Still Coming Down From The Boom
The Rocky Mountain News from Colorado. “Home prices and sales dropped in November in the Denver area, with some geographic pockets still getting ravaged by foreclosures. The data show there are 27,127 unsold homes on the market. But that’s a misleading number, said Maurice Giroux, the 2008 president of Metro Brokers, because it includes so many homes that are overpriced that they will not find a buyer in today’s market.”
“For example, he recently was showing a potential buyer condos in Aurora priced between $75,000 and $85,000, and came across similar ones that were priced between $115,000 and $125,000.”
“In Castle Rock, he showed a client a house priced at $750,000, which was competing against similar houses priced at $450,000, he said. ‘These homes are included in the statistics, but they’re not really for sale,’ Giroux said. ‘They’re not trying to get what they are worth but what they paid for them.’”
The Colorado Springs Independent. “The second-floor conference room where many El Paso County residents meet economic ruin is austere. About a dozen people wait in the room on this Wednesday morning, as the weekly sale of the county’s foreclosed homes is about to begin.”
“A man named Rodney, sitting at the table, offers $97,235 for a house in eastern Colorado Springs. A woman counters at $98,000, and a battle ensues in $1,000 increments. She ‘buys’ the home for $108,000; assuming the current occupant, who paid $159,000 for the house in 2005, does not find a way to catch up on payments during a required 75-day ‘redemption’ period, it will be hers.”
“Fifty-three other homes remain on this week’s list, but no one expresses interest in any of them. With the room fallen silent, Maria Bennett of the trustee’s office announces the week’s sale completed. Two homes sold to outside bidders, and the rest reverted back to the hands of lenders who’d rather not have them.”
“Barney Alvarado, a stockbroker turned real estate investor, gestures at the week’s list and calls it ‘heart-wrenching’ to think about. ‘And next week, there’s another list just like this,’ he says.”
The Arizona Republic. “Propelled partly by home-loan woes, Arizona bankruptcy filings, primarily involving consumers, have jumped 61 percent so far in 2007 and are on pace to surpass 10,000 applications for the year. ‘Mortgage problems are motivating a lot of it,’ said John Joseph Volin, a bankruptcy attorney in Tempe.”
“President Bush on Thursday announced a deal with lenders that will freeze interest rates. Valley resident Carrie Degnan, who said Thursday that the rate freeze would do nothing to help her. She and her husband bought a house in Queen Creek in October 2005 for $350,000.”
“It now appraises for much less, and her monthly payment has jumped from $2,700 to $3,600. Degnan said they had planned to refinance before their teaser interest rate increased but weren’t able to once the market conditions soured.”
“‘This solution isn’t a help for us,’ she said.”
“‘These people are upside down. There’s not a lot you can do for them,’ said Patricia Garcia Duarte, executive director of Neighborhood Housing Services of Phoenix. We’ve always preached (the importance of) 30-year fixed mortgages, and we don’t believe in 100 percent financing. It’s time to get back to the basics.’”
The Tucson Citizen. “Arizona is likely in a recession, a top University of Arizona economist said Friday. Marshall J. Vest, director of the UA Economic and Business Research Center, said…that three major shocks to the economy - the housing free fall, credit market turmoil and oil approaching $100 a barrel - mean it will remain weak at least through 2008.”
“‘Things got a little crazy here during the housing bubble. Times were good, we had a lot of fun while it lasted, and now we’re in the hangover stage,’ he said.”
“Arizona, Michigan, California, Florida and Nevada either are in recession or are on the brink of recession, Vest said. While not enough data are in to prove Arizona’s recession, Vest said, ‘The trends in the data are truly ominous, and it feels like the economy is contracting.’”
“Housing permits are down, inventory is up, foreclosures are up, and prices are falling, he said. ‘You shouldn’t be surprised if prices decline by as much as 20 percent,’ he said, but added that many homeowners saw their prices double from 2001 to 2006.”
The University of Arizona. “‘All the housing indicators are still negative with no sign of the bottom yet,’ Vest said. ‘Building permits and existing home sales are still heading south. The inventory of homes is high and moving higher (and) prices are still declining.’”
“Arizona has seen four significant downturns in housing since the mid-1970s. ‘What we see today closely parallels the downturns in 1974-75 and the twin recessions in 1980 and 1981-82,’ Vest said.”
“So far, building permits over the last 25 months have fallen 56 percent statewide. In the mid-70s, permits fell 75 percent over 26 months. If you look at the twin recessions in the early 80s, permits declined 69 percent over 38 months.”
“Vest then said: ‘We get to the late 80s and 90s, the ‘Mother of all real estate recessions,’ which lasted seven years and permits fell by 81 percent. The difference was that the real estate bubble then was mostly commercial, including apartments. Now it’s reversed.’”
The Arizona Daily Sun. “Home prices that had been declining slowly in Flagstaff since spring dropped at nearly double-digit rates in November. The median price for a single family detached home in November was $346,000, down $40,000 from October and $33,000 from the same month the year before.”
“The average time on the market was 118 days, compared with 40 days just two years ago.”
“Janet and Rick Forrester listed their five-bedroom Swiss Manor home last April as Rick prepared to open a a new surveying business in Tucson. But so far, nothing has worked. The couple has tried numerous incentives, including reducing the price of the home by roughly $100,000 to $455,000.”
“Janet, who also lives and works in Tucson, says she never expected it would take so long to sell their home. ‘We didn’t know it would take this long,’ she said. ‘We thought, ‘This is Flagstaff — they’ve never had a problem with selling houses.’”
“The delay in selling the 3,000-square-foot home has become a financial burden for the family. And it couldn’t have come at a worse time. The lackluster housing market in Tucson has made turning a profit recouping the start-up costs of Rick’s surveying business and turning a profit difficult.”
“The couple has found a tenant to rent a portion of the Flagstaff house, but she says it isn’t much. ‘It just helps ease the costs,’ Janet said.”
From Las Vegas Now in Nevada. “The Greater Las Vegas Association of Realtors has just released its numbers for November. They show the median price of single family homes in the valley is down more than 11-percent in the last year.”
“That’s not all. The association also says the number of home owners who were late making their monthly payments hit record highs, too. In the third quarter the delinquency rate climbed to 5.59-percent.”
In Business Las Vegas from Nevada. “Times are tough for the housing industry in Southern Nevada and the rest of the country. Steve Hilton, CEO of Meritage Homes, said Las Vegas is a ‘tough market’ at this time.”
“KB Home and Toll Bros. are already selling in Inspirada, but Meritage has curtailed construction there pending a revision to its model homes. ‘We were not happy with the original plan and needed a product with more value,’ Hilton said. ‘We went back to the drawing board and drew up a better plan suited to today’s market. I think you will continue to see a drive toward affordability.’”
“The cut in prices reduced profits, but halting construction isn’t an option, Hilton said. Builders need the revenue to pay employees and lenders, he said.”
“The home construction executives lamented their practices and training when the housing market was going well and profits were high.”
“Jeff Mezger, CEO of KB Home, said 80 percent of his management team had never been through a downturn, and they ‘froze like deer in the headlights.’ He cited the Las Vegas team as one that hadn’t seen a downturn.”
“‘The challenge is to get out of the box and do it differently because you have done it one way so long,’ Mezger said. ‘If you do it that way, you are going to fail, and we are not going to fail.’”
“As Las Vegas homebuilders continue to slash prices and cut back on construction because of soft demand, companies are continuing to trim staff levels. In the past four to six weeks, several builders have pared their staff once again in the latest round of layoffs that started about 14 months ago.”
“Monica Caruso, spokeswoman for the Southern Nevada Home Builders Association, said she has heard of more layoffs in recent weeks. ‘We are still coming down from the boom, and the numbers are slow,’ Caruso said. ‘It’s just a function of the lack of sales activity.’”
“The number of home closings are down 44 percent for the year. Permits are down 25 percent.”
“Dennis Smith, president of Home Builders Research, said some area developers, title companies and lenders have made cuts as well. ‘I had someone tell me … they were referring to today (Nov. 30) as Black Friday,’ Smith says of First American Title.”
From Globe St.com on Nevada. “After turning an eight-acre infill site here into a gated community of 92 single-family residences, regional builder Signature Homes opted to rent them out instead of trying to sell them off in a down market.”
“Called Town Las Vegas, the entire community was sold last week for $18.4 million, or $200,000 per home, which translates to a 6% capitalization rate for the new owner.”
The Salt Lake Tribune from Utah. “It’s going to be far from a cheery holiday season for the growing number of Utahns who are falling behind on their mortgages. About 3.92 percent of Utah mortgage loans were at least 30 days past due in the third quarter. That’s up from 3.71 percent in the July-August-September period in 2006, according to the Mortgage Bankers Association’s National Delinquency Survey.”
“The increase marks an abrupt departure from the trend of declining delinquencies in the state in recent years.”
“‘Many people thought if they had a problem paying the higher payments down the road, they could just sell their home and get out of it,’ said said Mark Knold, senior economist of the Utah Department of Workforce.”
“Kelli Cox in Springville faces the specter of losing her home after falling behind on the mortgage on the home her family has lived in for more than 12 years. Cox, who is separated from her husband, is struggling to make the mortgage payment alone.”
“Two month ago, a notice appeared on the garage door that her home was to be auctioned off in November. Cox, who lives with her five children, ages 2 to 16, said she’s tried hard to work with her mortgage company, but she said it wasn’t interested in helping her make reduced payments or figure out a new repayment plan.”
“Complicating matters was the fact that the home is in her husband’s name. She finally was able to raise enough cash to keep the mortgage company from taking her home. But she says cash is tight.”
“‘It is just a mess,’ she said. ‘I had to borrow from everyone I could think of to get this loan current.’”
“People with less-than-stellar credit records always have paid higher mortgage rates than those with the best credit. Soon those borrowers, and even those considered good credit risks, could pay much more.”
“Fannie Mae, which pools mortgages and sells them on the secondary market to investors, has issued new guidelines to lenders that increase the cost of obtaining a mortgage for a variety of borrowers with credit scores below 680.”
“People with scores below 620 are generally considered subprime. But this new rule will affect people with scores from 620 to 680 who traditionally have been considered the lower end of ‘prime,’ or among the best of borrowers. People in this category may have one or a few past-due marks on their credit report, but they generally pay their obligations and pay them on time.”
“‘What this does is create an almost new category of borrower - ‘mediocre prime,’ said Glen Ogden, president of the Utah Mortgage Lenders Association. ‘It’s your average American. And they are going to pay more.’”
‘Arizona has seen four significant downturns in housing since the mid-1970s. ‘What we see today closely parallels the downturns in 1974-75 and the twin recessions in 1980 and 1981-82,’ Vest said.’
Funny how they discover all these housing recessions now that things are heading down. And it should be pointed out that the fact few remember them illustrates they aren’t great depression events to be fought at all costs. Now, this housing bubble was bigger, but if we could just get prices down, the economy in the west could turn around. And we need more rain.
BTW, Flag FB - told ya!
“And it should be pointed out that the fact few remember them illustrates they aren’t great depression events to be fought at all costs.”
*****
This is a great point.
It’s been hard to get Californians to remember anything about the last downturn. Some lost their shirts, some less.
Let prices correct and let’s get on with it.
You’re optimism about the economy is admirable…..and I hope you’re right… But……
I was studying economics during the Texas bust, so I was paying close attention. It was dour when it was at the bottow, but really, just a lot of high living went away, institutions failed, etc. But you know what? We still had Christmas and Thanksgiving and birthdays and people went to school and we drove our cars a little longer.
But looking back, there were incredible opportunities to be had. And the really bad thing was the uncertainty about when things might turn up again. That’s why I say, let this thing correct and lets get it over with.
Same with the “recession” of 2001-02. It was inexcusable of the Fed to lower rates to 1%, which was one of the enablers of the housing mania.
I think the explosion of liars loans and CDOs had more to do with it than anything the Fed could do. Even when the FFR was at 1% the mortgage rates were still around 5%. Today, they’re around 6%. That 1% difference wasn’t the enabler of the ponzi.
If Greenspan’s rate cuts didn’t enable the mortgage ponzi scheme, what exactly did it do? It didn’t help the broader economy. The S&P 500 stock index was in doldrums almost till the end of 2004.
I disagree. Housing was moving along at a semi-normal pace in the day. Greenspan’s reckless lowering of rates ignited the fire. The wall street guys, ate it up and securizations skyrocketed. The mania began. Once we hit an affordability limit, the funny loans came along to keep the party alive for a few more years. This is not a chicken and egg paradox, but a clear progression. Greenspan is a taitor to this Country.
Sorry for the typos, I was to angry at anyone defending this monster. Also, I have not mastered by blackberry yet.
I have to agree. Greenspans 1% was a major influence, in that mortgage rates dropped as low as 5.4% at one point for prime borrowers. It was the funny loans, with low teaser rates and lack of qualifying standards on which the housing market is based, and regardless if lending standards had been maintained throughout, folks may have qualified for $200K instead of $150K, but nothing on the scale we currently see, with a $400K loan considered a “starter”.
I tend to agree with Jerry from Richardson. Greenspan is overly blamed. In case anybody forgot, the overriding concerns at the time were the slowdown in the economy, the aftermath of 9/11, and the collapse of the stock market.
Of course I admit that the blame thing has just never much interested interest me. Like citing “greed” as an explanation of behavior, it seems to me to substitute emotion for intellectualism. The more interesting question is: what will Bernanke do?
Securitization - Separating risk from making money on mortgages is what caused this. If banks and other lending institutions had to hold all of these loans they’d have been more honest and careful.
Greenspan is bad but I’ll put most of my blame on a congress that rolled back consumer protection and banking regulation for a few campaign dollars. The change in bankruptcy rules was the cherry on top of the crap sunday they served up to America. It’s what convinced me that the house of cards was about to come tumbling down.
Don’t worry about typos or your blackberry. We all know Greenspan is a traitor. Look at all the destruction around you and how confident you feel in the dollar now after that POS has done so much damage. Who needs enemies when we have the “federal” reserve operating?
Securitizations and changes in bankruptcy laws largely came after the rate cuts. Schemes were developed to take advantage of the situation, but the rate cuts created it to begin with. I agree they made it exponentially worse, but when Greeny says he couldnt foresee what it morphed into, he is a liar. It was obvious.
I dont understand why some of you still dont get it. When appreciation of housing nationwide goes up more than 5% a year, it is the duty of the Feds to figure out why and address the issue. Greenspan is not entirely ignorant. He saw what could only end in misery for this Country and let it happen. First he lowered rates, then he conspired in not raising them or taking any other action despite an obvious bubble. If you dont understand history or the link to motive and result, you are doomed to repeat it.
“The more interesting question is: what will Bernanke do?” Bernanke decided to lower rates, when that is what started this whole mess and created the over leveraged debt problem that will tear our Country apart during the next couple of years. That is what he would do. This is the most corrupt administration of my lifetime.
I left Montana for Texas during that time. Texas was absolute paridice compared to Montana. I could not find a job that was steady and be able to pay for rent, food and gasoline in Bozeman at the time. In Dallas I could, and I was able to save money.
Having lived through two of these stupid manias in Montana, I can tell you this. Because Montana’s economy is so small they overwhelm it, making it appear that it is much larger then it really is.
When the bust happens, It is a real shock, the economy is much smaller than people thought. All the high dollar jobs vanish and wage are lowered to reflect reality.
Another thing is the regulations that are put in place during the boom to deal with growth. they can make the recovery very difficult. During the 1970’s Bozeman changed it’s zoning code in way which in made it a difficult and long process to build or modify any structure. During the 1980’s during the bust, all it took was a few malcontents to prevent any industry starting up. by bogging down in endless zoning hearing. This happed a number of times. Only after the code was change in 1991 did the economy begin to improve.
I see the same political process happening now. In last two election growth was the big issue, even though anybody who pay attention that can see the area is overbuilt.
Heh, it’s going to change so much and no one here realizes it yet. They talk like it’s still 2003.
Things are going to change. It’s not going to be very fun though.
Only a very tiny fraction of the current Bozeman residents were around in the 1980’s. I sat next to the guy that started “Sacks” on a flight from Minny to Bozeman once, and he filled me in on just how horrible it was for everyone. He was in real estate at the time and went bankrupt. The town emptied out.
On another flight, I sat next to a guy who started a bear spray company in the Gallatin Valley, and he told me about literally starving during the 1980’s, scraping by on his hunting skills and odd jobs for several years. The old timers remember, but there are precious few of them around anymore.
I hear you. That’s why I’ve been stompin’ around like a two-year old for the last 3 days about the free market thing.
What’s that 3000 square foot place in the story really “worth?” That’s about the size of house I’d like to have.
You could rent those anytime for $1650-1800, brand new, but poorly built. I’m not familiar with the construction where this place is located. There are some nice houses here. I’d guess around $200k.
See, I told Flag was falling like a rock. The writer is a good guy, but he just isn’t getting much information from the local you-know-who.
‘We thought, ‘This is Flagstaff’
Yup, it is Flagstaff!
200K? I’d buy it yesterday for that price.
Yeah, well maybe as an REO in a couple of years. I have been trying to tell people that Flag may be the most out of whack market in Arizona, because of the low wage base and the overbuilding of McMansions.
“The most out-of-whack market in Arizona” would logically produce a superior housing-bubble blogmeister, and it did.
“I have been trying to tell people that Flag may be the most out of whack market in Arizona, because of the low wage base and the overbuilding of McMansions.”
As we say, “Flagstaff = poverty with a view”, still..
..It didn’t seem to be stopping the haves from wearing out their plastic cards when I was up to Flag yesterday. It was a shop-a-thon all over town.
Ria,
That may be, but people I know who work retail downtown tell me it’s slow, as in quit and leave town slow.
I’m gonna use the PWAV line, nice!
Perhaps this past Saturday brought out some xmas shoppers in Flag. Being up there full time you probably have a better handle on things, but I do know I saw the drug peddlers were out and about in the alleys around the Bed, Bath and Beyond area. It would appear business is still good for them still.
“Janet and Rick Forrester listed their five-bedroom Swiss Manor home last April as Rick prepared to open a a new surveying business in Tucson
Wow, a surveying business in Tucscon, should have just put some tight shorts on and go riding with Arizona Slim.
Ben, I have a question. Do you think that the situation in the economy is so bad, that if they just let the free enterprise system set the price of homes that the entire US and possibly the global economy would collapse?
It seems, and I am spit-balling now, that more effort is being made at this time than over the dot-com crisis.
Maybe the government is deathly afraid of the consequences of a collapse in home asset values.
Just a thought.
Ben’s strangely optimistic.
TPTB are quite afraid of what’s ahead, and rightly so. That said, there are many interpretations of the word “collapse”.
Oh, the TPTB know what’s ahead - that’s why they’re $hitting their pants.
We better hope whatever they have up their sleeves works to delay this mother as long as possible - because when it blows, life as we knew it is over.
And your dreams of buying a house at the bottom? Ha! You’ll be lucky to survive what’s coming.
I think what they are afraid of is that if asset prices decline then they will be unable to continue separating Asians (esp. the Chinese) and Arabs from their money. That is all.
“‘What this does is create an almost new category of borrower - ‘mediocre prime,’ said Glen Ogden, president of the Utah Mortgage Lenders Association. ‘It’s your average American. And they are going to pay more.’”
prime-mediocrity
““Kelli Cox in Springville faces the specter of losing her home after falling behind on the mortgage on the home her family has lived in for more than 12 years. Cox, who is separated from her husband, is struggling to make the mortgage payment alone.”
“Two month ago, a notice appeared on the garage door that her home was to be auctioned off in November. Cox, who lives with her five children, ages 2 to 16, said she’s tried hard to work with her mortgage company, but she said it wasn’t interested in helping her make reduced payments or figure out a new repayment plan.”
“Complicating matters was the fact that the home is in her husband’s name. She finally was able to raise enough cash to keep the mortgage company from taking her home. But she says cash is tight.”
“‘It is just a mess,’ she said. ‘I had to borrow from everyone I could think of to get this loan current.’”
Stupid woman.
(1) “yes dear- the house should only be in your name oh lord and master”
(2) breed like rats. Was she eever not pregnant for more than 18 months or so?
(3) doing the classic “oh but I want to stay in the house for the children’s sake and not disrupt their lives” Surest and fastest way for a woman to land in bankrutpcy after a divorce is to hang onto the house she can not afford ‘for the kids’ sake.”
(4) Just sell it! They have had it 12 years and should have enough equity in and paid a low enough price back then that they can do a bargain basement sale and move on.
Well, this is Utah.
As for 12 years of equity…I suspect there’s a HELOC in there somewhere.
Twelve years ago is 1995! The original mortgage was inflated away! She should be having no problem. Let’s hear the real story on the HELOC lifestyle. Grrr….
Got popcorn?
Neil
(1) “yes dear- the house should only be in your name oh lord and master”
It is that sort of snarky and unvirtuous attitude that will keep you out of the Celestial Kingdom and firmly lodged in the Telestial Kingdom, you unrighteous AnnScott person.
Listen to you! I bet you’re even wearing shoes right now! And maybe even cosmetics! And don’t you know, we should be fruitful and multiply, and replenish the earth with lots and lots of offspring? That’s in the BIBLE.
(For those of you unfamiliar with Mormon theology, think of the Telestial Kingdom as an afterlife low-rent version of a tacky subdivision, reserved for moderately but not completely wicked persons. Kind of like Tacoma, in many ways, but hopefully smelling better, because it’s not Outer Darkness, after all. The Outer Darkness neighborhood would be like, oh, I don’t know… Maybe Renton? And Satan lives there! He’s a bad neighbor. Noisy. Disrespectful. And I believe he actually has a condo in Renton, on this astral plane, so that’s a good analogy.
See, prime afterlife real estate in the Celestial Kingdom is only available to meek, submissive, and righteous Mormon women who obey the priesthood.)
I’m told by my gay Mormon friend that folks in Utah have some of the worst personal finances (among the highest bankruptcy rates) because in addition to having big families and tithing 10% of their income, they are obsessed with keeping up with the Joneses.
” because in addition to having big families and tithing 10% of their income, they are obsessed with keeping up with the Joneses. ”
Just like the ones I know.
And I meet lots of gay mormons. What is up with that?
If you accept that 10% of the population is gay, and that folks raised Mormon don’t necessarily practice the faith –which purposefully excludes gays– but identify with the Mormon culture, then it makes some sense.
“If you accept that 10% of the population is gay”
I’m no homologist, but that number seems quite high to me.
Well, if you think about it, when you have plural marriages, that leaves a whole lot of men without wives.
“I’m no homologist, but that number seems quite high to me.”
I live in NYC. I think it’s hilariously low.
Perhaps that’s because you live in NYC.
People have the same perception here. Why?
Perhaps because they live in San Francisco.
OMFG Mitt Romney is gay. That explains a lot.
Utah is a hot bed of MLM companies, the biggest schemers around. The modern equivalent of snake oil salesmen. Lotions and potions for whatever ails you. IT always amazes me how holy rollers can be some of the most dishonest business people out their.
Being the 13 times great-grandaughter of one of the women hung as a witch at Salem MA…….well, guess I’ll just have to put a spell on them…….
Sorry to hear about your gran, AnnScott. Bad news. However, real witches don’t get hung. They run away into the woods, pausing on the way to pick up a well-hidden and tidily packed bag with hard-tack, their best knife, a blanket, and their good boots, because they can see the mob of torch waving villagers coming down the road. Torch-waving villagers make lots of noise.
See, why else bother being a witch? So you can do what you want, and then get away—that’s why.
!3 x great-gran isn’t the black sheep on that side of the family. That honor goes to distant cousin Georgie W. living on Pennsylvania Ave.
Too embarassing for words but then every family has one. Most, however, keep their idiots locked in the attic.
Never ever let one of us old New England WASP families get elected to high office again - too much inbreeding over the past 387 years.
““Janet and Rick Forrester listed their five-bedroom Swiss Manor home last April as Rick prepared to open a a new surveying business in Tucson. But so far, nothing has worked. The couple has tried numerous incentives, including reducing the price of the home by roughly $100,000 to $455,000.”
“Janet, who also lives and works in Tucson, says she never expected it would take so long to sell their home. ‘We didn’t know it would take this long,’ she said. ‘We thought, ‘This is Flagstaff — they’ve never had a problem with selling houses.’”
“The delay in selling the 3,000-square-foot home has become a financial burden for the family. And it couldn’t have come at a worse time. The lackluster housing market in Tucson has made turning a profit recouping the start-up costs of Rick’s surveying business and turning a profit difficult.”
“The couple has found a tenant to rent a portion of the Flagstaff house, but she says it isn’t much. ‘It just helps ease the costs,’ Janet said.”
3000 sq ft and 5 (FIVE) bedrooms!! Good grief. What did they do - produce 8 kids - something which is highly unlikely.
That is conspicious consumption at its finest. They most likely had no real need for that much space and that many bedrooms except to boost their egos and showoff.
Serves them right.
Another idiot couple that blows into the new town and has to immediately buy a house - no need to acclimate to the new town, no need to sell the other house first, just jump right on in without any thought at all - yeah, sounds like a plan. Then when the obvious happens whine and complain about how the stars just didn’t line up for you and you had no idea this could happen.
And I love how they rented a “portion” of the Flagstaff house. What, did they rent out one bedroom and rope the rest of it off? Or was the thing subdivided into apartments, like old Victorian homes?
(I’d be interested in seeing how one would subdivide a McMansion. Do they put a kitchenette in each “princess suite?”)
Walk-in closets become kitchens, atrium entries become studio apartments, and the children’s wing accomodate a family of 4.
What’s a Swiss manor look like? I laughed my a$$ off this morning while reading a newspaper ad that described a typical new suburban McMansion as a “Frank Lloyd Wright home.”
Frank Lloyd Wright designed some very modest houses. Those designs were used by builders as standard models of the day. So thousands of FLW homes are very modest suburban homes. They’re all over CA.
Giroux said. ‘They’re not trying to get what they are worth but what they paid for them.’”
Something is only “worth” what some one is willing to pay for it! I wish just once these clowns would be called on this point.
wmbz, I agree with your point in general, but in this case I think you have misread Giroux’s comment. I think he is talking about OVERpriced homes, and saying they are worth less than “what they paid for them.” He is pointing out that many listings are not effectively part of any inventory that can actually be sold, because the wannabe sellers are trying to get out all their input.
“worth” in this sense, is “market price.” In general, you could define that as “the price at which an item would sell in a reasonable amount of time.” He’s just saying, they aren’t being reasonable with thier price. Things do have a market value and sometimes it’s hard to determine what that is. In this case, he’s saying the sellers are nowhere close.
I’m pretty pessimistic, if we are getting to 2003-2004 prices now, 2 years into this housing recession, and we have a minimum of 2 more years to go, I’d say we could be looking at 2000 prices or lower.
I still think many people are in the denial stage. Its bad but it can be fixed, is total denial. I still see over priced houses. I sold my house in 2004 and thought there was a bubble back then. My house jumped over 100% in price from 2002 to 2003 and another 50% from there from 2003 to 2004. I’d say we have to at least get back to 2002 prices, from where we currently are, since the biggest gains seemed to take place in the 2002 to 2003 time frame.
“2 years into this housing recession, and we have a minimum of 2 more years to go…”
i’d say we have at least 5 years to go before we reach bottom of this housing bust. and then we could sit on the bottom for another 5 years….
and by that time, who knows whatever else (peak water, peak oil — take your pick!) will come along to further total the housing market/economy.
If you had a normal inventory of homes you might go to 2002 or 2003 pricing ,but with this excess inventory ,one can get a price that is even lower on a desperation sale .
When you are in a “desperation sale market ” you can get prices way below the 2002 or 2003 market prices . And so much of the excess inventory is desperation inventory where the seller doesn’t have very many options to hold the property for very long .
Here is the long-term chart.
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
I still think we hit 1997 prices.
I’m on record as predicting 1997 prices, but adjusted for inflation at something like the headline rate.
That is, unless the whole economy collapses. Which I do not expect.
Well, if we adjust for median wage “inflation”, then prices will be lower than 1997.
As I said on the last thread, I think Fannie will have to rethink this FICO score strategy - there just won’t be enough people that even have the 620 when this whole mess is done. Between foreclosures, maxed credit cards, loss of jobs, car & student loans, I don’t think there will be many left with high credit scores - sure there’s some responsible folks, but not enough to buy the homes out there now, let alone the rest that will foreclose this year.
Pay stubs and bank statements, just like the days of yore.
They should look at FICO, nevermore.
Good rhyming Oxide!
Please give credit to E.A. Poe.
FICO is like predicting last weeks weather. I know really solid folks who just got sick and found their health plan had weaseled out of paying the bills and had never paid a loan late in 20 years prior to this (500 fico with a bunch of collection accounts from various specialists and divisions in the hospital). IMO, these folks are still far better risks than some shmuck gaming the card system with no lates (yet)
FICO is a strange thing. If you don’t borrow and pay cash, you get the lowest score possible.
My grandfather (who would be 108 if alive) was of the old school - cash for houses, cash for cars….never borrowed a dime in his life and had everything locked up in very safe investments. When he got to be around 90, my mother decided that he should have a cedit card in case he became ill and they had to pay something for him. Every major lender turned him down because he hda the lowest possible FICO until his local bank (the one holding all his money) intervened and got a card issued with a serious 5 figure limit.
When I checked on our FICO recently, it was way done too from not borrowing money. Mortgages stopped being necessary about 12 years ago. I loathe credit cards and won’t use them. i refuse to pay 8, 10 or 25% more for something. I operate on pay cash or do without until I save the money. Seems the FICO folks could care less that every ordinary bill is paid on time (isn’t autopay wonderful?) and the last 3 cars have been cash. National lenders have a stroke over someone like me. Luckily my tiny local bank (all of 2 offices) finds it very funny and regards me as utterly reliable so when I ask them about a loan to buy an inn, they had no problem with idea at all. (Didn’t get the inn - yet. Nutty seller who thinks it is worth over twice what it really is. Oh well, he has been trying to sell it for 2 years so he’ll get bored eventually.)
Why will Fannie will have to rethink this strategy? Yes, fewer people will qualify for loans, but with the secondary market transitioning into aridity there won’t be any money to lend regardless. As fewer pension funds, state slush funds, foreign governmental entities, etc… are willing to invest in US mortgage-backed securities, only the most qualified applicants will be able to secure loans.
Fannie and Freddie will be in retrenchment/survival mode for years… assuming they don’t fail completely and require a cash infusion from Uncle Sam.
I guess I meant the whole mortgage industry because if they’re going to hang their hats on FICOs there won’t many who will be able to qualify.
http://www.thestreet.com/s/the-true-cost-of-the-mortgage-bailout/funds/financial-advisor/10393534.html?puc=_tsccom
Wow! It really was “different this time”. Just not how the masses envisioned it.
Yup. Pension bailouts: coming soon to a political grandstand near you.
From the Merc: Giant investors Fannie Mae and Freddie Mac are imposing significant increases in fees for a broad range of borrowers who have lower than 30 percent down payments and formerly were treated as “prime” credit applicants. At the same time, the two largest private mortgage insurers - MGIC and PMI Group - are raising premiums on consumers who have low down payments and FICO scores in the mid to upper 600s. The added costs for some potential home buyers could mount into the thousands of dollars - either upfront at settlement or in the form of higher interest rates.”
Is that the sound of the death knell I hear? Boingggggggg!!
Didn’t I hear on some little old housing bubble blog that the stupid bail out plan’s only real effect would be to tighten lending standards, making even more foreclosures and price dives - brainiacs r us here folks.
Wow! So much for my 25% down payment prediction being the norm…
My oh my… it will go from fees to a minimum requirement. Let’s face it, the mortgage insurers are toast; so something must be done to convince investors to buy the bonds.
I’m happy with 30% being the down payment requirement. I have a feeling my fellow bloggers, once they realize what that translates to in selling price, are going to be happy about this. Sellers, Realtors ™, and mortgage brokers… won’t like the sales rates. Gee… Adam Smith wrote in his book about how a declining industry will try to maintain wages but they’ll decline unless a monopoly can be estabilished. So pardon if I have Glee at the growth of the discount brokerages and the chance of an open MLS. Maybe not the MLS… maybe Zillow… or Zip Realty evolving. Or something new.
Got popcorn?
Neil
25% down should be enough unless you are right at the peak of a bubble. But you’re right, it will help drive prices down to more reasonable levels. I think asking for 30% just means that the lender is not interested in making the loan, but is not interested in completely exiting the loan business either. If you (as a housing lender) think prices are going to fall more than 20% on your collateral, you probably should reconsider discussing the loan in the first place. After all, we’re not talking about business equipment here. Of course, who imagined that housing prices would ever become more volatile than stock prices?
I’m not sure that lower housing prices spell the end of the six-percenters though. As prices become more reasonable, the fee for the service also approaches a more rational absolute amount. Would I pay someone $6,000 to deal with the whole process of selling my house? Sure, I pay more than that to get my tax returns prepared. Would I pay $60,000 for the same service? Not in a million years.
I agree 25% should be enough. But due to the issue of selling the riskier traunches… 30% might be required until the credit markets settle out.
As to realtors, due to their high prifits, there is a lot of incentive to enter the market. Its simply too much profit lying on the table to ignore. I think someone will figure out a way and we’ll look at a lower commissions going forward. If not… ‘rebate’ brokerages will just become more popular.
Got popcorn?
Neil
I’ve been expecting lenders to raise the bar on downpayments, but didn’t quite expect it to be raised so far so fast. I’m ecstatic! By next summer borrowing money will be like looking for water in the Kalahari.
Got cash (in Norwegian Kroner)?
Let’s face it, the mortgage insurers are toast;
I would be careful here. I thought the same thing after storm after storm pounded FL a few years back. A client of mine told me, (insurance exec) that they actually make more money after huge storms because they get to jack up their rates. Might this happen with the mortgage insurers? Think about it.
Jackie
Oh I’m sure that the powers will come up with low down loans that are insured and government backed …oh I mean taxpayer backed .
Always thought of “death knell” as “bong,” pogo stick as “boing” !
Its the bell reverberating………….
I wonder how many can come up with 30% in the bay area?
What difference does an increase in fees make if they just roll the fees into the mortgage, or the piggyback loan, as if it were just another closing cost? All it does it make a $325K house into a $340K house. As long as you can buy a house on just a few signatures, you’ll keep making FB’s and foreclosures.
Banks are going to have to start requiring actual CASH-MONEY, not a debt, for a down payment, if they want the secondary market to buy the loan.
And when the down payment % is no longer 0, suddenly buyers will take a closer look at price. As in: “well, we only have $25K in the bank so we can’t — and that’s “can’t”, not “don’t want to” or “are too smart to” — afford more house, then prices will drop like a rock.
Eventually, lenders will also require the potential borrowers have actually saved the downpayment as well, and demonstrated the financial discipline to save. So much for the parental home equity line.
We bought our house using plastic, sort of. Took the money out of 401k for the down, then replaced it by taking a cash advance on credit cards. For years we played the credit cards off against each other, moving the balance around to get interest rates of 4% or so, until we paid them off. Those days are long gone, now the cards charge about 25%!
Secondary market no longer exists. Most investment banks are refusing to do new deals right now. Originator gets to keep the loan. This will also tighten standards. PMI should be required for anything less than 50% LTV right now.
I really don’t get how things run in Flag(used to live there). I think more than a third of the houses-and some very, very nice ones at that- are second homes. I have a friend who teaches up there and saw them at the ASU UofA game recently. She said homes just were’nt moving and prices have not really even come down much at all. Flagstaff with its job market, is just not a cheery place to be in a recession.
Here’s to getting a ton of snow this year in Snowbowl…..if only they could make their own snow!
Prices are down in Flag and everybody knows it. I have met college age people with huge house debt - almost no income, and the condo conversion market is a complete disaster. They had 21 condos and townhomes sold in the month. A couple of months ago there were 900 condos on the market.
Flagstaff is pretty nice in the summer considering a few hours down the road Phoenix is 115F. Thats why there are second homes there but 3000 sq ft ? For a mountian retreat ? Used on weekends ? there is no real work up there unless you bring it with you is what I hear.
I am in Colorado Springs and it is getting fugly here. I rent and my landlords wanted to move in in July. They have dropped the price on their current home from 599000 to 439000 and not a nibble. In the meantime I have been looking around for a new place. 1800 a month will get you a 4000 sqft McMansion. Ordinary houses are running 1300-1500 depending on the neighborhood. One I looked at sold for 600k in 2005 and is listed for 450k now. Around the corner is a nicer house with a view for 450k and they are down from 600k, and willing to talk. The Realtor asked if I would be interested in making an offer and I said 375k is all it would bring her answer was would you like to offer that.
Colorado Springs that has a similair climate to Flagstaff and there is some high tech work there? just wondering because someday I will wantto buy back in and it won’t be Phoenix but some higher elevation sunny place.
There is some tech presence, but as usual they are hiring in Bangalore, not locally.
Speaking of 600K houses, there is an article in this week’s Barron’s about the completely dead 600K+ market in (fairly wealthy) Sarasota. The money quote: “Luxury housing is after all just. . . housing.”
If one looks back at the real estate crash through the 1930’s, history will show you that the premium on so called luxury housing almost disappeared in many/most cases and even in some cases the so called luxury housing became totally obsolete and unsaleable.
With the current credit implosion looking like it may/will get as bad or worse than the 1929 deflation one needs to really be very careful in purchasing any real estate as he may well end up owning it for a whole lot longer than he thinks , and it may become a whole lot cheaper than anyone may imagine.
Imho what we are seeing here is the beginning of a massive decline in all assets and the beginning of a massive global credit deflation than can and will not be stopped by TPTB and one needs to really read up on and remember the 1929 crash era and especially The South Sea and Mississippi Land Bubble speculations to get a sense and flavour of how this truely may unfold.
“Around the corner is a nicer house with a view for 450k and they are down from 600k, and willing to talk. The Realtor asked if I would be interested in making an offer and I said 375k is all it would bring her answer was would you like to offer that.”
Probably just the real estate agent’s prayer that you’ll make a written offer (regardless of offer) so that they look like they’re doing their jobs for the client. Now these fat-bottomed agents aren’t sipping $5.00 Starbucks and saying, I’ll get back to you”. Now they almost plead.
“In Castle Rock, he showed a client a house priced at $750,000, which was competing against similar houses priced at $450,000,
Why is he bothering showing $750k homes when the same is available for $300k less and is probably going to go for $375k? What a rip off!
This is why you must become an informed buyer before ‘jumping in.’ Not that one should for a long time.
The blogger dinner went well. Naturally, we had a diverse opinion on when to start buying… But everyone agreed to avoid 2008.
There will be a better time to buy. It will be after capitulation; that’s over a year away. So sit back, relax and spectate.
When I read things like the above (showing overpriced homes to sucker one’s clients) I only root for the discount brokerages even more. Open the MLS!
Got popcorn?
Neil
Neil
After he’s show the $450,000 house and sees they are having trouble making up their mind, the scenario goes like this (’cause he’s a sleeze bag realtorwhore and wants to sell even though he knows the $450,000 will probably drop to $375,000 or less), “Folks, I can see you’re not sure so let’s get into my car - I want to show you something.” Quick drive over to the $750,00 home, then: “This property is on the market for $750,000. It’s the same as the one I showed you for $450,000. That should tell you the $450,000 house isn’t going to go much lower. Trust me, now is a great time to buy. Prices can only go up from here and you’re on the ground floor if you buy now.”
Finally, if they are still undecided: “Okay, if I let you screw my wife will that work for you?”
Mike,
lol. So true. That is how they think.
“end of an error”
They don’t want to ‘open up their bible’ as you say… but after this debacle, I don’t think they’ll have a choice. The information is out there.
Let’s just say I laugh hard when on ‘flip this house’ they bring in the Realtor ™ as the ‘authority’ on the house value. They don’t understand the change that is going on.
Got popcorn?
Neil
Actually I would probably have ask the used house salesperson to show me the house listed higher so I could see what was supposed to be such a big deal as to justify the higher price tag in the same area.
Curious as a cat and all that - and still have at least 6 lives to go.
“Open the MLS!”
Yeah like when travel agents opened up their secret flight lists. We made our own reservations.
Expedia MLS.
Exactly!
And air travel has been far more competitive since Expedia, travelocity, orbitz… and probably a few others I’m forgetting.
Shouldn’t that be the way with homes? Sit down, type in an area, and watch the homes listing be displayed. Have a contact number for a showing and that’s that.
Currently, 2/3rds of buyers find the home on their own. So we can get rid of 3% of the commission easy.
I’m ok with the commission being based on the sales price. But let’s make the system more efficient. Its not like most other areas haven’t improved efficiency and lowered transaction costs. Let’s do it with the REIC.
Got popcorn?
Neil
Don’t worry. Just stick to REOs. (But do your homework!) Banks don’t pay the full 6% on bank-owned.
Neil,
Why would they open their bible to us commoners. We aren’t intelligent enough to understand that is why we need the 6% ers to help us avoid mistakes.
The holy grail of comps. Yeck.
“‘It is just a mess,’ she said. ‘I had to borrow from everyone I could think of to get this loan current.’”
So, she is going to lose her home AND friends.
Supposedly 60-65 % of home “owners” defaulting on their loans are NOT subprime borrowers, but those with good credit. Here’s a huge story that nobody has touched on yet in the MSM. Think of the millions of idiots who refinanced their homes, often paid for in full, to remodel kitchens or buy silly SUVs, or get boob jobs. I cannot even imagine putting ones house in danger for something so trivial. I can understand people refinancing in emergencies, but that’s about it. Of course, eveyone said he was refinancing to get a lower interest rate, but what good is a lower interest rate if one vastly increases the amount of debt owed buy “liberating” alleged equity?
Suzie Orman last night told some former mortage broker now in serious trouble that, in essence, it was his own fault. She also ridiculed the idea that millions of people were tricked by the mortgage industry. She blamed both lenders and borrowers, and had no sympathy for either.
Yea caught Suze for a minute as well when she clobbered the Mtg brkr. And all the other schnooks who wanted to buy stuff with NO savings or retirement set up. What do people use for brains?
Here is a link to a chart showing which type of loans are what % of mortgages AND which type of loans are the % of those in default.
http://online.wsj.com/article/SB119696216000715924.html?mod=hpp_us_whats_news
As basic groups (prime/subprime/VA-FHA), prime defaults (fixed and adjustable) are 36.3% of the defaults, subprime (fixed and adjustable) are 55% of the defaults and FHA/VA are 8.7% of the defaults. Interesting as FHA and VA hung tough on their low income/debt ratios and documentation of income and assets as part of the underwriting criteria and show a default rate that is less than those loans are a percentage of all loans.
I refied my little 500sf dump back in the 90s, from 12% to 7, and just…took the lower payment for the same term. Then paid it off. Was I a schmuck? Have to admit no one talked me into doing anything different, and the bank even kept the loan. Different era I guess.
“Subprime” - nominee for most abused word of 2007 - heck the whole decade.
Fannie Mae and Freddie Mac’s accounting is just as bad as Enron’s, if not worse.
http://tinyurl.com/34483v
Check out the analysis of their books. They are projecting out revenue 20-30 years from now and booking it as “current” income.
How in the world can that sort of accounting be approved? Regulators!? We don’t need no stinkin’ regulators!
Any other company would be delisted. They still have to fix their old books. They have been delinquint for years. Because they are GSEs backed by the Gov’t means they don’t get delisted. Instead of the Government protecting them and enabling fraud, why don’t they crack down??? How can they even change their limits and rules when they are losing BILLIONS every month?
“‘Mortgage problems are motivating a lot of it,’ said John Joseph Volin, a bankruptcy attorney in Tempe.”
At first sight I read the name as ‘Violin;’ can’t think of a better name for a bankruptcy attorney!
Well, folks, here’s your choices:
#1. You can listen to Greenspan, Bernanke and the Bush administration and the NAR (lol) who did nothing to curb the “free money” mortgage industry and the “build-at-any-cost” frenzy for 6 years which resulted in a very dangerous financial bubble, then told us once the bubble burst in could be “handled”. Well, it wasn’t “handled” and is still spreading like a virus OR you read some of the posters on this blog who were predicting what would happen and have been proven right. 100% right.
#2. You can listen to Bush and Bernanke who tell us that we will avoid a recession and, “The economy is strong and able to withstand the shocks created by the sub-prime meltdown, $100 oil, massive bankruptcies, a credit crunch which is only in the early stages OR, you can follow the opinions of many posters who say a recession cannot be avoided.
You pick.
My apologies if this was posted earlier.
http://money.cnn.com/2007/12/05/real_estate/freebies.moneymag/index.htm?postversion=2007120906
Freebies from home builders
Builders are trying to lure reluctant buyers with plane tickets, new cars and even a pet peacock.
http://www.nypost.com/seven/12092007/business/house_on_fire_288916.htm
I read somewhere that they routinely added pre-payment penalties on payoff statements even when the mortgage loan had no prepayment penalty.
It works like this: Add a fee to which you’re not entitled. Many people don’t notice it and pay. If someone does notice the error first delay. If that person persists then admit to a “clerical error” and withdraw the bogus charge. If you get away with it you make money, if you get caught you lose nothing.
I remember one time a friend of mine who had a fixed rate note wanted to pay it off about 3 months before it was going to be paid in full . My friend got a bill for a extra 6 or 7 thousand dollars for the pay off ,so my friend came to me . After writing 7 letters to the creepy lender explaining and providing proof that my friend had a fixed rate note ,the jerks finally admitted they had overcharged on the payoff . Now my friend saved a lot of money on this dispute because he didn’t have to go to a lawyer to resolve it ,but I wonder how many people get inaccurate payoff figures .
At one point in my letter writing to this creepy lender I advised them that if they were computing their payoffs of fixed notes in the manner that they did to my friend ,than they were sc*ewing a lot of borrowers ,and I demanded that they make this correction ,and I put them on constructive notice of this error .
Makes you wonder how many people get scr-wed in business transactions these days by these so-called errors by companies that people don’t dispute or give up .
like when 5 yrs ltr I get a letter… and ten days ltr a deadline..then VOILA suddenly the Tax bd “found” 5k of $ that the lender incorrectly calculated.
I Knew it had been wrong in the first place, but if the “buyers/borrowers” don’t know or have Clout..you can get screwed and the CEO walks away with the $
Or the New one is to have your payment due on a date the bank is closed…(holiday)
I was just doing some back of the envelope calculations and came up with a scary equation. For every 100billion in MEW you have the equivalent of 2.5 million 40000 a year jobs. Does anyone know how much MEW has dropped since the peak in 2005.
I realize this is not exact because of the following variables but this is frightening.
Not all spent in 1 year.
Some went to pay off other debts.
You also have to use some current salary to make the payments.
However this is also tax free money so worth more than taxable income.
This borrowing created lots of profit and created many banking jobs.
Also this money went more towards the extras in life not toward food utilities etc.
Add this to the jobs about to be lost in the recession/depression and this is absolutely frightening.
Am I off on a tangent or do other people agree?
Remember the multiplier effect–that’ll increase the number of jobs by at least double. Those dollars get spent more than once.
other people agree
very good article below:
Bush’s Bailout Bait-and-Switch
http://www.fool.com/investing/general/2007/12/07/bushs-bailout-bait-and-switch.aspx
I loved the summation:
Foolish final thought
Put it all together, and it’s laughably ugly. With this subprime bailout plan, Paulson and the Bush administration have managed to simultaneously:
* Infuriate the majority of Americans who didn’t gamble on expensive homes.
* Propose a bailout plan that will help only a handful of housing gamblers, and not those who are most deserving.
* Severely damage the credibility of the financial system that provides the capital used for making home loans.
* Set a terrible precedent for a bailout regime that can’t possibly cope with what’s coming down the line.
Heck of a job.
this move will destroy credibility in the U.S. markets.
This move? The rate freeze? Hey.. i got news for him.. Participants in the lending “system” did an excellent job of damaging their own credibility over the last few years..
How is this any different..from when some tin-pot dictator …unilaterally decides to stop paying on his nation’s debt
It’s different because this is not some law or edict, not a unilateral govt decision nor is it even a decision by Bush.
The writer understands that this ineffective plan does nothing and helps nobody. Other than that the column is pretty lame..
Very funny
http://www.youtube.com/watch?v=fi4fzvQ6I-o
Remember: When the early birds start saying “bubble”, there’s another 4 years until it pops.
Mark you calendars.
“Remember: When the early birds start saying “bubble”, there’s another 4 years until it pops.”
The best indicator of a bubble’s peak is when “the flock” can invest with financing.
Just got back from an auction at 604 Palm, El Segundo, 90245 at 3:30.
House had a final bid of $530K and after disclosures and bidding we were out of there by 3:34. However, it still needs to go to court for final approval, and someone can still show up at court and overbid. The house is an 884 square foot mess with a 2898 square foot lot. There were, maybe, 50 - 75 people there with only a handful bidding. He started at 600k then moved down to 500k and then finally to 200k to “get the bidding started”.
Well… off to see another bank owned property up on the hill ! Asking price $749K.
Most bank auctions these days have hidden reserves. They just reject and try to renegotiate laters. The real auctions should start at the end of next year.
–
“‘What this does is create an almost new category of borrower - ‘mediocre prime,’ said Glen Ogden, president of the Utah Mortgage Lenders Association. ‘It’s your average American. And they are going to pay more.’”
They are temporarily prime! “Your average American” is sub-prime if not sub-sub-prime borrower. FICO scores during boom are not the same as during economic hard times. The assumption in American lending is that we wouldn’t have hard times. That the USG and the Fed wouldn’t allow hard times. It is a nice fantasy, but has no resemblance to reality.
Jas
“After turning an eight-acre infill site here into a gated community of 92 single-family residences, regional builder Signature Homes opted to rent them out instead of trying to sell them off in a down market.”
“Called Town Las Vegas, the entire community was sold last week for $18.4 million, or $200,000 per home, which translates to a 6% capitalization rate for the new owner.”
No viva, Las Vegas.
If the bursting of the bubble were a dinner party, I think the appetizers are just making their way out of the kitchen. Lots and lots and lots of floppers with houses languishing on the market, in addition to massive builder inventory, delusional have to sells, and fantasy price dreamers. It’ll take years to get back to some semblance of normalcy. The avalanche of prospective foreclosures is too large to describe.
” I think the appetizers are just making their way out of the kitchen.”
Can we get some jello bubble shooters?
I love the party metaphor.
Didn’t the Ancient Romans have vomitoriums?
Didn’t the Ancient Romans have vomitoriums?
Yes. Allows for more added courses.
The problem is halting our desire to buy… until we approach the desert course.
Got popcorn?
Neil
Gorging on helocs. Gotta yak.
“lots and lots of floppers”
LOL why didin’t I think of that..
This multiple home ownership is only for movie stars and old timers, not young people just starting out.
I cannot wait until all these failed flip flops overcome an already crowded housing market.
Hey PB remember when you reported how many homes there were for sale in SD in Jan 07?
How has it changed?
I have a place in Denver and the story makes it sound worse (or is that better) than it really is. Most homes in top intown neighborhoods are still going up. The one’s falling fastest, such as those areas mentioned in the article, are in marginal suburbs or the exurbs. Nothing has really sold in the last 4 months, however. So for those that really need to sell, 2008 is going to be a nightmare. Right now I am not seeing any deals. Just over optimistic wish prices and houses sitting vacant. I dont really look at properties except in historic intown neighborhoods or in the mountains. Still waiting for the real declines. I have no doubt they will come as all leading indicators point in that direction.
“Countrywide created late fees by failing to timely cash checks sent to cover the mortgage payments and by posting the funds after the due date even though they had the money in hand prior to the due date, the trustee, overseeing Chapter 13 cases in Pittsburgh, claims in court papers.”
Reminds me of my son trying to close out a bank account with USBank. I finally went to the post office to get verification of date and time of delivery on his check by mail and so far haven’t heard a thing back. I intend to take this further to his local Congressman as he is in the military and can’t do it from overseas.
Levitz Chpt 7 and someone bought them.
Providian was notorious for doing the same thing. Denied wrongdoing in CA, and the Fed wants to take the DA job away from states and make it Federal, so no one will be able to go after CC cos etc locally.
O/T: But there is no chance of recession. Let’s see, Bomby Co is on its way to closing its doors. And now: Venerable electronics retailer CompUSA has been sold to an affiliate of restructuring firm Gordon Bros., and will close all of its retail stores.
ADVERTISEMENT
CompUSA did not give a timetable for the store closings, saying only that all 103 existing stores would remain open and staffed throughout the holiday season. Some stores will apparently be sold to other retailers.
High overhead, stale idea companies in highly competitive businesses that have been dying for years. Bombay Company - let’s import and junk we can find anywhere in the world and mark it up 10 times - what a joke.
But I definitely am in the recession camp: At least four of the next six quarters under 1% GDP growth.
Wow, CompUSA! Maybe HD and Worst Buy will follow?
The internet made CompUsa obsolete. Plus you can get the same stuff at the office supply chains.
Okay, it’s Sunday night. This has nothing to do with the housing bubble but it’s funny as hell. Here’s the perfect gift for that baseball player in your house:
http://youtube.com/watch?v=6C9aiWr0Vfg
A comment from the Greenberg blog. FHA is the new dumping ground for fraud.
http://blogs.marketwatch.com/greenberg/2007/12/straight-talk-on-the-mortgage-mess-from-an-insider/
On 12/09/07 onel wrote:
As an ex-owner of a mortgage company (just closed it last week) I can tell you first hand that this article is understating what is to come. It doesn’t mention anything about the fraud that goes on. RIGHT NOW as I write, I know, again first hand, (because of “friends” I have in the business) that the new place to dump all the crap is in the FHA arena. Mortgage Fraud has been and continues to be out of control. Why doesn’t anybody address this? I went out of business in part because I refuse to partake in it. It’s a lot harder making money if you don’t commit fraud. But unfortunately, NOBODY does anything about it. MANY clients have come to me, I try to qualify them but they don’t qualify for a loan, and next thing I know my buddy down the street from another company approves them FHA. I saw their tax returns! They don’t qualify!!!!!! How do they get the loan then? FAKE paperwork! That’s fake paystubs and getting a friend of theirs (or the loan officer’s) to “verify” their employment. The assets are then a “gift” from relatives (another lie). And wha la! Done deal. I know because they tell me. They say to me they’re sorry but that other loan officer can get them the loan. Doesn’t anybody get what is going on? This is the tip of the iceburg. Have you noticed who is writing that the sky will fall? The mortgage people. Why? Because we, in the business, KNOW the crap that goes on everyday in our industry. Why is Fannie Mae getting killed when their paper is good quality, old fassion “full-doc”? Because lots of it is NOT full doc. They have an automated system ( called DU for desktop underwriting) where loans officers “bluff” the system as a full doc loan when people have high FICO scores. The system will approve the loan and then NOT request paperwork to prove the clients information. HA HA HA, what a joke. It is now a actually a stated income loan but with the backing of Fannie Mae. Do you out there (outside of mortgage people) have any idea how many times this is done all over the country? This is now a part of the Fannie Mae paper!!!! That part is garbage!!! Many of these people can’t truly afford their house. Optomistic friends out there, this is gonna get ugly. Much uglier than people who haven’t been in the business can even imagine. Why does the fraud continue? Well what’s the penalty for a loan officer? About a $5,000 fine IF (IF is the key word) they ever get prosecuted, meanwhile making hundreds of thousands putting through fake documents. C’mon, be serious! And Realtors are worse than mortgage guys. Many in my area (Hudson County, NJ) hated my office and wouldn’t want clients to come my way. Why? Because I wouldn’t put “their” clients into option arms. I also sat down with many of “their” clients and convinced them NOT to buy the home because they couldn’t afford it. They would stear clients away from me so they can sell them higher priced properties. I don’t blame them, but I think they are garbage as human beings. The only good thing I can say about what will be happening in the next few years is that many of these unethical Realtors and mortgage guys are going to lose EVERTHING!!! It’s the closest to justice they will ever face.
This would have a lot more impact if the guy didn’t write like a moron and misspell every second word.
Did anybody think that FHA wouldn’t be the new dumping ground for fraudulent loans ? This is why I have been calling for a total purging of the system as we know it . The same people who committed fraud with the sub-prime loan funders will do it with the FHA lenders .
The entire loan system is so corrupt that they either need a new underwriting system or something .Maybe they should just put loan agents on a salary ,and they get a bonus if they spot fraud . Maybe the appraisers should be drawn from a pool and Realtors and loan agents aren’t allowed to talk to the appraisers .
Also ,skin in the game by the borrower is one of the best ways to prevent loss for the lender ,if the appraisal is accurate .
Actually, given the situation and what he’s describing, I’m surprised he wrote anything that’s coherent.
I agree, why mess with such a beautiful stream of consciousness by worrying about a few spelling errors?
This guy was suffering from wanting to spit the truth out for a long time .If this Mortgage Broker is going out of business because he didn’t commit fraud ,than isn’t that a shame .
To “Housing Wizard”
You did not put the creepy lender on “constructive notice,” you actually put them on actual notice. Constructive knowledge occurs when someone is deemed to know a fact. For example, when an agent knows a fact, it is deemed that the principal knew it as well. This prevents someone from conveniently turning a blind eye to something and trying to avoid liability by pretending they did not actually know about something. Thus, constructive knowledge has the same effect as actual knowledge.
I stand corrected . This lender had a copy of the fixed note on hand ,so they had constructive knowledge of the terms of the note ,in spite of me sending them another copy of the note to remind them of their constructive knowledge of the terms of the note . The lender kept on trying to tell me that this note was a adjustable note . After 7 or 8 letters they finally realized it was a fixed note . I would like to think that my letters gave them knowledge of a mistake they had been making and might of saved a lot of other people some money they were going to overcharge people . In fact , I mentioned to this lender that they needed to review all the other loans that they had been making this mistake on. At the time I did get the impression that it was a mistake that some goof had been making in the pay-off department .
It is nice that Meritage stopped to redesign to lower the price of homes they are adding amongst the McMansions from KB Homes and Toll in Las Vegas.
SaladSD said -
“I’m told by my gay Mormon friend that folks in Utah have some of the worst personal finances (among the highest bankruptcy rates) because in addition to having big families and tithing 10% of their income, they are obsessed with keeping up with the Joneses. ”
I live just a few minutes from the lady mentioned in the article. Utah is one wierd place(leave out the why don’t you move comments, they NEED me here). Your comment was exactly correct. I’d love to know where your gay friend got his insight.
Don’t think the women are all barefoot and pregnant. Many of them are well dressed with Boob Jobs and Black Escalades. I have to dodge them when pick up my kids from school. A large percentage of them are on anti-depressants. Utah has lots of wierd news stories lately; the kidnapped bride, the old lady arrested for not watering her lawn, Marie Osmond, Mitt Romney, closing down the edited video stores, womens meth epidemic, the most depressed state. Ben, please I’m telling the truth, don’t delete me.
My friend lives in some upscale area of SLC (he rents). He grew up in a small town in Utah but spent some years on both the east and west coast, which probably is why he can make such dead-on observations about his home state. That TV series “City Confidential” featured a murder in Park City which really captured the wierdness of which you speak.
Thanks EnsaladaSD! Thanks Ben for posting my comments.
Reading and posting here is the daily catharsis I need to live in a very strange state. My mom is actually from Utah but was a farm girl and my farm relatives were/are very down to earth. Happy Valley is quite different.
As an aside, I feel for the issue of gay mormons. Stuart Matis’ family lived in my ward.
“Jeff Mezger, CEO of KB Home, said 80 percent of his management team had never been through a downturn, and they ‘froze like deer in the headlights.’ He cited the Las Vegas team as one that hadn’t seen a downturn.”
Great way to motivate the staff, Jeff.
On 12/09/07 onel wrote:
As an ex-owner of a mortgage company (just closed it last week) I can tell you first hand that this article is understating what is to come. It doesn’t mention anything about the fraud that goes on. RIGHT NOW as I…..”
If it is fraudulent, then be prepared to see much bigger drops than 40%-50% like what most people here predict. Just from what I have seen in the media and out in the real world, this fraud is going to do us in. If you lie and exaggerate on stuff often enough, no one will take you seriously. That’s why I’m doubtful that housing will ever recover in a lot of areas. No one will want to buy something that is BS in its nature. Same thing with stocks; most of the stock market is hot air. Fluff. The Dow Jones should be worth maybe 8000 tops. There is a ton of fraud in the paper investments alongside the housing economy.
I am a Mormon and grew up in Salt Lake City, even though been gone for about 10 years. Yes, Utah is one of the top BK places. Yes, there are a ton of MLM companies and other scams. Yes, there are bad people running businesses hiding behind the religion. The Mormon faith teaches members to be financially prudent. Many people choose not to follow that and make stupid financial decisions. That is those individuals fault. Not the fault of the religion. Many people try to keep up with the Jones’. That is a cultural thing of this country, not the church teachings. Those that make stupid financial decisions, Mormon or not, need to pay for them. Don’t make it a religious thing. I am sure the same could be said for every other religious group out there. This is a US cultural thing with the bubble, and not localized to religions, geographical areas, cultures alone, etc. Rant off.
I live in Provo, the happiest place on earth. It is a cultural thing but much of the culture is DERIVED from the religion rightly or wrongly. When you live here it doesn’t really matter where it comes from does it? Get back to Utah. Ten years = A lot of forgetting what it’s really like. Ben Why didn’t you put up my other post? You have my email. Are you a defensive LDS?
The recent article in Deseret News reporting Utah as the most depressed state drew similar responses. You may not like it, but religion is a de facto FACTOR in most things when the religion is so predominant. Anyone taking college level statistics would know that.
USB Crushed
Just flipped on CNBC Asia - USB to take $10 Billion write down on subprime exposure. That is of a total extimated exposure of $40 billion - 25%.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTEBcKLcytXw&refer=home
Getting ready to bid…
).. I would be happy in any of them. Ill see how low or high they go, Im not going any more than 150k, im sure that even at that price they will be going probably to 100-120k in 2010 or something like that.. that’s nominal 1998 prices… Im convinced of this… but also, yes, Im tired of renting… Of not doing things because in reality renting means you are on the move… apartments are crappy places you cannot really customize, no matter how you spin it. Im not buying to sell… my only worry is that I hope nothing mayor happens job-wise during this recession, since I know my house will be less than 150k for at least 5 years. I have a non-realstate related job… but still. so Ill report back.. in God knows which thread.., ah this is South Fl by the way… beloved by Tom Tancredo.
Im getting ready to bid in an reo auction.. (actually 2, if the first one doesnt work out).. all of the properties Im considering are ‘ok’ houses (a great house I couldnt afford bubble or not
It now appraises for much less, and her monthly payment has jumped from $2,700 to $3,600. Degnan said they had planned to refinance before their teaser interest rate increased but weren’t able to once the market conditions soured.
“This solution isn’t a help for us,” she said.
So you gambled and lost. Too bad.