Sellers Should Accept The Need For Price Cuts
The Baltimore Sun reports from Maryland. “The local housing market ended its second full year of the downturn in a worsening slump, with year-over-year sales in December falling 30 percent for the fourth month in a row. For local sellers, the problem hasn’t been merely falling demand. Supply rose, too. The average number of unsold homes in any given month last year topped 18,000. That’s by far the largest number on record.”
“Now subprime and other ‘exotic’ loans have all but disappeared because lenders - pummeled by rising foreclosures - pulled back. Just before Melissa Talbot and husband Aaron, put in a bid on a condo in October, their bank canceled the no-money-down program they were planning to use. They ended up borrowing from their retirement funds and going with a lender requiring a 5 percent down payment.”
“Since they moved in, the lender stopped offering that program, too. ‘I’m really glad we were able to buy when we did, because I’m not sure we could afford it now,’ said Melissa Talbot.”
“Realtor Chris Traczyk keeps hearing from his buyers that they want to continue looking and wait for better deals. He’s certainly hoping for an upswing in demand: He’s rehabbing city homes with a partner, and it’s starting to look like a break-even situation at best.”
“A house they renovated south of Baltimore’s Ashburton neighborhood has drawn no offers since it went on the market three months ago. The first asking price was $325,000. That dropped to $286,000. Now Tracyzk is asking for $260,000.”
“‘It’s probably going to be a loss,’ he said.”
Reuters reports on New York. “Eileen Anderson runs two NeighborWorks counseling centers on suburban Long Island, outside New York City. The number of calls to Anderson’s offices rose more than tenfold in 2007 from the year before, and since October more than half of those calls have been referrals from HOPE NOW, she said.”
“While the HOPE NOW alliance puts troubled borrowers in touch with counselors, both counselors and borrowers complain it offers no financial help. ‘There’s no money, nobody has emergency funds. Clients who are calling are desperate,’ Anderson said.”
“Agnes Kallon and Bai Turay, a Staten Island couple…have a combined income of $39,000 and six children to support. In 2005 they took out a mortgage for a $412,000 house with a low introductory rate, based on their mortgage broker’s assurance that they would easily be able to refinance when the rate went up.”
“But when their mortgage payment reset to $3,000 a month, far beyond what they can afford, that assurance didn’t hold up. ‘If we lose the house, what will happen to the kids?’ Turay told Reuters. ‘These brokers are profiting from other people’s misery.’”
Long Island Business News from New York. “The subprime meltdown is leading borrowers to fight back, suing for predatory lending practices and violations of the Truth in Lending Act. ‘I’ve seen an increased number by subprime borrowers who are either in foreclosure or on the brink of foreclosure bringing these actions,’ said David Scheffel, of counsel at Farrell Fritz in Uniondale.”
“Kari and Keith Sessa in 2002 achieved their version of the American dream when they bought the Huntington cape she lived in as child. They’re now among the thousands facing an American nightmare and deciding whether to sue.”
“After seeking a home equity loan, the Sessas walked out with a refinanced mortgage and a second loan through Global Home Loans and Finance in Melville (no longer in business).”
“She said her lawyer said that it doesn’t make sense to sue the mortgage holder, unless they face foreclosure. The fact that the firm that arranged the mortgage is gone makes legal action tougher.”
“While the Sessas’ mortgage holder agreed not to jack up rates for two years, they still haven’t agreed to turn it into a 30-year, fixed-rate mortgage. ‘It’s stalling foreclosure,’ Sessa said. ‘That’s all that’s doing.’”
From Newsday in New York. “More than $14.6 billion worth of homes was sold last year, compared with $16.5 billion in 2006, a drop of almost 12 percent, according to figures released yesterday by the MLS of Long Island.”
“The area’s real estate market didn’t freeze up this past year, like those in other states, but continues to soften, with some sellers dropping prices, others taking their homes off the market and buyers waiting for rock-bottom prices before making their moves, industry veterans said.”
“Agents and brokers say many sellers have realized they can’t demand the boom-time prices anymore; the median price of homes on the market dropped from $500,000 a year ago to $480,000 last month, a 4 percent difference. Homes are piling up on the market, taking longer to sell because buyers think prices will probably go down further this year, as experts have predicted. December had 30,854 homes for sale, up from 27,446 a year ago.”
“Last year’s 3 percent drop in listings could indicate a reluctance by some potential sellers to put properties up for sale when they probably won’t get the profits they want.”
“‘Those who are serious about selling, sell,’ said Mohsen Zandieh, president of the Long Island Board of Realtors. ‘Those who are determined to get a certain amount in their pockets, they wait for the market to change to the number they want to see.’”
The Boston Globe from Massachusetts. “Housing prices in the Boston market peaked in September 2005, according to the S&P/Case-Shiller Home Price Index. As of October 2007, the market was down 7 percent from its peak. But the latest drop has only rewound the markets back to the summer of 2004.”
“There also is a longer view of the future. The Joint Center for Housing Studies at Harvard University noted in its annual survey that a rebound is inevitable, even if the timing is unpredictable.”
“Over the next decade, the report said, the combination of a growing population and rising wealth, ‘will help propel residential spending to new heights.’”
“Eric Rosengren, president of the Federal Reserve Bank of Boston, told a Hartford audience that the current housing slump could be the longest in 50 years, increasing the risk of a broader economic downturn.”
“Rosengren said spending by home buyers has declined in every three-month period since the beginning of 2006, and likely will continue to fall through at least June 2008. That would be the longest downturn since 1958.”
“‘The trend toward securitizing mortgage loans allowed the financing arrangements to be driven by national rather than regional conditions,’ said Rosengren. As a result, regional problems - which once had a regional effect - now reduce the availability of loans nationwide.”
“The best response, Rosengren said, is to calculate and accept losses as quickly as possible. Banks should report and close the books on bad loans, and home sellers should accept the need for price cuts, drawing investors and buyers back to the market with the prospect of new profits.”
“Art Foley, a Quincy real estate broker, said many sellers on the South Shore seemed unwilling to cut prices. As a result, while prices in the Boston area have held relatively steady, the number of sales dropped sharply in recent months, suggesting buyers are waiting for larger price cuts.”
“‘A good real estate broker today will walk away from a lot of listings they could have because the seller is not being reasonable on the price,’ said Foley.”
“He said some agents joke that it is best to be the third agent to work with a seller, because after the seller fires the first two, he might be more willing to listen to the argument that the price needs dropping, and not the agent.”
The Providence Journal from Rhode Island. “Landlord Charles Oertel owned 10 rental properties around East Providence. Oertel said that he and his business partner, William Shawn Prunty, built their real-estate portfolio with risky subprime loans.”
“Then, real-estate values plunged, credit dried up, and demand for rentals softened. By the time 95 Oak Ave. was advertised for auction, they had lost all of their rental properties, except for one other. And that one, too, was headed for foreclosure.”
“Back in September 2004, Oertel and Prunty paid $233,000 to buy 95 Oak Ave., according to real-estate records. At the time they bought the rental house, property values all over Rhode Island were soaring.”
“Oertel and his partner borrowed $186,400, according to city property records. The 30-year mortgage carried an initial interest rate of 6.53 percent, which was scheduled to adjust two years later to a maximum of 9.53 percent. Thereafter, the rate would adjust every six months, to a maximum of 12.53 percent.”
“‘When the boom was going, we thought it was good to make an investment,’ said Oertel. ‘I consider myself a smart person. You listen. You never think it’s going to go down.’”
“Nor did he consider the hassles of rental property management. Some tenants paid their rent late; others did not pay at all. Evicting a tenant for nonpayment took up to six months. That was six months with no rental income to pay the mortgage.”
“‘The first tenants [on Oak Avenue] rented from September through April and left owing two months’ rent,’ Oertel said. ‘Then we got two guys in there, cousins, both working good jobs. They left owing about five months’ rent. Then I had some wonderful tenants — a husband and wife and baby — and they left.’”
“Meanwhile, the mortgage payments on 95 Oak Ave. began to climb. By last year, the payments had increased to about $2,300 a month, $1,000 a month more than the rent. His investment was losing money.”
“‘When you’re a personal investor,’ Oertel said, ‘it’s almost like a pool of investments in your portfolio, and when one place starts to tumble they all start to tumble.’”
“So, Oertel stopped paying the mortgage on 95 Oak Ave. ‘It was a business decision. I couldn’t afford it anymore. I was gonna lose it anyway,’ he said. ‘I think the last payment I made was in February.’”
“In June, Oertel agreed to rent the house to Maria Simmons and her family for $1,300 a month. By then, he was already three months’ behind on the mortgage. But he said nothing to his new tenants.”
“A lawyer who represents a loan servicer for Deutsche Bank wrote a letter to their landlord stating that the property at 95 Oak Ave. was ‘to be sold at a foreclosure sale’ on a date to be determined. The letter stated that the first auction notice would run in The Providence Journal on Aug. 2.”
“Maria Simmons did not see the legal notice on Aug. 2. If she had, she said, she would not have written Oertel a $2,480 check on the same day for August and September’s rent. (He let her deduct $120 for paint and the cost of removing an old refrigerator.)”
“Money was tight. Maria had reasoned that if they paid their rent through September, it would give them a measure of security. ‘I didn’t want to fall behind,’ she said, later.”
“Oertel said he did nothing wrong. Seated in his SUV outside his duplex, cell phone in hand, he described himself as someone who was simply trying to preserve his investments in a market fraught with risk.”
“Real estate, he said, is like the stock market. ‘You buy 10 stocks and you buy 10 buildings,’ he said. ‘Then people have to sell to get out because they need the money.’”
“Oertel blamed his financial losses on mortgage brokers and lenders and unreliable tenants. Not the Simmons family, though. He said they paid their rent. Oertel used the Simmons rent money to try to keep his other properties out of foreclosure. Further, he said, the family paid no rent after September. He also returned their $1,300 security deposit.”
“‘I used the money to try to keep the round-robin going,’ he said. ‘You start robbing Peter to pay Paul.’”
“Oertel said that he is the one who lost money, not Ken and Maria Simmons. ‘Nobody got hurt in this,’ he said, ‘right?’”
“Now subprime and other ‘exotic’ loans have all but disappeared because lenders - pummeled by rising foreclosures - pulled back. Just before Melissa Talbot and husband Aaron, put in a bid on a condo in October, their bank canceled the no-money-down program they were planning to use. They ended up borrowing from their retirement funds and going with a lender requiring a 5 percent down payment.”
“Since they moved in, the lender stopped offering that program, too. ‘I’m really glad we were able to buy when we did, because I’m not sure we could afford it now,’ said Melissa Talbot.”
http://en.wikipedia.org/wiki/Pyrrhic_victory
Ben, where did you find this?
Nah, you had to have made it up. No one is THAT clueless… are they?
‘I’m not sure we could afford it now,’
Meanwhile, the market value of homes in their hood gets more affordable by the day.
Oh the irony. Another FB in the making and a future foreclosure looms.
UFB! - Melissa, Melissa, Melissa … I’m feeling very sad for Aron.
‘The Joint Center for Housing Studies at Harvard University noted in its annual survey that a rebound is inevitable, even if the timing is unpredictable.’
‘Over the next decade, the report said, the combination of a growing population and rising wealth, ‘will help propel residential spending to new heights.’
This kind of stuff is irresponsible, IMO. These Harvard guys have the worst record for predicting of anyone in the past few years. I will be sure and remind them that they probably convinced FBs to hang on into foreclosure:
‘The Cape was among the regions of the state that experienced the most foreclosure action in the first 11 months of last year, according to numbers released yesterday by The Warren Group.’
‘Barnstable County had a steeper increase in completed foreclosures between January and November 2007 than all but two of the commonwealth’s 14 counties. Only Norfolk and Essex counties had steeper increases.’
‘The Warren Group reported 302 foreclosures on the Cape during those months, up more than 282 percent from the same period in 2006. The number of foreclosures statewide increased 187 percent in that time.’
‘Between January and October 2007, there were 1,223 foreclosure petitions filed on the Cape, an increase of more than 70 percent over the same period the previous year. Statewide, the number of petitions grew by 63 percent.’
The “Joint Center for Housing Studies at Harvard University” is an industry-funded operation, similar to the George Mason University “Center for Regional Analysis” in DC. Harvard is allowing its name to be used for industry cheerleading. Do not confuse this “Joint Center” with academic Harvard. Here is a link explaining it’s “policy board” with a list of its members. Surprise, surprise.
http://www.jchs.harvard.edu/people/pabpage.html
“Harvard is allowing its name to be used for industry cheerleading.”
Correction, Harvard is selling it’s name to be used for industry cheerleading. And they deserve to take the hit to their reputation for greedily selling out to shills like Retsinas.
And of course,their boy George, proudly demonstrating what a Harvard MBA is really worth.
Thank you, thank you, thank you. I have been on their list for years, reading their reports as if they were disinterested academic studies, and had no idea they were funded by the housing industry. I am not just “shocked, shocked”, but really and truly shocked. I think most people affiliated with Harvard would be shocked, too.
BTW Ben what is the policy on this blog for forwarding? With permission, I would like to forward this.
The “Joint Center for Housing Studies at Harvard University” is an industry-funded operation, similar to the George Mason University “Center for Regional Analysis” in DC. Harvard is allowing its name to be used for industry cheerleading.
Shit howdy, look at all those INdependent names of companies.. not the least bit Conflict of Interest no at all.
Sheesh.
“There also is a longer view of the future. The Joint Center for Housing Studies at Harvard University noted in its annual survey that a rebound is inevitable, even if the timing is unpredictable.”
‘Over the next decade, the report said, the combination of a growing population and rising wealth, ‘will help propel residential spending to new heights.’
Thats ridiculous at least for the next 5 years IMO. For one Massachusetts is losing population and secondly job losses, falling real estate and the falling stock market are causing wealth loss and not gain. And this is true even before the big R.
A rebound is inevitable even if the timing is unpredictable.
Well that is true. If it take housing 50 years to recover, then it will recover. Of course it is inevitable. Who are these clowns that work at Harvard? Remind me to avoid that college of idiots.
Now I know why Bill Gates dropped out.
Harvard: the legacy of legacy admissions.
Right. And, if there’s no corresponding INCOME GROWTH to pay for it than whatever’s left of the banking industry can just invent a new and more toxic mix of “affordability” products to close the gap. Are they stoned? Joint Center ….. hmmmm.
This kind of stuff is irresponsible, IMO.
I find this interesting because there seems to be a pattern emerging that institutions are increasingly commisioned by the realtor groups, builders, etc. to put out these kind of reports to fool the consumer. I just read a report put out by a Florida university professor that was in the local news. As I dug deeper, I found that the report was commisioned by the real estate industry.
The same is with the NAR mentioning to it’s members right now to inform the public that 2008 is the best time to buy.
The consumer needs to read between the lines when reading articles or reports like this and determine if special interest groups are behind these type of reports!
The boys from Harvard are known for their cheerleading ability. Yale too. And cheerleading seems to be all they do. Well, that and show Wall Street how to come up with new ways to innovate ala CDO’s.
Wasn’t W a cheerleader too?
I always wanted to be a cheerleader, didn’t know I had to go to Harvard /Yale to become one.
With regards to irresponsible behavior, can we call anything we have read or seen in the MSM responsible? From cheerleading the Iraq invasion to cheerleading the housing bubble, the MSM is nothing more than the propaganda arm of big corporations.
They call it Yellow Journalism for a reason.
From cheerleading the Iraq invasion to cheerleading the housing bubble, the MSM is nothing more than the propaganda arm of big corporations.
I’m in the camp that the PEOPLE are what make the MSM what it is.
The people who buy from the advertisers…. that support the shows. Yes, people really do buy cars, TV’s, drugs - because of the ads they see on TV.
See also: Popular music, popular movies that come out every week, radio station popularity, TV show popularity.
The news is nothing more than Entertainment. Well researched balanced news doesn’t sell, doesn’t get watched. It exists, but it isn’t the first “M” in “MSM”.
Death also is inevitable in the long run, even if unpredictable.
Hope No, W?
“Eileen Anderson runs two NeighborWorks counseling centers on suburban Long Island, outside New York City. The number of calls to Anderson’s offices rose more than tenfold in 2007 from the year before, and since October more than half of those calls have been referrals from HOPE NOW, she said.”
HOPE NOW is part of the current administrations attempted bailout plan getting hawked by Stuttering Hank Paulson.
This is what I meant in the bits thread; just make it up and call it whatever you want:
‘both counselors and borrowers complain it offers no financial help. ‘There’s no money, nobody has emergency funds. Clients who are calling are desperate,’ Anderson said.’
I just read your B&B comment. My post is meant to clarify aladdins comment. I wasn’t aware of “Hope(less) Now” until I saw the USA Today blurb on Hank trying to sell this thing.
This should be called “No FB left behind”.
“
NoMost FBs left behind.”I am beginning to grasp the distinction between political appearances and economic realities. Thanks for the lesson, Ben.
“suburban Long Island, outside New York City. ‘There’s no money, nobody has emergency funds. Clients who are calling are desperate,’ Anderson said.”
It’s known as the welfare system. It’s where many NYC residents ended up when the economy turned against them. People on Long Island didn’t think much of people in NYC at the time, and still don’t now. Since different sorts of people are being affected, however, this time “society is to blame.”
Stoner Logic…
‘The Joint Center for Housing Studies at Harvard University noted in its annual survey that a rebound is inevitable, even if the timing is unpredictable.’
“This kind of stuff is irresponsible, IMO. These Harvard guys have the worst record for predicting of anyone in the past few years.”
Seeing as everyone seems to be so into personal responsibility and accountability these days, where’s the outrage?
This post has more than one person blaming others for their losses. And the reporters go along with it.
That’s what really astounds me. One can only be “preyed upon” if one allows.
When I was mortgage shopping in 2001, the FIRST question I asked myself, as I considered an ARM was “If, for some reason, I cannot refinance this mortgage and the rate resets, can I afford it?” A quick input of figures on a mortgage calculator showed the answer. It was too close for comfort. I would have been able to pay the mortgage, but, I would not have been able to SAVE money.
I chose a fixed 30 year mortgage. Why did these other folks not ask themselves the same question?
If ARMS and pay opt weren’t available, we wouldn’t have to be concerned with people weighing the risks.
Why did these other folks not ask themselves the same question?
Hint: “Real estate always goes up!”
Same for us in 03 and 06 - never considered an ARM - I vividly remember saying what if the rates go up - it was so obvious. It was so simple - 25% of income for housing, period.
I insisted on a 30-year fixed, much to the chagrin of the wonder boy who was trying to sell me an ARM.
Bad poster - bad! What is this “saving” thing you speak of? Didn’t you hear the Prez: spend into oblivion or “they” will win?
Pondering the Mess, you must just hate america….. right?
I recall a mortgate broker presenting an ARM as a way to insure low monthly payments so you could use the money “saved” for “growing your investments”. That only works if you have the discipline to actually put aside that money and not spend it. I know my limitations, so I signed up for a fixed loan with an escrow account.
‘I’m really glad we were able to buy when we did, because I’m not sure we could afford it now,’ said Melissa Talbot.”
actually you could
wow, price doesn’t matter
And notice the failure to see that when they go to sell, the next buyer may not be able to afford it! (At their price, anyway)
That is the part that amazes me…
They cannot see the slowing market impacting prices… but… butt…
It took me a long time to really understand how slow real estate is on the downside. Now, I accept it. Its going to be interesting to see all the regions where REIC imployment drove the economy; that’s about everywhere.
Got popcorn?
Neil
Sheeple never look beyond the hype.
Propoganda systems exist because they work - don’t have to fool everybody.
Which illustrates what I was talking about yesterday. Trillions of dollars of credit is disappearing, causing a deflation in RE and equity prices. At the same time, with the fed lending money with both hands, the dollar is collapsing and interest rates are going up.
In time, that same credit destruction will take out food and fuel.
Except for the 4.5 trillion in non-debt based US dollar savings that foreigners hold. I doubt they’ll be plowing that into US RE. More likely into gold, silver, fuel, and food. Then there’s always the interest we have to pay on those holdings too.
“Agnes Kallon and Bai Turay, a Staten Island couple…have a combined income of $39,000 and six children to support. In 2005 they took out a mortgage for a $412,000 house with a low introductory rate, based on their mortgage broker’s assurance that they would easily be able to refinance when the rate went up.”
“But when their mortgage payment reset to $3,000 a month, far beyond what they can afford, that assurance didn’t hold up. ‘If we lose the house, what will happen to the kids?’
Panic! The children! The children! What will happen to the children! 39K a year income and they borrowed 412K. Now, maybe the children can find some parents with a brain…
Yes. I think that agencies should consider removing children from such families. Talk about putting your kids last. Gambling with money needed for necessities is a very serious problem. I hope they are court ordered to go into treatment, and the kids are placed with more responsible and caring ppl.
Tim: the “system” is already overburdened with kids without parents. They are better off with dumbass parents than none.
THe “Kids”… was my first thought as well,
SIX kids on combined $39,000. in the NY vicinity, are you crazy. There are condoms for that moment. Sheesh. maybe 4 kids less and some brains and restraint to boot..
With a 30 year fixed ZERO% rate, this couple would owe $1,144/month or 35% of their monthly income. What mortgage broker could not make such a simple determination of ability to pay?
No matter how many times I see stories like that one I am amazed. I make about 3x this couples income, with no kids and I would be hesitant to take on that kind of mortgage. While the ultimate responsibility lies with borrowers it shows how non-existent undrewriting standards were. Who in their right mind would lend a couple with a $39k income over $400k? They were doomed the moment they signed the mortgage documentation.
Who in their right mind would lend a couple with a $39k income over $400k?
Someone who was loaning someone else’s money and taking a commission, that’s who.
Who in their right mind would lend a couple with a $39k income over $400k?
A “professional” mortgage broker with a grade 8 education?
Sophisticated investors because the mortgage securites came with CDSs and AAA ratings.
Frank Hague ? A great name, do you remember Rushmore?
“based on their mortgage broker’s assurance”
This is the obligatory phrase, now inserted in every sob story, to exempt the greedy from blame. With six kids and an income of 39k, they couldn’t afford this house at any interest rate. Unless they planned to stop feeding the kids, or pay the prop taxes, or use heat or electricity, they didn’t have a prayer from the get go.
And what’s with the reporter…the “assurance” didn’t hold up?? If it ain’t in the contract, it’s just noise.
Huge numbers of americans need to be cut off from all credit, as they are too uneducated and financially illiterate to be responsible.
Section 8 for these folks and they ought to be grateful.
“With six kids and an income of 39k, they couldn’t afford this house at any interest rate.”
With six kids and an income of 39K, they can’t afford a cardboard box.
Sadly, I except Section 8 will coming soon to everywhere. A nice way to use up the McMansions AND prevent responsible people from living in decent neighborhoods - two wins for the price of one!
“based on their mortgage broker’s assurance”
This is the obligatory phrase, now inserted in every sob story, to exempt the greedy from blame.
An “assurance” that isn’t in writing isn’t worth much.
Good Lord, the kids might actually have to live in a….dare I say it……a rental.
BIG security deposit. Six kids can inflict a lot of damage, unless they’re well-behaved, something that seems pretty unlikely these days.
Maybe they can do an inverse teaser, pay $500 extra for 6 months to build up the security deposit.
“But when their mortgage payment reset to $3,000 a month, far beyond what they can afford, that assurance didn’t hold up. ‘If we lose the house, what will happen to the kids?’ Turay told Reuters. ‘These brokers are profiting from other people’s misery.’”
I’m so tired of people using their kids as proxy for what ails them. “Think of the children” blah blah blah, boo hoo. Like moving from a house they clearly couldn’t afford is going to ruin their children’s lives? We’re raising a generation of overdependent, unresourceful kids.
Where’s that damn trout? Or better yet, where was the box of condoms when this pair was breeding?
Thank you, Chick. I was thinking the same evil thought.
where was the box of condoms when this pair was breeding?
You first have to know how to read before you can find the box with the label condoms on it.
Rent the kids out to Gap sweatshops; 12 hours a day chained to a sewing machine, and the attendant flogging, builds character. If it’s good enough for the third world it’s good enough for us.
heck it was good enough for us growing up… we all had chores, and small jobs growing up. Like mowing lawns, paper routes, or working a few hrs for a farmer or baby sitting.
Just to name a few hourly small jobs that are still available to some degree.
What, kids don’t have to learn the value of work and money these days.
Don’t have kids, am dumbfounded that so many Americans have kids that are Entitled and have no idea about real work to earn a real dollar.
oops, real dollar?
anyway, you get my drift
I’m unclear on whether he’s asking the reader or himself the question about what will happen to the kids. I’d suggest the kids will live in an apartment while their father: 1) gets fixed, and 2) takes a remedial math class. I’m wondering if this guy paid any more than a rental rate for this house before the reset?
I saw this stupid show( or at least 5 minutes of it) the other night. It was on HGTV and there was a college grad looking to buy a condo in Downtown Nashville. She was ” In a time crunch because if she didn’t find something soon… she might have to rent.”
I swear to god. People seem to make such stupid decisions in a hurried manner when it comes to paying off a house that will take the rest of your life to accomplish. The same goes for people with kids, who for some reason automatically assume that a house= happy children.
Well look at this idiot. This house will sell for $180-190K absolute max but the stupid flipper selling it thinks he gets a 100K premium because it’s on tv for 5 seconds.
http://dallas.craigslist.org/rfs/535300220.html
That nighttime picture really oughta draw the buyers in.
Your chance to be a part of Dallas television history!
“3/1/1 1425 Square Feet.”
That house is worth $100k and I am being generous. Looking at the MLS shows comps at $100k asking price for this size house.
Act in haste, repent in leisure.
Vasectomies don’t cost 3 grand, so he should get it done and put the balance of his payment towards a security deposit.
Stories like this…
Ralston’s Purina’s “Politician Chow”
With that income, what are they doing with six children to begin with? If they are so concerned for welfare of children, how about not having more than you can afford to provide for. There is no way these people will be able to provide health care, college funds and their own retirement. I just don’t get this total lack of planning beyond the irresponsibility of buying a house.
reminds of the movie Idiocracy
(1) “Agnes Kallon and Bai Turay, a Staten Island couple…have a combined income of $39,000 and six children to support. In 2005 they took out a mortgage for a $412,000 house with a low introductory rate, based on their mortgage broker’s assurance that they would easily be able to refinance when the rate went up.”
“But when their mortgage payment reset to $3,000 a month, far beyond what they can afford, that assurance didn’t hold up. ‘If we lose the house, what will happen to the kids?’ Turay told Reuters. ‘These brokers are profiting from other people’s misery.’”
Federal poverty Level for a household of 8 is $34,570 (equivalent to 1 person with an income of $10,210.) They are at 112.81% of FPL (= $11518 for 1.) They qualify for Food Stamps (up to 150% FPL), they qualify for heating and cooling assistance, and the kids (and probably the adults because they have children) qualify for Medicaid. They qualify for public housing and/or Sec 8 and/or subsidized housing all of which would require them to spend 33% of their income on housing or $1,072.
If they spent 50% of income on the house, that would only be $19,500 a year and it would take over 21 years to pay just the principal – forget real estate taxes, insurance and interest on the loan!
Hope the kids are not as genetically stupid.
And the parents need to STOP breeding!!!!
Oertel = unaccountable, totally without ethics scumbag
“The best response, Rosengren said, is to calculate and accept losses as quickly as possible”
Roger That! Times 50.
“Agnes Kallon and Bai Turay, a Staten Island couple…have a combined income of $39,000 and six children to support. In 2005 they took out a mortgage for a $412,000 house with a low introductory rate, based on their mortgage broker’s assurance that they would easily be able to refinance when the rate went up.”
Okay, you live on Staten Island. You’re combined income is $ 39,000 per year and you have six children. Your gross pay per month is $ 3250. Subtract taxes (at least you have 8 deductions), subtract money needed for food and clothing (kids grow quickly), fuel/transit fare and various other misc. costs. Maybe you have half of that remaining.
I don’t get it. Of course, we have no idea if this couple put any money down. Maybe they did, but still. After I did some “computations”, even using a ridiculously low interest rate, I don’t see how they could afford this property BEFORE the rate reset.
a combined income of $39,000 and six children to support. In 2005 they took out a mortgage for a $412,000 house
39 x 3.5 = 136.5
So they could afford a house in the 136 - 140k range - if they stretched.
Is there any possibility of introducing financial literacy classes into the public school curriculum? Can we look forward to a future where students will be taught a simple home affordability calculation?
Somebody please say yes.
140k shack making 39k? Riiiiight…. Would you? I bought my first shack in 1993 for 90k. Wife and I earned 72k/yr at the time and we were scared $hitless.
Three-and-a-half times income - while fine for a smaller family - is too much of a stretch with 8 mouths to feed IMO. With that size family the multiple should be more like 2x income. Tough to find a house for that price in most areas, but such is the budgetary tradeoff for a large family.
I agree it is too much for this family, I was just offering the “outer limit” of affordability.
So does anyone have an answer to my question…
Can we look forward to kids being taught that home affordability is no greater than a multiple - (on this blog I’ve seen it from 2 to 3.5) - of HH income?
phillygal,
they are not folks who can buy, period. At 39k, they are eligible for section 8, and should be grateful. That will enable them to actually feed 6 kids, and put some cheap clothes on them. Once they decided to go for 6, their other options went out the window. They can ge taxpayer supported health insurance, and possibly food stamps.
Not from the public school system. The public school system was invented as an employee pipeline. It’s barely even that anymore.
If you want kids to learn important things, you have to teach them yourself. If you don’t have any kids to teach, the only one to blame is yourself (unless you’re physically unable to have kids).
More liberal financial life-training isn’t the answer, at some point you just have to bite the bullet and realize that some people just can’t cut it. This is equivalent to saving people by requiring kids to wear helmets while riding their bike, only to live long enough to make another more serious mistake later in life. All of us here made it through our childhoods without helmets for riding our bikes.
Not true. Helmet law was in effect for my childhood.
Not that most kids in my neighborhood paid attention. I wore mine because it was cool; it had stickers.
I don’t know why, there’s something about this particular story that just has me wishing there was a way to save these people from themselves.
You can’t depend on the mortgage brokers, they’re all out for themselves. You can’t depend on your neighbor who fancies himself a Junior McTrump, he’s already on his way to multiple foreclosures. You didn’t have a mama or a daddy who drilled some financial sense into your fool head.
Maybe if somewhere in time a high school teacher had spent a little time on personal finance education, the lesson, dropped like a little seed, would have lain dormant and come into full flower when the time was right - such as when the individual is considering signing his life away to finance a house.
This is the kind of story that gets me. It’s not about ammortization or compound interest or LIBOR. This couple simply had NO IDEA WHATSOEVER how much they could afford to shell out each month on housing. Why anyone thinks that they’ll suddenly be able to pay out twice as much a month for a mortgage as they did on rent is beyond me.
Hi Polly,
Where I went to high school, Business 101 was required in my Freshmen year. The class did teach how to balance a checkbook, how to calculate interest, how to calculate percentage off sales, etc. Don’t know if they still do. Learned a lot, however, still made stupid mistakes.
It’s a little late in the day, but…
I had the same class as SanFranAreaBayGal, but it was sixth grade math - ie the last math class before we started splitting up into college-bound or not. I’m consistently amazed at how little financial literacy people my age seem to have - my ex had never learned how to buy a car, for instance.
Try and calculate how a bank decides how little interest to pay on your deposit account sometime. The class covering that would be 5% mathematics, 80% jargon and definitions, and 15% anti-ethics.
Gee wiz…. You don’t think insurance companies had anything to do with helmet laws do you? Naaaaaah!
All of us here made it through our childhoods without helmets for riding our bikes.
That’s called “survivors’ bias”.
Evolution is the ultimate “Survivor’s Bias”.
Is there any possibility of introducing financial literacy classes into the public school curriculum? Can we look forward to a future where students will be taught a simple home affordability calculation?
Financial literacy would doom the American economy. The wheels of consumer spending rely on a financially ignorant population that acts on emotion, not fiscal responsibility.
sales dropped sharply in recent months, suggesting buyers are waiting for larger price cuts.”
The age old question on who controls the destiny of selling the house, the seller or the buyer. I would put my money on the buyer side.
Taught on the first day of all real estate appraisal courses: “buyers set market value.”
“After seeking a home equity loan, the Sessas walked out with a refinanced mortgage and a second loan through Global Home Loans and Finance in Melville (no longer in business).”
Okay, I give. Why were you ’seeking’ a home equity loan? Oh, to pay the first mortgage that you couldn’t afford.
Okay, I give. Why were you ’seeking’ a home equity loan? Oh, to pay the first mortgage that you couldn’t afford.
Very possible. However, I find an extraordinary amount of dumb people on LI that would pay ridiculously high prices for houses that needed to be fixed up. I had a RE agent try to sell crappy 50 year old house that smelled funky for 450k and say “Don’t worry, you can take a home eqity loan out and fix it up then if you HAVE to sell it, YOU CAN for double the price”
True story
Help me, I’m on Long Island, surrounded by idiots.
Danni, Problem is, long island seems to be exporting all it’s turds and imbeciles.
LOL
Thank God, I hope all hope was lost!
dang!
hope =thought
Agnes Kallon and Bai Turay, a Staten Island couple…have a combined income of $39,000 and six children to support.
Sheesh, that’s a red flag right there.
“In June, Oertel agreed to rent the house to Maria Simmons and her family for $1,300 a month. By then, he was already three months’ behind on the mortgage. But he said nothing to his new tenants.”
Guys like this deserve an especially hot corner of hell, IMHO.
Somehow, I just get a picture of old flattop,
come groovin’ up slowly, with this guy Oertel.
Think the lyrics from the radio sum it up:
“He got hair down to his knee
Got to be a joker he just do what he please…
He bag production he got walrus gumboot…
Hold you in his armchair you can feel his disease”
Sessas sue subprime slime, by the seashore.
“Kari and Keith Sessa in 2002 achieved their version of the American dream when they bought the Huntington cape she lived in as child. They’re now among the thousands facing an American nightmare and deciding whether to sue.”
“After seeking a home equity loan, the Sessas walked out with a refinanced mortgage and a second loan through Global Home Loans and Finance in Melville (no longer in business).”
“She said her lawyer said that it doesn’t make sense to sue the mortgage holder, unless they face foreclosure. The fact that the firm that arranged the mortgage is gone makes legal action tougher.”
“While the Sessas’ mortgage holder agreed not to jack up rates for two years, they still haven’t agreed to turn it into a 30-year, fixed-rate mortgage. ‘It’s stalling foreclosure,’ Sessa said. ‘That’s all that’s doing.’”
While the Sessas’ mortgage holder agreed not to jack up rates for two years, they still haven’t agreed to turn it into a 30-year, fixed-rate mortgage. “It’s stalling foreclosure,” Sessa said. “That’s all that’s doing.”
I think I missed something - is there some sort of legal requirement or obligation for the mortgage holder to turn their mortgage into a 30 year fixed?
If they could afford a 30 year fixed, they could presumably go out and get one from another lender.
‘It’s stalling foreclosure,’ Sessa said. ‘That’s all that’s doing.’”
That’s not all it’s doing. It’s delaying further writedowns for the bank and keeping payments coming in for another couple of years.
Reply to :by Bye FL ( from yesterday)
Sorry this seems to be a bit off-topic, but I wanted to give you some more info regarding TN since I’m a native from there. After hearing what you seem to be looking for, which is a lower crime rate, more affordable housing, and so on, One area that you might want to look into if you haven’t exhausted your search in TN is the Cumberland Plateau region. This is towards the middle of the state and includes cities like Sweetwater, Crossville, Cookeville, and a few others. The region stretches up towards the KY border and also includes Big South Fork National park. The area is less populated than the rest of the state. But the towns are big enough to be self supporting. Prices are definitely a lot cheaper, but there is a retirement golf community near Crossville, so that might have an affect on prices.
Secondly, you might also consider KY. It is one of the few states in the Southeast that hasn’t been deemed as takeover land from outsiders ( yet) and as a result, you can still get way more bang for your buck. That and there’s only about 4 million people in the whole state. So you would have all the open space you could care for.
As far as crime goes, well I grew up in the sticks outside of Knoxville and there wasn’t much crime to speak of. We probably had 30k worth of equipment that sat under an unenclosed shed with the keys in the ignition and we never worried about it, let alone lock the doors on our cars, etc.
Hope that helps you.
Thanks! Did you also post replies in other threads that I haven’t read yet?
Ill have to give Kentucky another look. Alot of people are recommending Pittsburgh. Maybe I can get my brother to relocate there, it’s a big city with lots of opporunities for lawyers. It would be nice to live by my brother and theres a good selection of houses for under $100k, making it easy for my brother and I to afford one.
Might have a house for sell in Sweetwater for you…
Err.. for “sale”… sorry.
Yes, Kentucky. 4 million citizens, 7 last names.
Just kidding, I was stationed in Kentucky when in the army. There are (at were, this was a long time ago) some nice smaller towns that’d certainly be worth looking at.
“Oertel said he did nothing wrong. Seated in his SUV outside his duplex, cell phone in hand, he described himself as someone who was simply trying to preserve his investments in a market fraught with risk.”
Is the SUV his mobile office ?
“Landlord Charles Oertel owned 10 rental properties around East Providence. Oertel said that he and his business partner, William Shawn Prunty, built their real-estate portfolio with risky subprime loans.”
This guy had a real problem getting and keeping tenants. In his short career as a landlord, he had two sets of tenants leave without paying a total of 9 months rent. (according to article)
Is this the norm now? Are tenants more likely to skip?
You have to screen tenants VERY carefully. I learned this from watching my former landlady get burned by more than one set of no-good tenants. The (very lengthy) book by Leigh Robinson called Landlording discusses tenant screening in great detail.
Slim, I’m just wondering if this is a new development.
I stopped landlording about seven years ago. In twelve yrs. of owning rentals, I had a grand total of 3 evictions, and one was due to the tenant vacating due to a drug bust. (I didn’t choose that tenant - my partner did!) I ended up getting the remaining rent owed from the jailbird’s brother.
Legal proceedings began and ended quickly against the two who were no-pays. We lost a total of six months’ rent on them.
I’m interested in hearing your landlady’s bad tenant story, if it happened recently.
Well, let’s see…
She had (and I think still has) a house in Scottsdale that was torn apart by two different sets of tenants. She took one set to Small Claims Court, won a judgment, but wasn’t able to collect. Seems that the lovely ex-tenants were frequent job-changers, so garnishing the wages wasn’t an option.
She also had one of her Tucson houses torn apart. In addition, she rented that very same house to the daughter of someone we both knew. You know, one of those friendly coworkers at the office. Turns out that this gal’s daughter and boyfriend were two of the biggest deadbeats in Tucson.
She also had a number of slow-paying tenants.
‘Landlording’ convinced me not to buy a four flat.
If I ever get into that game again, it would be a duplex with me occupying one of the units. (We had 21 apts and one SFR that went into a lease/purchase with tenant.)
I don’t know if it was dumb beginners’ luck, but overall we didn’t have too many problems. We did keep the rents low for the area, and most of our tenants were longtimers who knew a good thing and didn’t want to mess it up.
I will read “Landlording”, though. Maybe it will stop me from doing something stupid!
Is this the norm now? Are tenants more likely to skip?
No, it has always been this way and that is why you need to do credit and background checks and take large deposits.
7 yrs ago.
I got tenants with good credit. Even visited with them after they moved in.
Skipped with no notice, just went by house day after christmas and found doors open.
Didn’t get a dime for those 3 months,
went to property mgmnt co.
In the New Amerika, “wrong” is defined as “getting caught.”
Cat ethics rather than dog ethics.
My dad used to be a landlord to 21 apartments. He has his share of stories of bad tenants who didn’t pay, were late, did drugs and some even vandalized their apartments. Holes in walls, clogged toilets and sinks, grifitti, stolen doorknobs, etc.
No point being a landlord, too many stupid people. Those same idiots who got foreclosed are going to get evicted from renting. Your money is better off in funds.
“Now subprime and other ‘exotic’ loans have all but disappeared because lenders - pummeled by rising foreclosures - pulled back. Just before Melissa Talbot and husband Aaron, put in a bid on a condo in October, their bank canceled the no-money-down program they were planning to use. They ended up borrowing from their retirement funds and going with a lender requiring a 5 percent down payment.”
“Since they moved in, the lender stopped offering that program, too. ‘I’m really glad we were able to buy when we did, because I’m not sure we could afford it now,’ said Melissa Talbot.”
Great. Another family that taxpayers will have to support when they get old because they blew their retirement savings on a condo.
Agnes Kallon and Bai Turay, a Staten Island couple…have a combined income of $39,000 and six children to support. In 2005 they took out a mortgage for a $412,000 house with a low introductory rate, based on their mortgage broker’s assurance that they would easily be able to refinance when the rate went up.”
Without trying to be rude, but these people shouldn’t have reproduced. 6 more stupid kids in this world. Common sense should have said that this purchase was a stupid idea and that they should have thought “I can’t afford this”.
Have you seen the promo clip for that movie called Idiocracy? Sums up this very problem.
I love that movie. It is very funny, and yet a sad documentary. The first part alone sums up the future of humanity, IMHO.
Christ, if my wife & I only made that much we would think about a SECOND child and think “we can’t afford this.”
At that level in the Staten Island area, you can’t afford yourself let alone a single child.
“Agnes Kallon and Bai Turay, a Staten Island couple…have a combined income of $39,000 and six children to support. In 2005 they took out a mortgage for a $412,000 house with a low introductory rate, based on their mortgage broker’s assurance that they would easily be able to refinance when the rate went up.”
“But when their mortgage payment reset to $3,000 a month, far beyond what they can afford, that assurance didn’t hold up. ‘If we lose the house, what will happen to the kids?’ Turay told Reuters. ‘These brokers are profiting from other people’s misery.’”
_____________________________________________________________
This is beyond stupid, I mean really, how stupid can you get really and still be able to wear lace-up shoes and not need a walking helmet?
Forget small print or having the wool pulled over their eyes, what the hell makes these people think that if the rates go up in two or three years, that they’re going to get AN EVEN BETTER rate than their teaser-rate to refinance into. That’s not having the wool pulled over your eyes, that’s just basic stupidity. If they could barely afford the teaser rates, and then the rates go up, even a new teaser rate if they could find one, would be higher.
These people are barely more functional than a bird that builds a nest in a house heater in late spring that won’t get turned on and used again til september. This is beyond stupid. A lest the bird has an excuse, it’s a bird.
Andy, you are so graceful.
Sometimes simple analogies work the best.
We’ll call this one “The Parable of Chimney Bird Nest.”
Who says they actually have shoes that lace up? Nobody seems to wear those anymore…
Amazing that a whole country of people never made the connection between a (1.) permanent cycle of refinancing to stay afloat, and (2.) the concept of a Ponzi scheme.
And these same people think it’s funny when grandpa keeps pulling quarters out of his grandkids ears. LOL
“Since they moved in, the lender stopped offering that program, too. ‘I’m really glad we were able to buy when we did, because I’m not sure we could afford it now,’ said Melissa Talbot.”
Melissa, we are so glad you took that falling knife for the team. NOT.
Tracyzk is asking for $260,000.”
“‘It’s probably going to be a loss,’ he said
Not probably - It’s definitely going to be a loss.
A big, big loss at that
“Evicting a tenant for nonpayment took up to six months. That was six months with no rental income to pay the mortgage.”
This is the kind of stuff that makes being a landlord really tough. The government is full of crap. If you don’t pay your property taxes they take your property away. If you don’t pay your rent they give you six months free living to find a new place, and the landlord doesn’t get a dime out of the past due rent.
“A house they renovated south of Baltimore’s Ashburton neighborhood has drawn no offers since it went on the market three months ago. The first asking price was $325,000. That dropped to $286,000. Now Tracyzk is asking for $260,000.”
“‘It’s probably going to be a loss,’ he said.”
Here is an instance of what I see as a big part of the problem. These guys renovate a house and add MORE THAN 20% profit in 3 months.
“The Joint Center for Housing Studies at Harvard University noted in its annual survey that a rebound is inevitable, even if the timing is unpredictable.”
Are they saying that a detachment from the historic mean price/income ratio is inevitable? History shows that what deviates from the mean must return to the mean.
“Agnes Kallon and Bai Turay…have a combined income of $39,000 and six children to support. In 2005 they took out a mortgage for a $412,000 house with a low introductory rate…their mortgage payment reset to $3,000 a month, far beyond what they can afford, that assurance didn’t hold up. ‘If we lose the house, what will happen to the kids?’”
Simple. Move to a similar place that you had BEFORE you bought the current house that you can’t really afford. Homeownership is not a right, it is a responsibility. There are no shortcuts to success, just like all of real life.
“life, liberty, and the pursuit of happiness..”
Not, home ownership.
We would all be movie stars that make oodles of $ or rock stars that have all the limos.. where is that in the wording?
“When the boom was going, we thought it was good to make an investment,” said Oertel. “I consider myself a smart person. You listen. You never think it’s going to go down.”
Not as smart as he thought he was, as it turns out.
And the stupidity in the “special” land of Maryland continues. They are really glad the bought the house with a toxic loan because otherwise they couldn’t afford it. Nice… and these people vote?!
1) If you borrowing money from your retirement account to stretch to pay a 5% down payment on an overpriced CONDO in a collapsing real estate market… well, you already “can’t afford it,” nevermind the effects of a toxic loan.
2) The sheeple still don’t understand that toxic loans (along with general greed and stupidity) are what drove prices sky high: without them, prices would be AFFORDABLE!! In short, toxic loans are the OPPOSITE of “affordability products.”
And they never figured out that if they continued renting for a few years and SAVED the extra money that they’re now paying for their mortgage, they’d HAVE a downpayment. Really, saving money isn’t quantum mechanics.
>> “Over the next decade, the report said, the combination of a growing population and rising wealth, ‘will help propel residential spending to new heights.’”
Rising wealth! See this is eastern Massachusetts in a nutshell. They believe they are immune even now, even though they experienced destructive, virulent, extensive economic downturns in past decades.
Harvard has expenses of over 350,000,000 per year to keep the lights on. They may have a $36 bn. endowment, but when grants get cut, and property values come down, and more businesses close their doors, all of their economic might isn’t sufficient to pull an otherwise industry-impoverished state out of the doldrums.
Manufacturing is now practically non-existent. From Brockton to Framingham, Brazilians are leaving the state in droves to go back home, leaving landlords with empty units. The 128 computer industry is over–doesn’t exist any more. It’s pharma companies, and colleges now. Their downtown is going to see massive layoffs in the financial sector. Their state employment conditions are easily the most corrupt in the US, and overstaffed. Retail stores are leaving parts of the central business district as empty looking as central Cleveland.
But it’s Boston; everybody knows that Boston is the Hub of the Universe. The most desirable address. And lower resale prices are out of the question–we’re not giving it away!
What they fail to realize is that 5 years ago, not even half a mile in radius away, most of the housing stock around major universities ware a dilapidated mess.
my grandfather went to Harvard- now it’s all commies- event he GOP there has FREE-er healthcare
In this link “Reuters reports on New York’ there was an interesting comment:
“At the Salvation Army’s Johnson County Family Lodge in Olathe, Kansas, a 10-room transitional family shelter, at least five families on a 50-strong waiting list have lost their homes through foreclosure.
The size of the waiting list is unprecedented in Johnson County, a suburb of Kansas City that is wealthier than most, Laura Flynn, administrator at the shelter told Reuters by telephone. Johnson County has an average income of $68,013 in 2004 compared with $44,334 for the rest of the United States.
While some people are able to stay with family or find a place to rent after their homes are foreclosed, for others that is not an option, Flynn said. “If you get so far behind with your payments that you get foreclosed on, most landlords are not going to rent to you,” she said. Many families on the waiting list are living in their cars, she added.”
Sounds like renting after foreclosure is getting harder for FBs. Probably landlords are having a much greater number of possible tenants from which to choose as:
(1) Some prospective buyers got smart and decided to wait and save the difference between rent and mortgage (okay….not all that many of the lemmings but some); or
(2) Some prospective buyers found out they can’t get a mortgage until they save up money for a downpayment but have the income to easily afford the rent (which will still be less than the possible mortgage payment)
With potential tenants in those 2 groups, I can see why landlords are turning down the foreclosed FBs. Public housing, subsidized rentals (different from Sec 8, and they run credit checks and are very sticky about it) and Sec 8 usually have waiting lists 3-10 years long - and the lists are typically closed to new applicants. All of those have income limits as well - usually below 200% FPL.
There’s a Section 8-accepting apartment complex within hailing distance of the Arizona Slim Ranch. The owners (and the resident managers they hire) are quite strict about who they rent to. They’re also not afraid to evict the bad apples.
And, lemme tell you, although I am very sensitive to noise, that complex has NEVER disturbed a moment of my peace. Ever.
When I read this:
“Agnes Kallon and Bai Turay, a Staten Island couple…have a combined income of $39,000 and six children to support. In 2005 they took out a mortgage for a $412,000 house with a low introductory rate, based on their mortgage broker’s assurance that they would easily be able to refinance when the rate went up.”
I momentarily channeled Janice from Friends — “Oh, MY GOD!”
sevenofnine,
Is your name from a character on Star Trek Voyager?
How’s that new bottomless downside risk protection insurance program working out? And whose fault is it that the market is overly focused on Central Bank actions??? The Fed is falling victim to the rational expectations of its own creation.
BULLETIN
FED’S MISHKIN: MARKET OVERLY FOCUSED ON CENTRAL BANK’S ACTIONS
BOND REPORT
Treasurys mostly lower as Bernanke signals rate cuts
By Nick Godt, MarketWatch
Last update: 4:30 p.m. EST Jan. 10, 2008
NEW YORK (MarketWatch) — Treasurys turned mostly lower Thursday, with short-term bonds getting a lift while long-term bonds fell on inflation concerns after Federal Reserve Chairman Ben Bernanke hinted at more rate cuts ahead in a speech.
A rally in stocks and selling in bonds accelerated in afternoon trade after The Wall Street Journal reported that Bank of America (BAC: 38.85 -0.45 -1.15% 12:33pm 01/11/2008) is in talks to buy Countrywide Financial (CFC: 6.51 -1.24 -16.00% 12:33pm 01/11/2008).
Shares on Wall Street rallied, removing the safe haven for bonds, with the Dow Jones Industrial Average ($INDU:12,690.11 -162.98 -1.27% 12:53pm 01/11/2008) closing up 177.78 points to 12,853.09.
The benchmark 10-year Treasury bond was down 17/32 at 102 30/32, yielding 3.887% ($TNX: 38.32 = 3.832% -0.55 -1.41% 12:52pm 01/11/2008) .
The 2-year note, which rises along with expectations for cuts in interest rates, was up 1/32 at 101 2/32, yielding 2.7%. The 30-year bond, which falls when inflation expectations rise, slid 1 24/32 to 109 3/32, yielding 4.445% ($TYX: 44.28 = 4.428% -0.16-0.36% 12:47pm 01/11/2008).
In remarks released earlier than originally planned, Bernanke telegraphed that more rate cuts are on the way.
“In light of recent changes in the outlook for and the risks to growth, additional policy easing may be necessary,” Bernanke said in a speech to a business group in Washington.
Bernanke said the central bankers “stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.”
http://www.marketwatch.com/news/story/treasurys-mostly-lower-bernanke-signals/story.aspx?guid=%7BEDD70DA9%2D39E5%2D4B01%2D9DB9%2D2058DBED4185%7D&dist=TQP_Mod_mktwN
What Bernanke’s doing is hilarious. He knows that a rate cut would be destructive to the greater economy outside of Wall Street.
Simply telegraphing that the central bank stands ready to ease rates is good enough to send the Dow up 150 points. The monkeys were well trained to press the lever and take the treat.
Just saying they’re prepared to act may not work next time, but this time it limited the Dow’s two-day decline to -100 points.
Paradigm shift hits l-t T-bond yields. No worries now about Moody’s threat to downgrade.
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=TYX&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=1&freq=9&startdate=&enddate=&hiddenTrue=&comp=tnx&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
Im so glad Baltimore is tanking. What a crappy town.
Say what you will about Baltimore, but where else will you find the Night of 100 Elvises?
For those interested in the Suffolk County, NY market, the December 2007 numbers are out. The Newday article, quoted above, botched the data, IMO.
A story on statistics shouldn’t begin with a Carl Sagan lead [billions and billions], at least not if you people to understand what’s going on. Another problem with MLS data is that it combines Queens, Nassau and Suffolk counties, which are 3 distinct markets. Also, the reporter didn’t quote any long-term historical comparisons, which are easy enough to attain. I have 11 years of data in my office, which I got with a phone call.
The biggest news, especially in Suffolk, is the increasing inventory and dropping transactions, a combination that we have seen precedes big price drops.
Here are some of my calculations for Suffolk County:
– The number of residential listings on the market, 12,425, is the highest in the past 11 years [1997-2007]. This represents a 9% increase in inventory over the same month last year.
– The number of closings, 728, represents a 28% decrease from last December’s total of 1,018.
– The 20 months of inventory also represents the highest in the last 11 years. This represents a 50% increase in months of inventory over the same month last year.
– The median price of $385,000 represents a 3% decrease from the same month last year, and a 4% decrease from the December 2005 peak.