There Are Always Periods Of Excess
The Hattiesburg American reports from Mississippi. “A local developer in October halted construction on a Lamar County subdivision, leaving behind remnants of a planned community, an indication that some woes of the national housing market are being felt in Hattiesburg. Robert Neill of Neill Development in Hattiesburg said he finished six of nine phases of Chapel Hill subdivision before he notified residents he wouldn’t be able to complete the 315-lot project.”
“‘It came to the point where I was just financially unable to continue building and decided to finish what projects I had under way,’ he said. He partially blamed the national housing slowdown. ‘Certainly everything has slowed down,’ he said.”
“‘The community has been left unfinished,’ said resident Michael Moore, who said that several empty lots, unfinished homes, broken curbing and mismatching mailbox posts debilitate the development.”
“‘And I’m concerned he won’t finish. I fear one, it will decrease the value of our homes having the subdivision incomplete, and also, I look at it from a buyer’s perspective and worry about being able to sell our home. I wouldn’t want to buy a home with the subdivision looking the way it does,’ he said.”
“Sue Gallaspy, president of the Hattiesburg Area Association of Realtors, said the Pine Belt has taken a hit because of an excess of available houses.”
“‘We look at the local market, and it has softened a little because we have more inventory than we’ve had in the past,’ she said. ‘It’s taking a little bit longer (to sell homes) now, but we’re seeing prices more like they were pre-Katrina.’”
The New Orleans City Business from Louisiana. “‘Tough’ is how David Gilmore, a Kenner real estate expert, sums up the New Orleans-area residential real estate market. According to the New Orleans Metropolitan Association of Realtors, it took a lot longer to sell a home in October than it did back in October 2004.”
“With homes taking longer to sell, some agents are holding auctions to move stagnating properties. Gilmore, president of Sperry Van Ness/Gilmore Auction, said many sellers have not been satisfied with residential auction bids.”
“‘There are still buyers in the market,’ Gilmore said. ‘We had bidders at every one of our auctions for 12 different sales three weeks ago. But I’ll tell you, on the residential homes, there was a price differential between which the sellers were willing to accept and the buyers are willing to give, and that tells you we have market issues.’”
“Of the 12 properties Gilmore’s firm featured three weeks ago, three homes did not sell because the sellers rejected the offers, he said. There was a 30 percent average difference in what the sellers wanted and the buyers offered.”
The Houston Chronicle from Texas. “Based on new and existing home sales, local economist Barton Smith says about 37,000 adjustable-rate mortgages — or ARMs — will reset by year’s end in the Houston area, jumping to 50,000 next year.”
“Across Texas, of the estimated 91,600 subprime ARMs that had yet to reset as of the end of September, 66.8 percent will do so in 2008, with the biggest chunk coming due from March into the summer, according to estimates from First American LoanPerformance.”
“Without the federal assistance, Smith and other experts predict high foreclosure and delinquency rates through next year, peaking in the summer.”
“While freezing rates helps lenders spread out their bad loans over an extended period of time, ’sooner or later those interest rates have got to go up. It doesn’t solve the basic problem,’ said Smith.”
“Callie and Morris Brooks haven’t been able to make their monthly mortgage payment of nearly $1,000 since it went up by about $300 earlier this year. They’ve received letters saying the loan is in default and that their northeast Houston home will go into foreclosure.”
“When the couple bought the house, they said they weren’t aware of how and when their payments would go up. ‘We didn’t understand,’ said Morris Brooks, who is on disability. ‘It was our first time buying a house.’”
Business Week reports on Texas. “Homeowners started losing hold of their homes years before spiking foreclosures and the housing slump slammed the economy.”
“Piece by piece, some gave away their homes by tapping equity to take cash out to pay for cars, weddings and vacations. Others never owned one brick. During the country’s most recent housing boom, the term ‘homeowner’ became a misnomer as lenders offered 100 percent or more home financing to some buyers.”
“Catherine Alexander, who lives near Plano, Texas, first dipped a toe into home equity before taking a plunge. After her husband died four years ago, Alexander moved to Texas to be closer to her children, buying $172,000 four-bedroom house with life insurance money.”
“For more than a year, she shredded countless home equity checks sent to her unsolicited by Beneficial, a member of HSBC Group. She finally cashed one for $6,000 to meet expenses after being unemployed for over a year. That in turn led to phone calls from Beneficial recommending a larger equity loan.”
“At the end of 2005, Alexander took out a $50,000 equity loan to pay for day-to-day expenses and charges related to her son’s wedding. To satisfy that loan and to pay off her Ford Escort, she took out another home equity loan the next year, this time for $93,000.”
“Alexander put her home on the market in May after her home and loan expenses became too costly. Even though she felt lured into the loans, she also blames herself.”
“‘A lot of it has been my ignorance and being naive about my finances and in trusting people,’ she said. ‘I shouldn’t have had a loan that size for my income and I should’ve been more reasonable in the house I needed.’”
The SMU Daily Campus from Texas. “‘There are always periods of excess. Everyone in the industry could see what was happening. The rules of the whole housing industry have changed,’ said Tony Dona, founder of Thackeray Partners, a real estate private equity fund.”
“Dona said there were two insanely dangerous things going on before the crash. ‘Firstly, floating rate mortgages, and secondly, not requiring purchasers to put money down for funds borrowed.’”
“These two factors allowed people to purchase homes who they would have otherwise been unable to do so. Now that interest rates have increased, these borrowers are unable to pay their mortgages. They simply cannot afford to keep their homes.”
“Some people are drawing comparisons between today’s home foreclosures and the real estate crash of the late 1980s. Experts believe this is not the case. ‘The ’80s crash was a direct result of job loss. In this go-around, salaries haven’t decreased or disappeared, but mortgage prices have increased,’ said Chuck Dannis, an SMU real estate professor.”
“Others think rapid condominium development in Uptown, Victory Park and Downtown may pose a threat to the already weakened real estate market.”
“‘There has been a demand for condos because people could buy them for the same amount they could rent. If lawmakers tighten up the mortgage standards, there won’t be anyone to absorb condos being built,’ said Ben Brown, a real estate contractor and developer based in Fort Worth.”
“Homeowners who were forced to default on their mortgages will also be able to spurn growth in the rental market. This should help the increasing condominium market. ‘Rental housing is already a pretty healthy market, and now [people whose homes were foreclosed on] will again become renters,’ said Dona.”
The Dallas Morning News from Texas. “City government mustn’t waver in its commitment to revitalizing downtown Dallas through direct investment, public tax subsidies and partnerships with the private sector, Director of Economic Development Karl Zavitkovsky told City Council members Wednesday.”
“His recommendations came while presenting council members with a broad proposal for building on the center city’s recent and rapid growth; growth that also has caused its own set of challenges, such as soaring housing prices and inadequate transportation options.”
“In recent years, City Hall has infused the center city with hundreds of millions of dollars in property tax abatements and direct cash incentives. Such money is largely credited in sparking the conversion of numerous vacant office buildings into residential towers and attracting retail that didn’t exist even earlier this decade.”
“But widespread private investment downtown that isn’t subsidized remains elusive, Mr. Zavitkovsky acknowledged.”
“Mayor Tom Leppert said the city must honor a de facto pact with downtown residents to turn their environs into a true neighborhood filled with amenities such as parks, retail services and security.”
“‘We don’t want them to be pioneers with arrows in their backs,’ the mayor said.”
“The city’s downtown plan appears ambitious and well-conceived, said John Crawford, president and chief executive officer of DowntownDallas, which represents center city business interests.”
“‘It reinforces the necessity of moving forward quickly,’ Mr. Crawford said. ‘It’s also realistic in saying we cannot be all things to all people and we have to approach development on a very strategic basis, and we need some strong, short-term successes.’”
“David and Mary Anne Alhadeff have called 1505 Elm St. home for two years and love easy access to downtown restaurants, the Arts District and Urban Market – the only supermarket in the center city.”
“Still, Mr. Alhadeff feels the city could do more to make both residents and visitors feel more secure.”
“‘Dallas needs more police down here on the streets, particularly at night,’ he said. ‘And I think a year or two from now, it’ll be like a real city, where if you wanted to make a day of it, you could.’”
The Albuquerque Tribune from New Mexico. “Before the foreclosure crunch really started to hit the nation about six months ago, finance counselors at United South Broadway Corp. in Albuquerque received about three calls a month from people looking for advice.”
“Now, the phone rings 20 times a day with calls from all over New Mexico, said the group’s executive director, Diana Dorn-Jones. ‘We’ve been doing lots of foreclosure counseling,’ she said. ‘Lots and lots and lots of it.’”
“Between July 2006 and June of this year, Valencia County had been about twice the national average in foreclosure rates, according to Realtytrac. New Mexico has also seen its foreclosure rate rise. Since October 2006, foreclosures in the state have gone up about 44 percent.”
“‘Our Consumer Division keeps track of this stuff, and all the trends they are looking at say it’s finally going to hit New Mexico in the next couple of years,’ said Phil Sisneros, spokesman for the state Attorney General’s Office.”
“That’s in part, experts say, because the once-popular adjustable rate mortgages are starting to rise, at a time when housing values are going down. ‘You’re going to be getting a higher payment, and your home is worth less,’ he said.”
“Valencia County, just south of Bernalillo County, in recent years has seen a boom in new housing that generally is more affordable than in many parts of Albuquerque. It’s also home to many subprime loans.”
“‘If we look at Valencia County and what the poverty rate is and the increase in what’s supposed to be affordable housing, it’s a perfect storm for people to lose their houses,’ said Ona Porter, executive director of an Albuquerque group that works to help low-income New Mexicans save for a house.”
“A similar storm is brewing on Albuquerque’s West Side, Porter said, for many of the same reasons.”
“While going into foreclosure can be tough for the homeowners, it can also affect neighbors, Dorn-Jones said. ‘You may not be in trouble, but when five, six, seven homes on your block are foreclosed, your value goes down, and you haven’t done anything wrong.’”
From the DMN:
‘ As managing attorney at Legal Aid of Northwest Texas’ downtown office since 2003, Kervyn Altaffer Jr. has a perspective on downtown redevelopment like few others. On his way home in the evenings, he once was confronted by burglar bars obscuring the view into Main Street businesses. Today, those views are now of groups of friends or co-workers enjoying happy hour or dinner together at bars – the drinking kind. ‘It’s like a neighborhood,’ he said.’
‘His recommendations came while presenting council members with a broad proposal for building on the center city’s recent and rapid growth; growth that also has caused its own set of challenges, such as soaring housing prices’
I’ll say it again, the main market for downtown condos are barflys, and people grow out of that. Also, why would a subsidized residential ‘district’ result in ’soaring housing prices’? Housing bubble, anyone?
just go to Ybor City for proof of out of control bars ruining any chance of residential development. or non-sleazy bidness. new orleans mardi gra year round - whoopppeeee smile for the nice camera posts !!
then again it IS tampa, where zoning is non-existant & a BMW dealership is right across the street from a large strip club.(Reeves Imports - Fowler Ave)
wonder where those sales guys go for lunch…
I wasn’t aware that bars were a recent innovation in Texas. I seem to recall spending some time in a few over the last 30 years or so, but my memory is kinda hazy.
Bars were not a recent innovation, but selling liquor by the glass was not legal until 1972. It is still not allowed in many counties and towns in Texas.
Prior to that bars were BYOB or private ‘clubs’ that required memberships.
I worked at the Longhorn in Dallas 1979-1982 and it was BYOB. So was the Debonair and the Log Tavern I think.
Wow, the Longhorn Ballroom? I went to see a band there in the early 80’s. We paid $14 each to get in (a lot then), only to find the band had gone spandex and the LB wouldn’t give us our money back. So we stuck around to see the opening act. It was the Red Hot Chili Peppers and there were only 5 or 6 other people there. We left after 2 minutes.
I live in Downtown Dallas and I can assure you that the folks who would want to move down here (i.e. barflys) can’t afford to buy any of this over-priced condo garbage. Why would you want to buy a condo downtown anyway? Of course, the rent for any sizeable places in Downtown, Uptown or around Victory area (American Airlines Center area) is extremely high, and I don’t know who’s paying for it or what they do for a living. My loft is $1800/mo for 2500 sqft, and it’s been the same for the past five years. To rent something comparable in one of the new places would cost me well over $3K/month and I don’t know who is paying that. The condos keep getting built around here - I don’t know who is going to buy them.
Just like down here in FL. Developers seem to think that barflys and alcholoics have plenty of money to spend on downtown crashpads! And then, when they get too expensive, that baby boomers (the great white hope) will want to live in these condos that have almost no purpose for anything but clubbing and partying..
It’s truly assinie.. And more and more people seem to realize that every day!
I know a few developers. Where do you think these brilliant ideas for downtown crash pads are thought up? That’s right, at the downtown BAR after boozing it up with other equally brilliant developer buddies.
Well, they did convince city officials to give them tax abatements, so I imagine they had some company at that bar.
Whats going to happen to all those places when the tax abatements run out? Are they going to freeze those teaser tax rates too??
“Mayor Tom Leppert said the city must honor a de facto pact with downtown residents to turn their environs into a true neighborhood filled with amenities such as parks, retail services and security.”
And how do plan to fund all that, Tom? Or is that little detail going to wait until your term has expired, whenever that may be?
“..the term ‘homeowner’ became a misnomer as lenders offered 100 percent or more home financing to some buyers.”
This is the first time I have seen this opinion written in the MSM.
“‘Tough’ is how David Gilmore, a Kenner real estate expert, sums up the New Orleans-area residential real estate market.
“Just a little pinprick. There’ll be no more aaaaaaaaah! But you may feel a little sick.”
that David Gilmore???
“to pay off her Ford Escort”
She should look on the bright side; at least her new home is paid off!
Sad, it used to be illegal to borrow against your home in Texas.
I seem to recall the banks rejoicing when they got rid of that obsolete old rule.
Not a good place to wait for a comeback in housing either.
” Dallas … [OFHEO index] 110.9 in 1986 and is only 167.37 today. To have kept up with inflation, its index number would need to be 206.49. ” Oct. DMN
This stupid old bitty is exactly what’s wrong with the freeze plan. Why should anyone that had a paid off home or had or could have received a good 30 year fixed, get any sort of help?
Mass CW layoffs today - confirmed with my sources
Merry Christmas!
Mine confirmed the same thing. I guess Mozillo has to get ready for another “planned” stock sale coming up.
When may one expect the news to go public?
Did they let them keep their CFC wristbands?
This all has obviously been a large scheme orchestrated by many players to transfer wealth in the form of real estate to the upper echelons. Hold out an easy money carrot & watch all the rabbits jump to grab it, backed by their rabbit holes as security collateral, for when they cant or wont pay.
Brilliant, actually!
Homebuilders up almost 10% today and Mortgage related stocks almost 5%. This volatility reminds me of the Nasdaq collapse and that river in Egypt.
NOTHING will stop the market from selling off. All of the homebuilders and Retailers are under heavy short selling. Any spike up causes the weak hands to cover their short positions.
Is the river named “Up a Creek” or “Denial”?
Is the river named “Up a Creek” or “Denial”?
There’s perverse anagram irony for someone who used home equity to purchase a GMC Denali.
feelings, nothing more than feelings”
Even though she felt lured into the loans, she also blames herself.”
does she qualify ?
Will someone answer this question for me: Are there now more homes than there are potential owners? Hasn’t anyone stopped to calculate this? Isn’t it possible that many of these homes built for nobody and bought by investors can’t be sold under any circumstances, because there’s just no need?
At some price, those renting or wanting a newer home will be willing to buy. In addition, if price falls to a point that the property would have postive cash flow, ppl will buy as an investment. To take it to the extreme, if prices fell 99% those in shacks would move up and its the shacks that would be abandoned, not the new homes. We still have over 20% of the pop classified as renters and I dont think we have that much excess inventory. All that said, we have a long way to go down.
I am a prime example, I am a renter ready, willing and able to buy at 50% off. I have no doubts I will be able to obtain this in 2 years.
Yes.
Yes.
Yes.
This has been another edition of a disabled but talented musician knowing more about real estate than the NAR.
Egg man no way i can assure you. Their is a huge market worldwide of buyers the problen is very easy sir FEAR of the Unkown. When people get turned off and also hear bad news you could give houses away and they would still ask their must be some gimmick and walk away.
We have firends with loads of big money and guess what they ain’t interested anymore in the stainless steel kitchens and granite counter tops and a golf course view they want to know if they are buying at the middle end of the market or should they wait to see if their is a bottom to this, so they wait?
I like to think of it as more of fear of the “known”, rather than the “unknown”. We are at least 40% higher than historical rent/income/mortgage ratios would suggest we should be at. There is a credit and liquidity crisis, and a recession is coming. Foreclosures and inventory is skyrocketing. This I know, and this is why I dont buy even though I could buy a 500k home for cash.
That says it all - “fear of the known”.
Well done, Tim.
“‘The community has been left unfinished,’ said resident Michael Moore, who said that several empty lots, unfinished homes, broken curbing and mismatching mailbox posts debilitate the development.”
Yup - those mismatching mailbox posts will trash whatever equity they told you you had…
Old School: Location, location, location
New School: Matching mailbox posts
Dont forget granite countertops and stainless steel appliances. The sheeple wouldnt buy a home without them, and are willing to pay huge premiums (or were at least). Give it a few months, and if it hasnt already hit your area, new school will be renting until that nasty credit report clears up. Has anyone researched the correlation between foreclosure and divorce rates. While some women find fat and balding sophisticated with respect to guys in fancy houses driving fancy cars, what about renters who take the bus?
People sitting in devaluing homes are looking around the community for a scapegoat
“But that small decline masks a much larger plunge in the amount of equity homeowners hold. This figure, equal to the percentage of a home’s market value minus mortgage-related debt, fell to an average of 51.7 percent at the end of the second quarter, down from 62 percent at the end of 1990, the Federal Reserve reported, even as the average home value surged 139 percent during that period.”
“Some economists believe the home equity number will drop below 50 percent by the end of next year, marking the first time homeowners will owe more than they own since the Fed started recording the data in 1945. The central bank is set to release the third-quarter equity figure Thursday.”
One more sign that the economy is not healthy, not even close. The symptoms are growing. How bad is the disease?
One more sign that the economy is not healthy, not even close. The symptoms are growing. How bad is the disease?
I seem to recall Edie Murphy joking about a certain part of the body exploding.
She: Maybe you should see a doctor about that.
Got popcorn?
Neil
Pretty soon the banks will own everything and our children will wake up homeless in the land that our forefathers conquered.
You had me about to cry until the “conquered” business. Homeless in a land that are forefathers took by force from the previous owners. Nice liberal satire twist at the end. Bravo! People run banks. Its people that are for the most part inherently evil, not institutions.
I have big hands and a small blackberry, and am usually pressed for time. Forgive the typos. I actually know English.
You mean like other migrating people have done since the dawn of time when those currently living in the area choose to try and kill them? It’s been going on a very long time, you know. Our forefathers did not send in conquering armies like Ghengis Khan and Alexander the Great or the ancient hordes of Constantine. Once having settled a portion of the East, migration west was met with more resistance. It led to more battles. Such is history.
I’m actually tired of hearing how we stole this land from the Natives. The Spanish did quite a bit of conquering and killing in the Americas in the 14-1600’s. Along with alot of others. Mostly the British, French and Spanish fought each other.
But having settled the land and started a new order, most people try to keep their communities going, not let them be taken over by other invading forces.
The way I see it, the “re-conquista” invasion from the south is going on without any fight from our side at all.
This too may change.
Well, if our forefathers didn’t conquer, those kids would have been homeless in the first place. You’re comment makes no sense.
Anyway, “It’s for the children.”
Technically, the Native Americans never claimed to “own” the land either…at least on the Plains.
They weren’t “defending their land” when that attacked settlers, wagon trains, stagecoach stations, and railroad track gangs. They were just treating the waisihcus the same way they had been treating each other, before the waisichus ever showed up.
The President looked awful. He stood puffy-eyed, stoop-shouldered, in front of the press corps discussing the stunning new National Intelligence Estimate (NIE) that Iran halted its nuclear-weapons program in 2003.
and oil goes to the bottom now…i hear the fat lady.
I always wonder what drug cocktail they’re feeding that sad little chimp to get him through the next year.
“Homeowners own just 50% of equity, Fed says”
http://www.mercurynews.com/realestatenews/ci_7651575
The financial services industry applauded the administration for negotiating a plan that will allow free-market forces to operate. The hope is that the five-year freeze will buy time for the housing industry to work down record levels of unsold homes and for sales and prices to start rising again.
A housing rebound would allow homeowners to refinance their current adjustable rate mortgages into fixed-rate loans with more affordable monthly payments.
The big sticking point in the lengthy negotiations was getting investors who have purchased the mortgages after they have been bundled into mortgage-backed securities to agree to accept lower interest payments. Critics have said even with a deal, there are likely to be lawsuits.
So in one corner we have the government artificially supporting prices instead of letting free markets work and in the other we have the investors who were sold this crap by the financial industry (i.e. Goldman Sachs) ready to sue. This will not be pretty.
Let the lawsuits begin - it will put a halt to this debacle.
Those lawsuits will be entertaining!
Let’s face it, investors want out with no loss or even what they feel is a fair profit.
There is no way to keep this intact until the next election. Heck, no way for China to keep things together until the Olympics. We have a last hurrah getting us through Christmas and that isn’t looking too great. I have a feeling tax day is the killer.
Got popcorn?
Neil
200 years of ‘Contract Law’ down the toilet?
I don’t think that the Tort Lawyers will let it happen (Intentional Interference).
Can we start impeachment now?
If you manage to delay a problem (whether it be a poorly managed war declared under false pretenses or dishonoring contractual rights to bailout wall street and gambler buddies) beyond your term, is it really a your problem?
They need to publish detail of the plan…one report said no freezes for those with more than 100% loan to value (ie they owe more than the house is worth), while another report said no freezes for those with LESS than 97% or loan to value (ie you still have some equity).
In other words, one report says you get the if you still have equity, the other says you get the lock only if you have little or no equity.
Details, details, where are the details…
* Mortgage had to be issued between January 2005 and July 2007
* ARM must reset January 2008 to July 2010
* No more than 3% equity in your home
* Home must be worth more than the mortgage
* You must have income and prove that you can make the payments
* You must not be more than 60 days past due
Well how do you prove home value, it goes down daily? Who is paying for the appraisal? Those paying usually get one that says what they want it to say. Also, what about the forgiven interest, is it tacked onto principal? Sounds like total incompetence.
‘Well how do you prove home value”
- You contact ‘Big Tony’s’ guaranteed appraisal service.
Run by former mortgage brokers.
What about people that started out with fixed and chose to refi into an ARM? What about people that chose an ARM when they could have gotten a fixed? What about people that would have equity, but sucked it all out?
They’ve been going over the details on the NBC (?) business channel. It seems that most of the FBs are out-of-luck on this one. They can’t qualify if the values of “their” homes are less than the amounts still owed on their mortgages–which, if truth be told, should eliminate 100% of FBs. Someone estimated maybe 250,000 would qualify (about 1 in 10), but I bet it will be fewer than that. In other words, all the hype about the rescue was just that. It will thrill a lot of people for a few minutes, till they call and discover they don’t qualify, or that their homes aren’t worth nearly what they thought. Of course, the whole thing is designed to keep house prices up by preventing foreclosure-decimated comps (enriching municipalities through inflated taxes, and realtors, and home sellers) and keep losses off the books for five years (enriching banks, and Wall Street pigs), till the market miraculously turns around and reinflates the bubble to the glory of all concerned.
Another bunch of hooey from the people who perfected hooey’s distribution.
Of course, the whole thing is designed to keep house prices up by preventing foreclosure-decimated comps (enriching municipalities through inflated taxes, and realtors, and home sellers) and keep losses off the books for five years (enriching banks, and Wall Street pigs), till the market miraculously turns around and reinflates the bubble to the glory of all concerned.
If it doesn’t help anybody how does it keep prices inflated?
I don’t know - it still looks more like a “compassionate conservative” program - designed to do nothing while looking like “we care”. Wasn’t the republican’s big mistake (in a political sense) in the great Depression standing somewhat to the side and saying let the market take it’s course?? You aren’t going to compete when families lose their homes with “well, this brings prices down for everyone and free markets, blah, blah. Even if it’s the right thing, people don’t respond well to they perceive as doing nothing in the face of suffering.
Of course, any interference at all also begs for a loss of investor confidence in the contracts themselves which will make the whole credit/housing collapse worse.
It keeps prices inflated by hiding the losses, so they don’t have to be declared and the properties don’t have to be foreclosed on right away. It doesn’t help the FBs, it helps the banks, mortgage companies, and Wall Street.
Hillary says the freeze should be for 5 years minimum, meaning she thinks the housing crash could go on far longer. I wonder how many home “owners” waiting for a rebound realize their their own Government and the sleezebags who sold them bad loans don’t think a bottom is anywhere in sight.
I wonder if Bush (or family) and Clinton happen to have any property investments their “solutions” might coincidentally protect.
“Of course, the whole thing is designed to keep house prices up by preventing foreclosure-decimated comps (enriching municipalities through inflated taxes, and realtors, and home sellers) and keep losses off the books for five years (enriching banks, and Wall Street pigs), till the market miraculously turns around and reinflates the bubble to the glory of all concerned.”
——————————–
I thought this at first too, but I don’t thing anyone really expects the market to reinflate and prices to actually rise in the 5 year period anymore. The losses then will be as bad as they would be now. This bailout is meant to keep those it “helps” from realizing that they are paying some monthly amount on a house worth much less than the debt, and probably more than what they could rent the same property for (and what their new neighbors will be).
I think this bailout is more akin to the banks starting at a huge bowl of brussel sprouts (or whatever food you dislike). They know they have to eat the whole thing, but they’d rather spread it out over 5 years than over 5 months. Either way, the brussel sprouts still taste horrible, but over 5 years maybe they can eat a few steaks and lobster too (new profitable loans made to old standards), so the whole thing balances out (and they don’t die from sprout poisoning).
One thing’s for sure - the big banks will have so many writeoffs and markdowns over the next 5 to 10 years that they won’t be paying one red cent of income tax for a while.
“While freezing rates helps lenders spread out their bad loans over an extended period of time, ’sooner or later those interest rates have got to go up. It doesn’t solve the basic problem,’ said Smith.”
Well let’s think about this. Does anyone believe those who bought from Jan 1 2005 until the middle of this year will see housing price increases from their purchase price within five years? Perhaps in some markets, but not in those with huge price run-ups or massive construction.
And how much equity will the FBs be building up over that time? Sounds to me like the mortgage holders will still be facing a loss if they foreclose five years from now. They might increase the rate to suck up any wage increases between now and then, but in that case the FBs might get the message that they’ll never get out from under that debt.
BTW, are the 3 percent introductory Option-Arm rates being frozen?
This is just like the FED and interest rates. Just what is the “perfect” house price? If they could figure that out they could pull a Nixon and just “fix” house prices along with interest rates.
Our president lives in subsidized housing, has subsidized transportation and eats subsidized food. He has a subsidized retirement plan. It’s no wonder he thinks government is the solution to all problems, it’s certainly solved his problems.
I’d like to see The Onion do a spoof on The White House being foreclosed. That’d be funny as hell.
“The financial services industry applauded the administration for negotiating a plan that will allow free-market forces to operate.”
I thought “free-market” usually implied lack of government intervention. Does that mean Bush resigned and is no longer part of the government? If so, I’d like a nice barrel-full helping of popcorn.
To them, “market forces” means “Wall Street Bonuses.”
This deal is never going to fly. In order to address every situation, they’d need a bill the size of War and Peace.
* Mortgage had to be issued between January 2005 and July 2007
* ARM must reset January 2008 to July 2010
* You must not have more than 3% equity in your home (what? are you f*cking kidding me? if you put money down you’re f*cked!)
* Home must be worth more than the mortgage (ha ha ha ha ha!!!!)
* You must have income (i.e. sorry realtors and Casey Serin)
* You must prove that you can make the payments
* You must not be more than 60 days past due
* Program is voluntary with the lenders - government has no authority or legal status
Based on the qualification list that Tom posted, hardly anyone will qualify for the bailout.
Make no mistake, this is a bailout for the banks. They’re desperate to keep those sheeple paying their loans for another few years, holding out a ray of hope that in 5 years the RE market will be fine and they can sell or re-fi.
Online polls are running 90% against this plan, which to me just says it’s not for the public’s benefit, it’s for the banks. The public clearly doesn’t want this.
If anyone watched Paulson when this plan was announced, he looked like someone ready to go to the electric chair. And the first question a reporter asked was brilliant….so what happens in 5 years? Then what? Loan still resets to a payment the borrower probably can’t afford. What happens if the house is worth even less than now? I thought Paulson was going to come right out of his skin.
These terms aren’t going to help 1.2m out of 1.8M! This is a friggin joke, I’m loving this. This will undoubtedly be exposed as the joke it is but it’ll be interesting to see whether the dolt FB’s figure out this is an attempt to keep them indentured?
My guess is that the PTB want the public to get acquainted with the whole notion of a bailout and they are floating out terms that seem fairly benign. The terms will be changed as this debacle accelerates in ways that help the bankers get out from under this shitstorm and load up the taxpayers with more debt, not that any of it will ever be paid back as it is. That’s my forecast at this juncture. At least we are all being entertained on an almost daily basis nowadays.
“If anyone watched Paulson when this plan was announced, he looked like someone ready to go to the electric chair. And the first question a reporter asked was brilliant…. I thought Paulson was going to come right out of his skin.”
********
I’d almost paid money to have seen that - maybe Nightly Business Report will have captured that tonight on my wife’s Tivo.
This is what may hppen and it ain’t good. People are going to panic even more they will list thinking why wait the housing prices will drop another 15% at least. Of course their are no buyers now because they want to wait for another hefty drop thus another huge amount of homes will come into a already dying industry.
This whole mess is the cancer they didn’t catch early and is now widespread in the system ,they are running around looking for a miracle cures guess what, it hasn’t been dicovered yet.
The country is not headed for a recession that is a new phrase like the theatre of war is really a war zone it just sounds better, try depression as the key word nobody wants to say?
I keep saying it, look for 7 or 8 quarters of negative economic growth; the New Depression. The horse is out of the barn and in a vat at the glue factory, and the barn door is in pieces being used as firewood in a barrel outside the foreclosed upon farmhouse, as the former owners shiver against the oncoming cold and darkness. No; this won’t be pretty at all. For some it’s already a living nightmare. The young man yesterday who went and shot up the mall after losing his hamburger flipper job and girlfriend - sad to say, but there may be many, many who “go out in style” over the depressing economic and personal situations now spreading across the land.
RANT ON BIG TIME
what the heck…since incomes have been frozen for a long time…we just froze mortgage rates, lets freeze gas, house prices, groceries….oh oh..medicine, health care, dont forget bank deposit rates-nah they are so low anyway it wont matter..whats the word im looking for..theres something attached to all this…i know i learned it when i was young..it was wrong for a free market society..oh whats the word im looking for..someone help me out here..
Nixon is dead, but he’d like that plan.
http://www.econreview.com/events/wageprice1971b.htm
I’ll take “Communism” for $400 Alex.
I’m confused–was it okay when only wages were frozen, because that was the “free market” at work? Please explain, because I can never quite follow the conservative talking points of the week on these issues . . . thanks!
Free market is what our dear leaders tell you it is.
Bingo.
It’s only “obstructionist” or “protectionist” if it negatively impacts a corporation’s bottom line.
Unless we’re talking about a conservative pundit or economist, of course — they’re simply living in a pie-in-the-sky dreamworld — as are most of their pundit and economist peers across the political spectrum.
Yep… if the rich don’t keep getting richer, then the FED and gov’t steps in to try and right the ship.
It’s only “obstructionist” or “protectionist” if it negatively impacts a corporation’s bottom line.
Yep. But talk about health care and you are a SOCIALIST! Talk about anything that helps you and I and you are a COMMIE.
I never want to hear “free market” out of another Republican as long as I live. It’s a lie.
I’m glad I am not the only one that is pissed off about this whole bailout. This is bad on so many levels.
“The city’s downtown plan appears ambitious and well-conceived, said John Crawford, president and chief executive officer of DowntownDallas, which represents center city business interests.”
Gotta love those unbiased opinions.
“‘There are still buyers in the market,’ Gilmore said. ‘We had bidders at every one of our auctions for 12 different sales three weeks ago. But I’ll tell you, on the residential homes, there was a price differential between which the sellers were willing to accept and the buyers are willing to give, and that tells you we have market issues.’”
“Of the 12 properties Gilmore’s firm featured three weeks ago, three homes did not sell because the sellers rejected the offers, he said. There was a 30 percent average difference in what the sellers wanted and the buyers offered.”
______________________________________________________________
Will the sellers who refused to sell despite having willing buyers be eligible for the subprime bailout?
Dubya just cost the GOP the 2008 elections.
If the markets go into a freeze - why would anyone lend anything now, if these new pseudo-banktrupcy laws allow the contracts to be rewritten on a whim? - Bush will be to blame.
Plus, the rank-n-file Republicans are against the bail-outs and consider GW a sell-out due to his various compromises and spending programs. They - about 1/3 consider themselves economic conservatives - won’t go to the polls in November.
Then Hilary will begin her New Society Deal programs.
The US economy may recover by 2025.
GW and his crew have never been conservatives in anything other than name. They are deeply and profoundly radical.
Deeply and profoundly insane is more accurate.
Dubya just cost the GOP the 2008 elections.
Hah.
Georgie Boy has been working hard to screw the GOP (and our country, too) on many different levels, like a Zen Master of FUBAR.
This isn’t even the dumbest thing he’s done this week.
Georgie Boy has been working hard to screw the GOP (and our country, too) on many different levels, like a Zen Master of FUBAR.
Amen,
I haven’t sent a nickel to the party since he got back in office.
I consider him a traitor to America, turning our country over to illegal aliens. He is very concerned about the borders of Iraq, but could care less about us, except to have us (citizens) searched at airports. I’m through with the whole party.
Remember it’s the party of MEL MARTINEZ (ex-patriated Cuban), who thinks America is all about getting here anyway you can so the rest of us can support you.
I’ve never understood why the GOPs so ardently backed ‘lil Bush in 2000. His whole life story is papa bush bail-outs and taxpayer subsidizes. He’s never “earned” a dime in his whole life. All hat and no cattle.
The 1st National Bank Of Your House…
(or how our country stopped working and learned to love the heloc bomb)
“Catherine Alexander, who lives near Plano, Texas, first dipped a toe into home equity before taking a plunge. After her husband died four years ago, Alexander moved to Texas to be closer to her children, buying $172,000 four-bedroom house with life insurance money.”
“For more than a year, she shredded countless home equity checks sent to her unsolicited by Beneficial, a member of HSBC Group. She finally cashed one for $6,000 to meet expenses after being unemployed for over a year. That in turn led to phone calls from Beneficial recommending a larger equity loan.”
“At the end of 2005, Alexander took out a $50,000 equity loan to pay for day-to-day expenses and charges related to her son’s wedding. To satisfy that loan and to pay off her Ford Escort, she took out another home equity loan the next year, this time for $93,000.”
Wow, a $43,000 ford Escort. I’ve never seen one of those, it must have had one kicking sound system.
Cathy took me for a spin in her car.
It was fun!
Mega stupid is even generous to say. At least if she had taken a reverse mortgage, she couldn’t be foreclosed on and wouldn’t have to make payments. Bet her kids are real happy she’s so close now - won’t be too far for her to move.
Paying for her deadbeat son’s wedding expenses were bad too, should have told Cletus to elope.
Mission acCOMPlished
“While going into foreclosure can be tough for the homeowners, it can also affect neighbors, Dorn-Jones said. ‘You may not be in trouble, but when five, six, seven homes on your block are foreclosed, your value goes down, and you haven’t done anything wrong.’”
Maybe you never had much value to begin with.
“‘The community has been left unfinished,’ said resident Michael Moore, who said that several empty lots, unfinished homes, broken curbing and mismatching mailbox posts debilitate the development.”
There’s lots to go on about here, but what really caught my eye was the ‘mismatching mailbox posts’. What?! Huh?
Where is this crazy person FROM? Planet Camazotz? ‘Cause a giant pulsing brain on a platform has very clearly got him. I bet he sorts his Q-tips. I bet he has a salad fork collection, and regularly polishes it with a special rubbing cloth from Albania that he got on eBay. I bet he is a freakin’ LEGEND with the UPS guys and local supermarket bag guys. I just sense it, somehow.
Thank you for the reference the Camazotz. Because that’s exactly what a lot of these ridiculous communities look like. Identical SUV’s driving into identical opening garage doors into identical McMansions, “like a row of paper dolls.”
I expect to find IT soaking in the hot tub in the clubhouse.
I have come to the conclusion that the prognosis offered up by the majority of these so-called “academics” at most universities as to where the mess is going and their opinions in inflation and recession should be put where they belong. In the trash can. Over the lasst 6 years, I doubt if 10% of their opinions have been correct. In fact, had people been reading this blog, they would have seen that 90% of the posters have been correct as to where this mess would lead. So much for pretty Certificates and Diplomas in Fancy Frames.
J. K. Galberaith said and economist doesn’t give an opinion because he knows; he gives an opinon because he was asked (or words to that effect).
The honest answer to most questions regarding the future behaviour of human beings is “I don’t know”.
But an economist can’t say he doesn’t know because, being an economist, he is gets to know.
Harry Truman said he wanted to find a one-handed economist, an economist who, when asked a question about economics, wouldn’t reply with: “Well, on the one hand …”
“he gets to know” should be “he is expected to know”
The first and fundamental flaw of economics is this precept:
The consumer is rational.
An unsound idea. Almost comical, really.
‘The honest answer to most questions regarding the future behaviour of human beings is “I don’t know”.
No, the most honest answer to the question of likely future behavior of human beings is: ‘Probably whatever is stupidest.’
**Question about the Bush Subprime Interest Rate Freeze Plan**
What is the government kicking in to get the lenders on board? It seems that there are always a huge number of things the government neglects to relay to us citizens about the true costs of all the recent debacles, so I’m wondering what the taxpayers are supposed to be footing for this latest folly? Anyone seen anything about what we’re paying to all the Countrywide, et als of the world to go along with the program. I’d sure love it if my tax money would help the “Tan Man” get a darker more even tan while he cashes out some more of his Countrywide stock.
They’re kicking in the legal protection.
Otherwise, the investors would sue the “freezers” into the next century.
Ah yes like freezing medical malpractice suits was supposed to bring down health care costs. Oops - that one didn’t work very well. They forgot the profit margins and outrageous administrative costs had anything to do with health care costs - it’s just the big bad lawyers. No one has really explained how they got the Chinese and others that are holding the bag on these investments to go along with this dog and pony show.
Once again the right-wing Supreme Court comes in handy in a pinch.
Right wing? This is the supreme court that decided cities could confiscate personal property so developers could build condos on it, increasing tax revenues. Every liberal on the court voted for this.
Judges should be very careful about reinventing the Constitution to suit the cause of the day. I notice it’s only called a “living document” by those who benefit from such deviations, and only cited by them when it suits their cause. Ninety-nine percent of time, they ignore it completely, or try to twist it into a weapon to clobber everyone with whom they disagree.
Countrywide was probably dragged in by the Goverment promising not to prosecute Tan Man or the rest of the gang. Ditto for the other giants who consented. In return for doing what the Government wants–i.e., what Wall Stree wants–,they walk. Betcha.
What is the government kicking in to get the lenders on board?
——-
Well, next week on the 11th they’ll be kicking the Fed funds rate down to 4.0%, then again to 3.5% 6 weeks later, etc, etc.
The big banks will be borrowing in the high 2’s pretty soon, so these “frozen rates” in the 5-7% range won’t cause them to lose any sleep. All that matters is the margin.
Nice conforming 30s will be available in the mid 4% range this time next year. The only thing stopping low rates now is the price of oil, which lo and behold has already dropped 10% from its peak. Europe and Canada can choke on their “strong currencies”.
Exactly my point. It’s all rigged. Let’s see how many lawsuits against Countrywide and the other three suddenly disappear, are mysteriously settled out of court, or dismissed outright. This is the real meaning of “too big to fail.”
“If we look at Valencia County and what the poverty rate is and the increase in what’s supposed to be affordable housing, it’s a perfect storm for people to lose their houses,’ said Ona Porter, executive director of an Albuquerque group that works to help low-income New Mexicans save for a house.”
A few years ago I was in Albuquerque, NM doing a hydraulic infrastructure review, and I remember reading in the local paper that over 50% of all children born there were on government assistance. It seemed awfully high for a modern American city. I would think that this fly-over region would have been fairly late to the housing bubble party.
Naw, its just New Mexico.
>>
Well, the lenders still hope that those with reasonable credit would pay up. They are basically addressing cases where they have little hope of collecting anything. So they want something - keep people in, hopefully they’ll pay a little and stay in those homes, leveling off the inventory.
>
Why not write-off everyone’s debt right now indeed?
That’s what’s going to happen at the end anyway … by the power of the printing press.
Can you say Weimar Republic?
Jawohl!
>
The bond fund managers have been living off the BLS fake inflation numbers for years. If the real inflation were shown, their “8-10%” returns would be underwater and the whole annuity industry would be bankrupt.
But thanks for keeping up the apperances.
Ah, the lunatic is on the grass.
Oops…. the arrrows don’t work …
link to Bloomberg is here http://www.bloomberg.com/apps/news?pid=20601103&sid=aUt8lwaz9tbw&refer=us
Quote one is from Barney Frank.
Quote two is from Spence Backus.
Quote three is from Scott Simon.
dude, they just tossed them out the window
> please tell me how the TAXPAYERS are not involved ??
I’m kinda slow
`The things that make the U.S. mortgage market the capital-market success that it is are property rights and the sanctity of contracts, so they have to be careful to not damage either one of those,”
“There is no perfect solution,” President Bush said Thursday as he announced an agreement hammered out with the mortgage industry. “The homeowners deserve our help. The steps I’ve outlined today are a sensible response to a serious challenge.”
Why in the hell do ppl that buy chit they knew or should of known couldnt afford deserve our help, and responsible renters who decided to putoff the decision to purchase do not? Just tell the truth and say I have some rich wall street buddies who dont want their bonuses effected anymore by the current liquidity and credit crisis so this is the best I could throw together. He talks to us like we are his retarded children. It gets old fast.
Why do the homeowners deserve our help? I’d really like to know. I heard someone on CNBC say there should be a rate cut because homeowners deserve a good return on their investment.
I live below my means and have cash in CDs. Why does one group deserve a good return and not another?
Wellll . . . . . lookie here. 1500 S&P again and another 25% position for the Texas beyotch.
Ya’ll will like this
http://blogs.marketwatch.com/greenberg/2007/12/straight-talk-on-the-mortgage-mess-from-an-insider/
Gawd this is a great piece. Hits more of my hot buttons than that picture of Herb above
My favorite one is the FICO score BS. My score would probably get me jerked around if I tried to get a mortgage today BECAUSE I HAVE NOT DEBT AND DON’T USE CREDIT. How sucky is that?? I can pay cash for any house I would want and any other think I would want but I’m considered less credit worthy than Casey Serin was when he “bought” all his houses!
Incredible.
These assets will need to be sold for pennies on the dollar to free up capacity for new vintage paper or borrowers allowed to pay 50 cents on the dollar, for instance, to buy back their note.
The latter is probably where the ’second mortgage implosion’ will end up going. Why sell the loan for 10 cents on the dollar when you can get 25 to 50 cents from the borrower and lower their total outstanding liens on the property at the same time, getting them ‘right’ in the home again? Wells Fargo recently said they owned $84 billion of this worthless paper. That is a lot of seconds at an average of $100,000 a piece. Already, many lenders are locking up the second lines of credit and not allowing borrowers to pull the remaining open available credit to stop the bleeding. Second mortgages are defaulting at an amazing pace and it is picking up every month.”
So much for paying down those CC’s which many will want to use to pay their income tax, property tax bills, etc on.
Chick, great article, scary, but . . . thanks. Your 1490 level was topped, looks like a little extra goodie in your stocking this Christmas . . . and next.
From CNN:
As he announced his plan to ease the mortgage crisis for consumers, President Bush accidentally gave out the wrong phone number for the new “Hope Now Hotline” set up by his administration.
“And I have a message for every homeowner worried about rising mortgage payments: The best you can do for your family is to call 1-800-995-HOPE. That is 1-800-995-H-O-P-E,” he said.
Anyone who dialed 1-800-995-HOPE was greeted by just a busy signal.
Freudian Slit? errrr Slip?
Ben and others on this board. NBC news is going to interview me this afternoon for my take on the “housing bailout,” I’m going to mention this blog if that’s ok with Ben. There is a reason they got my name I will explain later. I’ve been reading this blog for 2 years so I’ll be ready with righteous anger. Anyone want me to say anything?
Casa
Tell them to buy the dips and sell the rips
Yes, ask them how putting limits on their first mortgage is going to take care of their increasing CC balances and HELOC payments that come with increasing interest rates.
Ask them if this bailout is going to help the illegals.
Ask them if this bailout is directed to the poor (black and hispanic) and towards the inner cities.
yeah, ask them to pull the canary out of paulson’s mouth…anyone?
Ask them why bailing out home owners is good free market practice but providing health care to everyone is SOCIALISM?
1-888-995-HOPE
Oh dear lord, I hope these bastards get what they deserve.
1-444-444-4444
(for Asian numerology believers)
Why are the markets up today ? Doesn’t make any sense.
When ever the US markets are up AND gold is up, you know there’s something very wrong!
Just got to read the whole post here.
Thackeray Partners and the gentleman quoted are clients of a friend of mine. They know whereof they speak.
Chuck Dannis is also on the “Reliance Mortgage Real Estate Hour” every weekend on KRLD - a long running radio show dedicated to signing up the stupid for overpriced houses and mortgages in Dallas.
Wrecked Excess
who on earth wants to live in Dallas? it doesn’t even have public transportation! it’s such a basic service.
if i were religious i would be praying for home prices to come back down. or light some candles for that matter, maybe i should try. i want home prices to go down 40% really badly, that’s my target.
Nobody with a brain.
Hey, Ben. This is from our old friend Dick Armey. I know you remember him:
http://www.freedomworks.org/informed/issues_template.php?issue_id=2921
Yeah, Armey was one of the good guys, IMO.
Laugh.
Well, he did bring plenty o’ pork back to the Great State of Texas.
One candle for every 10%. Catholic law.
H(elping)
O(bligated)
P(eople)
E(scape)
“Buy the dips and sell the rips.” OK Tx, that’s what I’ll tell them. I got this call about an hour ago from NBC in New York, they are apparently interviewing people all over the country about their feelings on the shrub’s plan. They want the personal stories from “bitter renters.” This is for Good Morning America. After reading you guys for years I’ll have plenty to say; however, I think it will only be like a two or three second head shot, then fade to black. Anyway, maybe we will get the word out.
I’m in Reno.
Casa
Casa
Dick is a good guy but he is profoundly wrong about the size of the contagion.
I know, I am preaching to the choir here.
definetely i’m part of the bitter renter class (about to light candles for a 40% drop). my rent is subsidized (building doesn’t pay prop taxes), so not so much to complain about.
but in solidarity with others paying market rents i’m doing a consumption strike for this holidays. there’s no need to spend in stuff that nobody needs anyway (been reading walden lately). i’ll give my presence and free work in the farm as a gift to my in laws (lovely thing to do!).
“While going into foreclosure can be tough for the homeowners, it can also affect neighbors, Dorn-Jones said. ‘You may not be in trouble, but when five, six, seven homes on your block are foreclosed, your value goes down, and you haven’t done anything wrong.’”
If it’s a house that you’ve had at least a few years and plan on keeping for a long time, unless you pulled equity out of it, it’s still worth more than you paid for it. Having your house come down in value from an insane peak price a year or two ago should at least result in a slight decrease in your tax assessed value.