is their inability to sell on the other end. If we could eliminate that, our market would be pretty much normal.’”
LMAO! We can stay in business with these reduced margins, if only we could sell the homes! You have these guys pegged Ben.
I used to do some corporate accounting in the commercial construction biz, and did some public accounting for home builders, etc. They are all the same.
Reminds me of the layman’s version of the three laws of thrmodynamics:
First law: You can’t win
Second law: You can’t break even
Third law: You can’t quit playing the game
“Eppur si muove” - Galileo Galilei
Fourth Law: Your screwed!
Fifth Law: When the heat is on someone else, it ain’t on you.
Sixth law: If it goes against you, whine.
..
I have said all along that if the profits “pencil out” the builders will continue to build.
Here in Central FL:
1) People want affordable housing - “check”.
2) Land prices have plummetted - “check”.
3) Materials prices have dropped significantly - “check”.
4) Plenty of skilled labor is available and motivated - “check”.
Given current land prices here in Polk County you could probably build a very well constructed 2400sqft 3/2 with garage on 1/2 acre for around $ 100,000 - $ 125,000…..Brand New…built with decent American labor.
In fact I had this conversation at the local watering hole with an “underemployed” contractor and he wholeheartedly agreed. There is plenty of quality labor available and competition is fierce. I was told that I could basically subcontract out my our construction ( with some helpful supervision ) and build a very nice home for 100-125K that would compare equally with the current bagholders house prices of 275-300K. The guy that told me this has 20 yrs experience as a General Contractor.
The builders are gonna keep on building as long as there is a profit margin.
“Its what they do”
..
You are exactly right. Builders are still making money on each house, once they sell it. So as long as they can get capital to pay for inventory and they eventually sell that inventory, they are going to keep building.
Yes margins are falling. But they are still making money from building homes. So they keep building.
Yes costs are falling. That means new house prices are falling. Combine that with falling margins and new house prices are really falling ! What this does is drive down the market, EXACTLY what we predicted would happen. This is why the price of housing can NEVER get out of line in the long run. Builders always bring it back to reality.
I coined a term regarding how our “benevolent” government will try to fix the housing fiasco: immigflation. The _only_ way to truly mask monetary inflation and keep prices from skyrocketing or shrinking is to allow massive legal immigration into the country. There is no other solution, regardless of whether we agree with it or not.
How many houses are vacant? How many apartment buildings are vacant? To fill them, you need warm bodies, preferably families who “need” them. You can’t impregnate, birth, and raise 3 million 18 years olds in 12 months. You can open the borders full swing, and let those people suck up the vacant properties.
Immigflation is not on the books, yet, but the Democrats will surely find a way to make it a campaign issue. If people cry about how immigrants lower wages, the Democrats will quickly shift to “Hey, they’ll rent your condos, landlords, and they’ll buy your homes, FBs.”
Yes, we’ll see wage stagnation or decreases, but the demand on food, housing, clothes, and consumer goods might offset some of it.
Is it a good solution? Probably not, but it’s the only one remaining to fill those vacant homes and condos and apartments.
It will happen. Mark my words, and use my term. Immigflation: create money out of thin air, and invite millions to use it.
The big builders are the one’s with the most leverage on labor & material pricing…They buy direct on materials and just “Pummel” the sub’s on labor cost…The sub’s have no choice…Its either work for crumbs or die…The real loser is the resale market trying to compete with these builders…
I am tired of hearing all these so-called lowl prices now regarding the construction trade. EVEN IF you were to get a low bid for a project, you have to fight like hell to get that price, then during the project, they can just increase the cost. Just like how govt subs lowball to get the bid, then always claim price overruns later. Anyone working on a project can & will stop midway thru by demanding more money.
So all these contractors claiming now is such a cheap time to build will just jack everything back up to regular rates during the build process. And dont even start with the ” I got a contract ” talk . Whattyya gonna do when yer half empty house is exposed to the weather during stalled negotiations?? Yeah, sure, go to court for 2 years ?!?! HA.
And these contractors have wised up regarding legalese; they all formed holding companies, just like car lots, that allow em to dissolve & reform very easily in event of financial troubles. Dont you ever wonder why that used car dealer name changes every 6 months ?
When you see claims of ” been in business 15/20/30 years ” I’d ask if it was the using the SAME NAME for 30 years.
Keep in mind I am speaking of medium to large builders….Major builder contracts are as tight as, well, use your own imagination….The sub’s have literally “No Power”…As far as changing price in the middle of the contract, that may work well in government but does not hunt with the big builders….Materials are usually purchased by the builder to eliminate the sub adding on the handling premium for it and it also allows the builder to minimize waste in that they know exactly how much lets say (sheetrock) is going into a certain model….As far as the sub stopping work in the middle of the job to renegotiate, the builder has strict timelines for work completion and any failure in that timeline without express waiver from the builder is a breach of the contract (other than maybe acts of god)…Also, the builder is always paying in “arrears” thereby having the sub’s money “after” they have delivered the labor…Lastly, the builder has the final two arrows in their quiver in the “retention” & “performance bond” provisions in the contract…..
Part of the problem with builders being natural optimists is that they’re hard-wired to build. Remember the kid in your grade school class who couldn’t sit still? Well, he went into construction.
Even now, he has trouble handling idleness. Hence, he’s gotta keep on doing something, even if taking a breather would be the wiser choice.
I have seen some mom-n-pop builders out here who have switched gears and are working more on remodeling. I keep getting flyers from builders who want to finish my basment (but where would my wife keep all her crap then?)
‘Remember the kid in your grade school class who couldn’t sit still? Well, he went into construction.’
Ha! You are so right! How funny. Now that I think of it, though, I couldn’t sit still either. Hence, the Ritalin. Thank you, little white peace pills.
Actually, Ritalin did not help me sit still. If it did, I would take some now. Of course, then I couldn’t eat about 4000 calories a day with impunity. Who wants that trade-off? Not me!
Well, gotta go fidget. Bye, HBBers.
As far as how the building industry works, there was a great quote attributed to Ara Hovnavian in today’s WSJ. “The building industry is 200 years of tradition unhampered by progress.”
This reminds me of a Lou Reed song that says “they’d eat sh#t and say ‘it tasted good’ if there was money in it for them”
“Our biggest problem is their inability to sell on the other end. If we could eliminate that, our market would be pretty much normal.’”
Said another way “if I didn’t have all of this debt, and I saved and invested, I would be rich”
Is employment reports seasonal hiring? That’s totally bizarre or a mistake. maybe a revision coming later next month? I am not looking for doom and gloom but my better half works in a mall and traffic alone is down almost 20% from last year. Sales are off 30%. Those are early projections by sr management. Lowest since 2000. We are in NE.
I know, I am seeing the same thing here in N AZ. Instead of trying to soften the blow on MBS holders and Wall Street, our focus should be on getting the economy off of the housing bubble ATM and on a firm footing. It’s gonna take time, and we are just spinning our wheels, IMO.
Innovating our way to financial crisis.
http://www.nytimes.com/2007/12/03/opinion/03krugman.html?em&ex=1196917200&en=ac60abcdbd977d07&ei=5087%0A
Preach it, Ben!
Simplesimon,
Wow… Interesting news. I see crowded malls, but mostly with kids. Restaurants are relatively empty and have good specials. But last Saturday I was in and out of Borders in minutes. I even went back to the register as a DVD special on the way out caught me, no wait. However… you know its slowing. REIC and financial jobs are being sent out the door.
Since this is a Florida thread, how is the shopping there?
Yet somehow stocks are up today…
Got popcorn?
Neil
I must be living in la la land. Cannot find a restaurant without long wait and have to wait in line in every store I go into. Even Lowe’s was packed on Monday night when I was there! I don’t get it.
Not here! Lowes and HD are ghostowns on weekdays, and only have moderate traffic on weekends. You can almost always get into a restaurant without waiting, and if you do have a wait its 10 minutes on a Saturday night.
But I know what you mean. I visited relatives in Winston-Salem, NC earlier this year, and even at 9:00 PM chain restaurants had 60-90 minute waits on Saturday night.
Seeing the exact thing in Central Valley towns in CA - some weekend traffic but very slow on weekdays. Lowes was all staffed up yesterday about 6 PM and it was dead - maybe 30 cars in the lot.
I just bring my bowling shoes, ball & set of pins before entering the Home Depot here in Sacramento, CA. … do some bowling runs down the empty aisles while the spouse wanders around.
(personally hate Home Depot, but got dragged there recently. My GOD that store looks shabby & filthy compared to Lowes. Yes yes I know Lowes are newer but still the employees could at least straighten the lanes but instead are grouping up around the entrance yakkking all night. And just try to BUY something. Good lord its like the nightmare of KMART Price checks in the 70’s … yer stuck at the register while the archaic computer system locks up over any minor detail. GOOD JOB BOB NARDELLI. Now Chrysler gets the benefit of yer effups, which by the way, I called to check on the new Dodge Challenger model supposed to be for sale/deposits on Dec 3rd ?? No one at HEADQUARTERS CALL CENTER in Tennessee even knew which car I was talking about ,,, GOD ALMIGHTY!! and domestic car makers. just. keep. shooting. themselves.in.the. foot. stupid stupid morons !!!!
rant off - for now
Must have something to do with their commercial — they seem to think women will be happy with a Xmas gift of a giftcard from Lowes……………….LOL
Neil: I think Terrell Owens was channeling you.
http://graphics8.nytimes.com/images/2007/11/29/sports/30cowboys-600.jpg
LOL
When ex-nnv gets channeled and we see a photo with a Joshua tree…
Is it because the survey of senior executives came out saying they expected profits and hiring to be up next year?
Profits will be up but probably less than inflation. Thats what happens when you crush the currency.
the managers call my wife was on did not paint a rosy picture at all. they are predicting 2000 levels or a little worse. I think there is an extra week here too. Unless everyone is online doing stuff i dont see any positive news. Maybe standalones like target or wallmart are having more success but that would be expected.
i know one thing..there is a huge tri state realtors convention this week in AC. If you didnt remember it was this week on your calender you wouldnt even know it existed. no advertising, no buzz, no one talking. No invitations from Lenders. Very very different from the last few years.
In the Tampa area malls, there is tons of inventory and few shoppers who are touting bags of goodies. The consumers have clearly cut back on spending in the Tampa Bay area.
take it as a good shorting opportunity…a gift
The News & Observer from North Carolina. “The Triangle housing market deteriorated further in October as sales of existing homes dropped 26.5 percent. It was the largest monthly decline since the housing slump began last year; it follows a 24 percent drop in September.”
Gee, I thought everyone was moving to North Cackalacky to escape the high housing costs and taxes of Florida and NY.
The Triangle is in fact a nice place to live, and a hell of place to go to college, but you wouldn’t want to visit there.
“Down on the sidewalk, a dozen protestors carried signs that read ‘My Home is Being Sold on the Steps’ and ‘Stop Foreclosures
I am a bleeding heart liberal and believe that everyone who works or who is sick or disabled is entitled to shelter. That said, the entitlement stops at a small efficiency in a marginal neighborhood. Rent or buy what you can afford. If you cant afford it, dont buy it and try to find a higher paying job and work harder or smarter, or settle for something less. If no one bought what they couldnt afford many things suddenly come affordable. By buying things out of their reach not only was foreclosure the only possible outcome, it raised prices screwing everyone else in their position. I should show up with a sign reading “Why isnt your house being sold on the steps? More foreclosures now! Support bailouts and end your political career!”
I should show up with a sign reading “Why isnt your house being sold on the steps? More foreclosures now! Support bailouts and end your political career!”
You bring the signs, I’ll bring the coffee.
“I should show up with a sign reading “Why isnt your house being sold on the steps? More foreclosures now! Support bailouts and end your political career!” ”
Too long and complicated for the six o’clock news sound bite. What about:
It’s not your house once you stop paying for it.
It’s not your house until the mortgage is paid off.
“It was never ‘your’ house to begin with, money renter. It belongs to the bank and now it’s going back to its real ‘owner’.”
Why not just hire a sign twirler to do the work for you?
Paul shuffling paper to preserve Peter…
“On Friday, the same day it closed the Metro purchase, Lennar sold 11,000 home sites in a $525-million deal with the real estate arm of Morgan Stanley, for 40 cents on the dollar.”
That’s a couple days old.
But that 8300 of the lots were in Florida is not.
It’s also interesting to do the math, assuming the info is correct. $525 million divided by 11,000 lots is almost $48,000 a lot. At a reported $0.40 on the dollar, that means Lennar’s basis in those lots was $120K. And those aren’t estate-sized lots, either.
“‘Don’t wait for Goldman Sachs to be announcing that they’ve done 12 deals in Florida,’ said Stephen Blank, a senior fellow at the Urban Land Institute.”
(blank sheet) of the ULI tribe.
“‘Don’t wait for Goldman Sachs to be announcing that they’ve done 12 deals in Florida,’
I’m not waiting, I’m not holding my breath, I don’t like to turn blue. Gimme a break. Who’s afraid of Goldman Sachs at this point? Ooooh, I’m scared I might get priced out because Goldman Sachs is buying up Florida land, LMAO!
Yeah. They’re far to busy trying to get this deal done.
http://www.tradingmarkets.com/.site/news/Stock%20News/883711/
Great financial advice above to take out the 401k loan to keep your house.
[end sarcasm]
‘What you can do is indeed borrow up to $50,000 from a 401(K) if your plan allows it, and you can use that for any purpose,’ Bromma said, and pending federal legislation would increase that to $100,000.”
Just what we need, federal legislation allowing people to throw more good money after bad… and then cry for Uncle Sam’s help when it comes time to retire.
Don’t shoot me, but I approve of this. We need to return to a long term viable economic model. If fleecing grey haired sheeple by the millions is required to keep up spending… so be it. This solves our “baby bust” labor issues. If they’re working, it also solves the social security payments.
That said, housing is doomed… far too overbuilt. Above Ben notes that the Fed is creating a situation when new entrant builders can buy land at 60% off and keep building. With materials down 30% to 60% and labor down ~25%, its possible to undercut a ‘used house’ by 50%. Personally, I predict continued deflation in construction wages. Hence these people will naturally try to get into other industries. Chuckle… I doubt much chance of that in February…
Some guy on Bloomberg is talking about how ‘the system of trust’ has broken down in the lending industries. He then went on to describe how this is like an engine running low on oil. You can do it for a bit… but without improved credit, the economy is going to ’seize up.’ Ah… they said it was “Barry, a chief investment officer” at (if I heard right) some obscure hedge fund/bank.
Got popcorn?
Neil
its possible to undercut a ‘used house’ by 50%. ??
100% agree Neil….
“Some guy on Bloomberg is talking about how ‘the system of trust’ has broken down in the lending industries.”
Yeah no sh*t! Along with government, the accounting industry, the real estate industry…
The problem is, they’ll just tax the SAVERS like me more when I retire to pay for them.
“Borrowing” your own money? Oh sweet Lord. About as sensible as borrowing against an already-financially-dubious whole life insurance policy. Where doth the madness end?
If you’re stupid enough to overpay for a house you deserve to lose your 401(k) too. The gvt should FORCE people to liquidate their retirement accounts if they don’t have ample savings, etc. rather than make lenders forgive debt or adjust the terms of the loan.
I agree on moral grounds (except for amounts needed for subsistence living), although we appear to be in the minority, but the fact of the matter is that social security is in trouble too, so one way or the other, I get to pay for it. I can’t wait.
Keep accumulating your savings. When the retirement time comes bail out of this country if the politicos want you to support the deadbeats with your savings. There are places in the world where you can have a nice house near a beach for half the cost, great weather, good medical care, all daily necessities cost far less, you can even have servants at your beck and call. You just have to explore the benfits of globalization.
I, for one, will be in pursuit of freedom (from work and socialists) and happiness, wherever it may take me, come year 2021!
I have yet to believe that the govt can “make” lenders forgive debt or adjust the terms. My belief is, only the lenders who volunteer this solution (because they’d be screwed otherwise) will be subject to it. The US can’t just tell a lot of Europeans and others, “Oh, by the way, contracts entered into in the US are subject to retroactive tinkering.”
“I have yet to believe that the govt can “make” lenders forgive debt or adjust the terms.”
They sure can’t surmount the legal contract law covenants but they can make attractive under the table incentives to throw even more creative alternatives into the mix.
It hurts to read about a “professional” essentially bragging that they advise clients to use 401k funds as a house-saving strategy. Using the 401k in Florida to finance an alligator is incredibly foolish. 401k funds are exempt from creditors in Florida. The advisor should be telling his clients to exercise the put option to the lender, skip the mortgage payments until the foreclosure catches up (while saving what they can to fund a deposit for a rental), send in the keys, and rent. If the lender or other creditor pursues, the borrower can file a bankruptcy case (Chapter 7 or Chapter 13 dirt for debt) - avoid a deficiency, and be in a different house for less $ in a matter of months. Using the 401k money is sheer madness - when the 401k runs out the borrow now has a tax liability with penalty (not dischargeable in bankruptcy) in addition to no housing.
Analogy - when you are bleeding to death - its not a good idea to donate blood.
And note he is based in California!
Ben,
While I’ve never had any direct dealings with THIS particular “firm” I was always suspicious of their practices. They are VERY aggressive and for something like 5K they will set up and “direct” your self-directed IRA (usually into THEIR projects!) They have an ongoing mgmt. fee as well. The mailers I get typically peddle their “seminars” and tout all kinds of outlandish returns!
Apparently that liberal interpretation extends to disinformation about using your 401k to bail out the underwater investments they have placed you in as well? I can’t say for certain but it certainly seems to be what he’s “advising” his clients to do!
There were so many inaccuracies in his statement we hardly know where to start?
“It hurts to read about a “professional” essentially bragging that they advise clients to use 401k funds as a house-saving strategy.”
_________________________________________________________
Thank you. I sincerely hope this “gentleman” is not an attorney, because advising financially distressed clients to drain funds from one of the last assets that is virtually judgment-proof under state and federal debtor-creditor law to pour into a depreciating asset that they shouldn’t have bought in the first place, can’t afford, will likely lose no matter what, and should rationally cut there losses and walk away from–and oh yeah, by the way, is subject to foreclosure by the lienholder–borders on malpractice.
You fail to realize the Spring bounce is right around the corner and that prices will shoot up again. These ppl actually believe it.
You said it Tim! The Superbowl surge is bound to cause a massive spike in prices! By a couple of houses now, and flip them in the Spring!! Easy as pie.
Should be an even bigger spring bounce seeing as how we didn’t have one this year. LOL
I’m not buying a house until the Bears win the Superbowl!
P-e-o-p-le.
The bigger issue is what role does one’s attorney have to tell their client that housing will not bounce back and will go down in value, and to dump now at a loss. These people go to the advisors trying to save their homes because, as Tim said, they believe it will go up in value next year and they just need a temporary bridge. Borrowing against ones 401k is the only option they may have to acheive their goal. We all agree that the goal is ignorant, but that’s not the point. A lawyer is not one’s parent. They can advise, but are not allowed to spank and scold. Of course lawyers should explain the risk and get a get a signed disclaimer, but ultimately, the client calls the shots.
Dont forget the retainer. It’s the only payment you may see.
Borrowing against your 401(k), at this juncture, presents its own set of risks. I know people who did that at my last job. The accounts occasionally were packed with company stock, which promptly tanked when the internet bubble burst.
I agree 100% that a lawyer is not one’s parent–you don’t pay your parents for their counsel.
The decision to use retirement funds to prevent foreclosure on a property in which you have no equity is a foolish one, but is ultimately the client’s to make. But advising a presumably otherwise insolvent person to tap their sole creditor-proof asset in order to invest the proceeds into underwater real estate is crossing the line from “bad advice” to “incompetent advice,” depending on who is giving the advice, IMHO.
Agreed it is bad advice. I was not party to the conversations discussed in the article, but sometimes ppl come to their attorneys saying all I want is to save my home and the only asset I have is my 401k. My realtor says prices should jump next year and we are in a temp lull. I agree no attorney should advise the client “well lets borrow against that 401k as fast as we can.” I would explain the risks fully, and even put such risks in a letter they counter-sign. No one is attacking you. Sometimes you have foolish clients that wont listen. If you are willing to sit down with them and explain the risks in detail, you are better than the attorney down that street that doesnt even do that. Most lawyers are not real estate advisors either. To advise you client to sell at a loss and forget about the 401k also opens you up to angry clients if there is a Spring bounce (although its not gonna happen folks). A lawyers goal should be to inform. Once you inform accurately, the client has the responsibility to decide what to do. I tell my clients all the time I am here to inform you of the business risks, but whether to take that risk is a decision you have to make.
aimeejd,
Like all REIC cheerleaders I think this guy is much more concerned about saving his OWN @$$! Non-recourse loans have much more stringent LTV parameters and if he’s placed ppl in investments that are underwater and the rents they “projected” aren’t coming close to covering the loan obligations he’s clutching for straws hoping ppl even HAVE the dollars to rollover to salvage the investment.
If he’s enthusiastic about raising the ceiling to 100k they must really be in trouble!
steve alafia
I bet yer well stated comments caused many financial & real estate people to scream at their computers in anger after reading it .. hehe !!
If more people would just think things out for themselves . . .do a little resarch instead of relying on whats fed to them . .. check behind the scenes before making as important decision, it would avoid so much misunderstanding and misery later in life.
It’s great that they can tap their 401ks for fifty-thou, even greater if then can get one-hundred thou. They need to dig into their kids college fund while they’re at it. And don’t forget to tap their relatives.
The money needs to keep on flowing, house payments need to be kept up, hope must be kept alive, else the economy tanks.
RE is doomed; it’s better for us on the sideline of this mania to witness a slow doom rather than a catastrotophic crash.
As long as the FBs keep up their payments and the knifecatchers are willing to buy events may come out all right. If not, we are all screwed.
I think you have made this point before, or someone has: that the crash is best conducted in a slow and orderly way. Even though it means we all have to wait a little longer to buy RE. Anyway, just chiming in with agreement.
40 cents on the dollar on land, the part they’re not making more of,in the retirement state w 800 people a day shuffeling in= WOW !
‘ w 800 people a day shuffeling in’
Nope:
‘Florida is experiencing a net out-migration of residents to other Southern states. Rising home prices, property taxes and health care expenses are converting Florida from a low-cost to a higher-cost state. Foreign direct investment in Florida companies has declined significantly since 2000, while the number of international visitors has plummeted.’
‘Florida continued to attract residents from the Northeast and the Midwest, but Florida became a net exporter of residents to other Southern states,” the foundation said in its report. “This trend has been confirmed by major moving lines such as Atlas, Allied and United Van Lines, which reported more vans leaving Florida than entering the state in 2006.’
‘The foundation suggested that the outflow might be because of the fear of hurricanes and the increase in home prices, homeowners insurance and property taxes.’
Ben,
I assume that as soon as the United Van Lines’ survey for 2007 comes out, you’ll have a thread? I’m very curious to see what happens for California, Arizona, and Florida.
Got popcorn?
Neil
I would like to see that also…
‘The foundation suggested that the outflow might be because of the fear of hurricanes and the increase in home prices, homeowners insurance and property taxes.’
The other major factor is low wage jobs and very few quality professional jobs. The majority of those who moved here from the midwest often move back when they realize they cannot afford to live in Florida.
Cynicalgirl is correct. The article is vague whether this was 40% off their basis (price they actually paid) or off their current mark-to-market (i.e., what they valued it on their books or what it was previously offered for sale at). Me also thinks its fuzzy math. Damn accountant and wall street types.
Make that 40 cents on the dollar.
Calculator PLEASE:
11,000 for $525,000,000 equals? $47,727 per lot..still too high i think even if this is 60% off the over $118 THOUSAND dollars per lot it originally cost them
=============================================
“A Tampa developer made the biggest land gain in its five-year history Friday, scooping up 8,300 home sites in seven counties from financially troubled Lennar Corp. Lennar’s apparent fire sale is the latest domino to fall for what once was the top builder in the Tampa Bay area.”
“On Friday, the same day it closed the Metro purchase, Lennar sold 11,000 home sites in a $525-million deal with the real estate arm of Morgan Stanley, for 40 cents on the dollar.”
I may have over looked it, but I still dont see where it says 40 cents on the dollar they pd v. 40 cents on their mark-to-market calculation.
I have a question about the Lennar sale. Is the “40 cents on the dollar” based on reality? How do builders account for land? Is it based on what they purchased it for plus expenses, or are they showing appreciation on it when they hold on to it for a period of time? Or is it based on some wacky appraisal system?
Just wondering.
I want to live with a cynical girl
I’d be sarcastic
The rest of my life
With a cynical girl
We never would trust
What the people all say
We’d only care ’bout
Ourselves every day
With the cynical girl
She is taken.
Well, there are plenty of other cynical girls out there.
bubbly, I have to post this in case the young’uns don’t get the reference:
I wanna live
with a cinnamon girl
I could be happy
the rest of my life
With a cinnamon girl.
A dreamer of pictures
I run in the night
You see us together,
chasing the moonlight,
My cinnamon girl.
etc…Neil Young
Actually, my handle comes from the Marshall Crenshaw song. And, no, I’m not taken.
My cinnamon girl. Yes i have dated and lived with a few of that color. But alas it was not meant to be…my GF website is on my handle.
Ah yes - Crenshaw’s debut LP — I have that vinyl lp (well, somewhere in my parents basement, to be exact). good stuff.
Where was Jeb?
http://www.truthout.org/docs_2006/120407F.shtml
Tried to use the original Forbes link, couldn’t get the article, so took it from another source.
And right before he left office, he had the State of Florida buy up tons of worthless property from one of the builders –St. Joe’s?– in North Florida for outrageously inflated prices, while the real estate market was collapsing (or maybe BECAUSE it was collapsing?) . The same builder had contributed heavily to his campaign chest. The St. Petersburg Times made a big deal about it, but the Bush’s manage to skate through life doing incredible harm everywhere, but never suffering any consequences. This does not mean I’m voting Democratic, or that I believe in conspiracies (a favorite theme of the anti-Bush loons), only that I think the entire Bush family sucks the big one. The combined IQs of the three Bush brothers wouldn’t come close to numerical cost of a single first-class stamp.
“only that I think the entire Bush family sucks the big one.”
Testify! Sometimes the simplest words say it the best. But, there does have to be some sort of “conspiracy” or at least a meeting of some evil minds, for the bushies to skate through the way they have.
Which tells you how terribly broken our political system is….
“The combined IQs of the three Bush brothers wouldn’t come close to numerical cost of a single first-class stamp.”
It’s not that they’re stupid. It’s the fact that they haven’t an ounce of honesty, integrity and spine combined. Not even a smidgen. Can you recall the last time IT told the truth? I challenge you to do so and I’ll wager that I’ll be waiting a long time for an answer.
Are you all aware, Bush bought land in Paraguay. Other articles to google too.
http://www.thetruthseeker.co.uk/article.asp?ID=5324
We voted for Bush in 2000, and can honestly say, we regret it every day.
This land purchase is bogus and has been disproved numerous times. But like you, I voted for Mr. Bush believing there would be some fiscal responsibility. I am still waiting for any acceptance of responsibility.
Hoz,
Apparently we supporters,all drank some toxic koolaid. I’m not sure who I loathe more, Bush or Greenspin. Both worthless human beings.
Thanks for the land purchase insight.
Todays genius of the week award: Seller who stuck to their guns over $500.00 difference with the potential buyer. Yep, ya read that right.
“Broker Shields Pittman had a sale fall apart two weeks ago over a $500 difference between the seller and buyer. ‘The buyer thinks there will be other opportunities at less price,’ Pittman said of the North Raleigh home priced at $225,000. ‘I think he’s mistaken, but people are waiting to see what the market will be.’”
Oh wait! We have another contender for the same award! The broker thinks the buyer is mistaken!
Vote–who wins genius award–seller or broker?
Ya just can’t make this stuff up!
Leigh
A perfect example of why this bubble will take years to deflate. Many homeowners either can’t sell at a lower price or are completely delusional.
The broker let a deal die over 500 bucks, and doesn’t think lower prices are coming. A real shiny bulb in the real estate universe.
You would think that the broker would have said something along the lines of, “Hey, I stand to make about $5,000 on this deal, maybe I can afford $500 out of my pocket to make up the difference.”
Maybe he’s running low on Ramen?
There was an article here awhile back about a woman who could have qualified for a fixed but took a IO/ARM “subprime” because she refuse to pay a $35 dental bill she disputed that blocked her “prime” application.
Sheesh. My next door neighbor did the same thing. She was trying to sell her house as an in-the-family (no sales commission) deal with a relative of hers, pointing out how nice our neighborhood was. She asked too much for her house (overvalued by at least $25K according to current comps), but even so, the relative agreed. But she refused to pay closing costs as the relative asked her to do.
A few weeks later she got a note from the relative thanking her for showing them what a nice neighborhood she lives in. Oh, and by the way, they bought a nicer house on a much better lot two doors down and one over from hers - for only $9,000 more than she was asking for hers, after they bargained the seller down $35,000 and got the guy to pay their closing costs.
Now she’s mad at them. She got upset with me when I pointed out that the two most comparable sales on our block went for $20K-$30K less than she was asking for hers, and she’s got the worst lot on the street.
Speaking of Florida real estate, a couple of years ago my mother in law who owns a property down in FL made a comment to me: “You’ve got to be crazy not to be in real estate” … Like hearing the proverbial shoe shine boy giving stock tips, I knew at that very moment that all was lost and that the bubble would be soon deflating.
Sure, that was a sign to many of us. Financial imbeciles full of big talk about “property [real] being the basis of all wealth.” Yawn. Early in 2007 some of them were still saying it. I’m really NOT hearing it now. End of “denial” phase.
“Hugh Bromma, CEO of The Entrust Group, said there are sometimes strategies for people to keep their houses even when they’re in desperate financial situations. ‘What you can do is indeed borrow up to $50,000 from a 401(K) if your plan allows it, and you can use that for any purpose,’ Bromma said, and pending federal legislation would increase that to $100,000.”
“The money has to be paid back to the 401(K) over a five-year period, Bromma said, so it’s a stopgap measure. ‘But at least it’ll give me some time to decide what to do.’”
I’m sure it’s a clean deal, they are named “Entrust” after all.
And, if you fail to pay it back it becomes taxable income with a 10% penalty.
I’m wondering if they will pass legislation allowing FB’s to withdraw 401(k) funds tax free if the proceeds are used to pay down/off an upside down mortgage?
Not to mention what happens when the 401K drops in value?
That doesn’t affect loans. If you borrowed 20K, the funds no longer show up in any investment. So if you had 100K of Fidelity Contrafund and you borrow 20K, you will only have 80K in the Contrafund. As you pay it back (with interest) each payment is reinvested into the plan.
Some of these builders are utterly clueless. It’s sad.
Where is the growth?
Thinking things through isn’t their long suit. They’re doers, not thinkers.
But that’s an American core value! We are a nation of doers, not thinkers. In Corporate America you are rewarded for being a doer. If you think, and find a fly in the ointment, then you will be branded “negative” and that you lack a “can do attitude”.
Since I work with a group of offshore engineers I took a special class on “Partnering Across Cultures”. One thing that I learned from that class is that we Americans are perceived as “impatient” and “quick to make decisions with incomplete data”. They instruct our foreign partners to keep their presentations short on details (preferably in bullet format) lest they lose the attention of their American audience.
So it appears that the squirming school boys are also sitting in the executive suite, laying off the boys who paid attention in class.
This might explain my troubles in the job market.
Here in the states I am considered negative. But when I went to Europe, I met French people who whine about conditions we here would consider a bonanza, and I met Czechs who loved to make cynical and negative remarks about everything. It’s like I found my tribe.
“Increasing foreclosures are creating eyesores in some upscale Seminole County neighborhoods. Code enforcement said it’s seeing more violations at homes in financial trouble. Channel 9 found one property in Longwood that may soon face nearly $14,000 in fines.”
“Some neighbors are skeptical that steep fines will make a difference.”
“‘Code enforcement can fine them all the want. If they’re in foreclosure, who’s gonna pay the lien? No one, so it’s just useless,’ said Al Moses, a homeowner.
So, if one was cynical enough about it…
The $14,000 has already been booked, mark to model, as profits by local governments?
The thing is that the local government has a really good chance of collecting the $14,000. When the lender goes to sell it, they’ll have to pay off the tax lien before they hold clear title. If they let it go too long, the government can just foreclose on the lender, and put the house up for auction. All they need to do is get their $14,000. Also, in some places, like Suffolk County, NY; if they get anything over $14,000 they get to keep that too.
But, as Detroit has found out, house prices can fall farther than you might imagine, then the greedy local government ends up owning the POS and they have to pay to have it bulldozed because they’re too stupid to unload it while it has at least some value left.
Those upscale neighborhoods don’t stay upscale forever when the government goes bad. You wouldn’t believe the beautiful brick victorian structures in Detroit that became totally worthless. Those were once upscale neighborhoods too.
“But, as Detroit has found out, house prices can fall farther than you might imagine”
Amen to that. Right now you can see that most people believe it can only get so bad because housing couldn’t possibly fall below X.
If the house is habitable, then it is probably not worth $0. At some point it will be cheaper than rents, and an investor will be able to cash flow it. A local government doesn’t need to bulldoze it, just lower the price enough.
Umm… guess you’ve never been to Cleveland, then.
Wait, scratch that: it all depends on your definition of “habitable”.
St. Lucie HUD listing:
http://hud1.towerauction.net/cgi-bin/e9_select_property.cgi?id=094511294&office=e9&state=FL
Just a small bump in the road nothing to worry about, they’re not our back wheels bouncing past us.
House prices dip
http://news.bbc.co.uk/1/hi/business/7128308.stm
Call for rate cut
http://news.bbc.co.uk/1/hi/business/7128251.stm
Prices didn’t go up too fast: credit/liquidity was created too fast. The bubble could have been anywhere, but in this case it was housing. Prices in a market economy are effected by two pressures: supply and demand. In a regulated economy (non-free economy) prices are effected by three pressure: supply of asset, demand for asset, supply of money.
Another reason why the regulated money supply is akin to wealth destruction for most, and wealth creation for the elite few.
I put the blame, always, on the most fraudulent party in a transaction. In this case, both supply and demand sides were defrauded by the primary oppressor: the Federal Reserve.
Quotable. So simplistic even a moron should be able to understand it. I love it!:
“Prices in a market economy are effected by two pressures: supply and demand. In a regulated economy (non-free economy) prices are effected by three pressure: supply of asset, demand for asset, supply of money.”
If I’m anything, I’m quotable.
I love the bubble talk, but only because it does justice to what the fine economists such as Hayek, Rothbard and von Mises spoke of decades ago. They were quickly forgotten by their peers (the very same people some promote as financial wizards!), but now their memory lives on because of the fine posters at the HBB, including Ben Jones.
If there is anything in life that the common man can’t avoid, it’s death and theft by monetary inflation. Taxes are easy to avoid if you know how to play the game.
ABD, are you available for consultation as a tax advisor?
Exactly.
And Krugman is whistling a wrong tune again. The money was created by the Fed’s artificially low (i.e., below the market) rate of interest and the Fed is the US sole monetary central planner.
It’s not the financial innovation that deserves the blame. ARM’s and Alt-A’s have no inherent weakness if they’re priced to the market. This includes the associated risk hedge, credit swaps and all.
It is however remarkable that MSM never mentioned the housing bubble until it was bursting. The pro-GOP publications (and, for the record, I’d be a Ron Paul supporter) still defend the “economic growth” based on cooked BLS numbers.
The NY Times and its cohorts will blame “free markets”.
It’s idocy to the left of me and idiocy to the right and I’m stuck in the middle with you.
Actually, I’ve exited the middle completely. The left and right are on the same side of the coin: authoritarians who will taxes you, rob from you via inflation, and regulate you out of being competitive, all for the good of their cohorts, cronies and cloutist elites.
What have I done? I’ve moved all my savings and cash to gold and silver (not as an investment). I’ve bartered with local businesses (grocers and restaurants) to accept my gold/silver in exchange for their goods and services heavily discounted (my landscaper charges me 3 ounces of silver for $100 worth of labor, the local steakhouse charges us 2 ounces of silver for a $50 dinner). I’ve paid off my home, cars, and credit cards completely. I’ve lowered my rates for labor by over 7% a year for the past 4 years, based on NET0 payment. How and why? Instead of NET30 or NET60 (or worse), I offer a 50% discount on a bill if paid COD. Almost everyone pays, but those who don’t more than offset the discount, as my real billable rate went up nearly 14% a year. Now I earn about 7% less than last year, but I have freed up almost 300 hours a year I used to spend on collections, so I have a net gain in time even though I have a small net loss in income.
We also accept gold and silver for services rendered, and I have 2 customers who pay me in gold (U.S. coins at face value income).
I say let them tax me and regulate me, but I’m still happy the way things are going. Hopefully in a few years I’ll be able to buy my neighbor’s homes at a discount, and the severe pressure I put on the city government and police force and schoolboard at every town meeting will continue to gather support from my neighbors. I print my monthly goals for the meeting in English and Spanish, and more and more people are starting to crow about the demands of the government — and balking at the idea of more taxing or even more services.
Take care of your own home first. Save. Then take care of your neighbors. Life will quickly change for the better as you build the community we once had, before government decided that IT is the community.
50% discount for COD? all cash now in gold and silver? many vendors accepting payment in gold and silver? sorry, I find all this hard to believe…
Today’s Officer Of Loan (TOOL)
“Lenders have tightened lending rules for nearly all borrowers, said Glen Astolfi, chief operating officer at DNJ Mortgage of Raleigh. ‘You can still get a loan, but the bottom line is it’s more expensive,’ Alstofi said.”
“Broker Shields Pittman had a sale fall apart two weeks ago over a $500 difference between the seller and buyer. ‘The buyer thinks there will be other opportunities at less price,’ Pittman said of the North Raleigh home priced at $225,000. ‘I think he’s mistaken, but people are waiting to see what the market will be.’”
Wow talk about a bunch of tightwads. That’s maybe .2% of the whole purchase price. But then again given how most people manage their money this doesn’t surprise me.
Or, maybe the article is wrong, the buyer wanted the house for $500.00 and the seller said no. Who knows.
Stupid seller…
Its a buyer’s market. That doesn’t mean its smart to buy, but the seller cannot set the terms. Ok… each realtor office was set to get $6,750 (assuming a split 6% commission). Why didn’t one step in and offer $500? Are they that broke too? chuckle. The buyer should have gone with a discount broker that gave a 1% cash back… or they realized most markets are dropping about 1/2% per month and that drop is accelerating.
Got popcorn?
Neil
We experienced a similar scenario this past May. We made a lowball offer, they countered, we countered and they wouldn’t move. We were $6k apart on a $275k house and the deal fell apart (they ended up listing on the MLS, carrying vacant for another 3 months, paying full realtor fees and accepting less).
Though the difference was just 2% of purchase price, the back and forth gave me a chance to work a bit on the wife. So even if the sellers had come back down to our original low-ball offer a week later we wouldn’t have accepted. I agreed to the low-ball offer feeling confident they wouldn’t accept. Once it started looking like we might reach a deal, I more actively opposed buying the house altogether.
I’m guessing that this buyer was using the difference as an excuse for cold feet. Wise move.
“Dan Tingen is building homes in Raleigh, Cary and Holly Springs. But he’s starting to feel like he’s in Vegas. With the market for new homes in its steepest decline in years, Tingen is making big bets that he can find buyers for 15 homes he is building.”
“‘This is high stakes poker,’ Tingen said. ‘It will keep you awake some nights.’”
Most Houses of Cards fall apart when you get to around the 15th card…
It’s been awhile since I watched televised Texas Hold ‘Em, and I don’t play myself, but I think Tingen’s strategy would be called “drawing dead.”
Bush Administration plan to freeze teaser rates for 5 years. Welcome to the Soviet Union.
Actually, the Soviet Union was better. They actually provided housing AND health care.
I want to throw up.
Having known people who lived in the Soviet Union, I’d have to say that their housing and health care wasn’t anything that we’d want to deal with.
OTOH, one could make a similar argument for our housing and health care.
When you are sick and dying, trust me, any health care is better than no health care. In any case, our government now aids speculators while turning a blind eye to those without health care.
Again, I want to throw up.
WalMart sold out of puke pans so you’re on your own Joe.
I lived in the Soviet Union.
The gov didn’t provide housing to all and its health care was .. uh, not healthy.
And everything came with strings attached … like sometimes, they volunteerd you to shoot at some people with an AK-47 and stuff and you couldn’t exactly say no.
In Soviet Union, teaser rate freeze you!
priceless!
‘Oakland Cross Creek’. ‘Waterleaf’.
It’s funny how the developers so often give names like these to their craptastic subdivisions. After they’ve made very sure there’s no creeks, no water, and damn sure no leaves left in the place.
That’s what always killed me about new subdivisions around where I live too…..all these big new houses, and not a shade tree to be seen anywhere.
And I bet they’re allllll named ‘Orchard Mills’, and ‘Maple Farms’ and ‘Apple Ranch Estates’ etc etc, aren’t they?
Olympiagal-
So true, and their PUD’s are Levittown ugly. We use to joke about the stubs in the front yard of our first garage mahal. It took 14 years for them to look like trees.
It’s up to the homeloaner to by a relaxing DVD of fall foilage for the big screen.
They name them after what they destroy to create them. How fitting!
It’s all good, no worries. So I guess the housing market will have no effect, therefore I see no reason for the Paulson plan.
http://biz.yahoo.com/ap/071205/wall_street.html
Goldilocks dies hard. Skatin’ the razor’s edge between doomsday and orgasmic prosperity.
A big hunking piece of mouthwatering cheese is being put in the trap.
US Mortgage Applications Surge as Rates Fall: MBA-
someone disect this please. refinance/purchase applications. any facts figures on this. re-applications as opposed to new ones…august, sept, october were nil on my end.
No loan demand in my universe. Of course I’m not lowering my rates either. Don’t need any loan demand since nobody is prepaying right now. Just sit tight and let things amortize.
Hugh Bromma, CEO of The Entrust Group, said there are sometimes strategies for people to keep their houses even when they’re in desperate financial situations. ‘What you can do is indeed borrow up to $50,000 from a 401(K) if your plan allows it, and you can use that for any purpose,’ Bromma said, and pending federal legislation would increase that to $100,000.”
This has to be the dumbest advice I’ve ever seen. AFAIK, 401K $$ is protected during a BK procedure. The homeowner’s best bet is to simply walk away!
(However, I doubt most of the FB-types have anything in their 401Ks! I remember seeing statistics that most people cash out–even with the 40% penalty–every time they change jobs.)
Last I checked the penalty was 10% and they held another 20% for tax purposes.
So it’s your tax rate + 10%! I knew it was something like that.
The FB-types may have no money in their 401ks but maybe their relatives do.
From relatives is probably were a lot of the fresh money will come from.
The folks on this blog should chip in for PSAs telling people not to lend money to relatives to help them “keep their house!”
(I once got a call from an in-law asking for a loan to cover the difference for the amount owed on a house in Burney, CA that she wanted to sell so they could move to Boise, ID. I asked “how can you ask for a loan when you have absolutely no means of paying it back?”…and that was the end of the discussion.)
Pyramid $cheme…
“The Triangle housing market deteriorated further in October as sales of existing homes dropped 26.5 percent. It was the largest monthly decline since the housing slump began last year; it follows a 24 percent drop in September.”
They’re calling it a “monthly decline,” but I imagine it’s actually YOY. Anybody?
Yes, Y-o-Y values reported each month. Sales here stared to drop off year over year starting in July. The numbers for active listings are worse - they have looked similar for the months of May through now - 15-25% off same month a year ago active listings.
Prices are relatively steady - positive Y-o-Y in real dollars but trending down as the months go on.
Here’s the stats I watch, which seem to be a bit different than the ones quoted in the article. The trend is obvious, regardless.
http://www.trianglemls.com/tmls-stats.html?organization=TMLS§ion=stats&&subsection=stats_monthly&label_stage=TMLS%20Statistical%20Resources~Monthly%20Stats
So to recap. You lied on your loan application. Totally gambled on profits. If you got in and out early, it was cha ching! If you got caught, you get:
- Complete forgiveness on the tax hit. You won’t get a bill from the IRS
- Fixed teaser rates for 5 years in the event you can’t handle the reset
- Next will be a law that says your credit cannot get dinged do to forecloser
There is very little downside to full-blown speculation in housing. The entire complex comes to your rescue if you get caught. I must be a complete asshole and an idiot to think saving and being prudent has any long-term benefit in this world.
It clearly doesn’t.
joe momma-
I feel your pain. We sold our home, have no consumer debt, and are waiting to pay cash, with 825 FICO’s. Hell, if we knew being irresponsible was prudent for us financially, we would have lived less parsimonious. I hear ya.
“A Tampa developer made the biggest land gain in its five-year history Friday, scooping up 8,300 home sites in seven counties from financially troubled Lennar Corp. Lennar’s apparent fire sale is the latest domino to fall for what once was the top builder in the Tampa Bay area.”
“On Friday, the same day it closed the Metro purchase, Lennar sold 11,000 home sites in a $525-million deal with the real estate arm of Morgan Stanley, for 40 cents on the dollar.”
Suddenly, Morgan Stanley is transformed into a “Tampa Developer”
So is Lennar in trouble or are they wisely exiting the game and hoarding cash?
Here’s a tidbit for the Colorado folks - this comes from RealtyTimes.com . . . “In the entire price range from $350,000 to $1,000,000 there were 313 sellers, but only one (1) buyer. (If that does not put downward pressure on pricing, we don’t know what will.) [Only 7.45% of all available listings were sold, and the ones that sold were on the market for an average of 126 days.]
That is fugly.
Do you have a link? How big an area is that?
Some of the headlines on Realtytimes.com are (unintentionally) hilarious.
“Somebody’s Buying Homes!” (Well, people do win Powerball.)
“Subprime Loans Can Work” (If it’s 2005.)
“Slowing Inflation Good for Mortgage Loans” (Actually it’s bad, but math is hard.)
“Careless Buyers Making Deal-Killer Mistakes” (So I guess “actually looking for a house in the first place and willing to pay what one can afford and what is dictated by fundamentals” means “careless”.)
http://realtytimes.com/rtmcrcond5/Colorado~Fort_Collins~bjjohanningmeier
Loveland is North of Denver about 45 to 50 miles. Population is roughly 45 to 50 thousand
“Locally, it’s now clear that housing prices simply rose too quickly, said Hal Roberts, president of wholesale banking for National City Bank and a panelist at Tuesday’s conference.”
“Buyers aren’t happy unless they’re paying less than the previous buyer paid, said Jeff Chamberlin, president of the Stuart-based real estate firm, SLC Commercial.”
“‘The good news is, the same people that got us in trouble are the same people that are going to get us out,’ Chamberlin said. ‘Because there’s nowhere for South Florida to grow but this way.’
It’s Captain Obvious and his sidekick, Monday Morning Quarterback Boy!
The same people? Oh, he must mean idiots. OK, I agree.
If fleecing grey haired sheeple by the millions is required to keep up spending… so be it.
Remember that statement when you are in your 50’s or 60’s and losing your hard earned savings due to fraud! I would not be proud of my son or daughter making a statment like this and I’m certain your parents would share the same view!
People will alway do stupid things, not save, etc.
My point: It may seem “fair” to let greedy sheeple dump more good money after bad, but ultimately, the folks who actually pay taxes and save money will end up paying for them! So it’s in our bes interest not to encourage it, and have some forced savings (like what SS was supposed to be.)
I think he was being facetious.