Skimming Along The Bottom
Some housing bubble news from Wall Street and Washington. Reuters, “D.R. Horton Inc, the largest U.S. home builder, posted a wider first-quarter loss on Thursday, as sales fell by more than a third and new orders dropped 61 percent, reflecting the depressed U.S. housing market. Markets such as California, Las Vegas and Arizona, where builders once couldn’t get enough land to fill demand, are now stone cold and weigh on the balance sheets of the companies.”
“‘I don’t see a recovering California in the next 12 months,’ Donald Tomnitz, D.R. Horton’s CEO, said on an analysts’ conference call.”
“The results included land impairment and write-off charges totaling $245.5 million.”
From CNN Money. “Donald R. Horton, Chairman of the Board, said, ‘Market conditions remained challenging in our December quarter as inventory levels of both new and existing homes remained high while pricing remained very competitive. Lending standards continue to be more restrictive than during the previous year, and buyers continued to approach the home buying decision cautiously. We expect the housing environment to remain challenging.’”
“The Company’s cancellation rate (cancelled sales orders divided by gross sales orders) for the first quarter of fiscal 2008 was 44%.”
The Associated Press. “MDC Holdings Inc. said Thursday its fourth-quarter loss widened as the housing market slump deepened. The Denver company reported a loss of $281.1 million, or $6.14 per share. The result included charges of $175.2 million for asset impairments, $7.8 million for write-offs (and) $13.8 million on land sales.”
“Revenue dropped 42 percent. Average selling price dropped 9.7 percent. Closings fell 39 percent.”
“The company’s operating loss in the West _ one of the hardest-hit regions where home prices plummeted in Arizona, Nevada and California, ballooned to $159.3 million. MDC swung to a loss in its Mountain and East regions as well, as sales swooned across the nation.”
“Paris G. Reece III, MDC’s chief financial officer, said, ‘As has been the case in each of the last four quarters, the impairments this quarter primarily occurred in our West homebuilding segment, with more than 75% applicable to subdivisions in our Arizona, Nevada and California markets. Over the last six quarters, we have impaired approximately 60% of the 15,000 lots we owned at the end of our 2007 fourth quarter.’”
“Reece continued, ‘Of the $727 million impairment charge we took during 2007, $556 million related to our land inventory, which decreased by almost 65% year-over-year. In our West segment, where 80% of the impairments in 2007 occurred, land inventory decreased by more than 75% during the year. California’s land balance alone dropped by more than 90% in 2007, and most of the remaining $35 million of land is being held for sale to third-party developers or investors.’”
From MarketWatch. “M/I Homes Inc.’s fourth-quarter loss widened to $68.5 million, due to various charges totaling. Results from the latest quarter included land-related impairment and abandonment charges of $104.9 million, joint venture investment write-offs of $4.3 million and severance costs of $3.1 million, M/I Homes said Thursday.”
“Pending sales of previously owned homes fell a steeper-than-expected 1.5 percent in December, pointing to more dreary conditions for the beleaguered housing market, a real estate trade group report on Thursday showed.”
“The National Association of Realtors Pending Home Sales Index, based on contracts signed in December, a key gauge of future home sales activity, dropped to 85.9 from 87.2.”
“In a fresh sign that the nation’s housing crisis will worsen, home prices are likely to decline in 2008 for the second straight year, the NAR said Thursday.”
“The Realtors, in its monthly economic and sales outlook, is forecasting a 1.2% drop in prices of existing homes sold this year. Only a month ago, the association was forecasting that prices would be flat in 2008 and that the home market would rebound in the last half of the year.”
“The group was forecasting that the first quarter would see a record 5.3% drop from year ago levels. Now it’s expecting the current quarter to see even a larger decline in prices of 6.1%.”
“The group is also forecasting a 4.8% decline in the number of existing homes sold this year. A month ago it was still forecasting a 0.9% pickup in the sales. Existing home sales plunged 12.8% in 2007, according to the group’s figures.”
“‘We’re seeing a pattern that is consistent with skimming along the bottom of the cycle, and sales could ease modestly,’ said Lawrence Yun, the group’s chief economist, in a statement.”
“The Pending Home Sales Index fell 1.5% to 85.9. That was better than only the record low of 85.5 set in August.”
“The Realtors have been recently lowering their price and sales forecasts with each monthly update. The group still has a more bullish view of the market than other outside forecasts.”
From Realty Check. “In their never-ending quest to put a positive spin on the housing market, the Realtors today changed the way they report their annual housing forecast.”
“Usually, they just put the current year’s predictions of sales and prices and then the following year’s predictions.”
“This month they divided the current year into two parts, saying that existing home sales would run at an annual rate of 4.9 million units and then rise ‘notably’ to 5.8 million units.”
“This prediction is based on an assumption that Congress, as part of the stimulus package, will raise the GSE loan limits.”
“The increased share of housing debt taken on by Freddie Mac and Fannie Mae during the housing slump has put the two government sponsored enterprises at risk, it was charged Thursday.”
“The two outfits are ‘reducing risks in the market, but concentrating mortgage risks on themselves. These risks are beginning to take their toll,’ said James Lockhart, director of the Office of Federal Housing Enterprise Oversight, which regulates Fannie and Freddie.”
“The two government sponsored entities (GSEs) saw the housing debt they and the Federal Home Loan Banks carry grow by 16 percent to $6.3 trillion, more than the total public debt of the United States, according to Lockhart.”
“‘The conforming market supported by Freddie Mac and Fannie Mae is the only well-functioning segment of the mortgage market,’ said Richard Syron, CEO of Freddie Mac. ‘We’re experiencing greater losses as house prices decline, but that is not surprising since this is the market we were created to support it.’”
“And Daniel Mudd, Fannie’s CEO agreed. ‘Our business is meeting the increased demand for liquidity and our overall credit book has held up relatively well,’ he said. ‘Yes, these are tough times, but that is when you want a Fannie Mae.’”
“‘[GSEs] have become the system for secondary mortgages,’ said Senator Richard Shelby, and that creates a risk to the general economy.”
“Democrats sought to expand the role of Fannie Mae and Freddie Mac in affordable housing and the subprime market on Thursday as a proposed increase in the companies’ conforming loan limit ignited some protest from Republicans.”
“Congress is considering allowing Fannie and Freddie to buy bigger loans as part of an economic stimulus package. The idea drew fire from Richard Shelby, the committee’s top Republican.”
“‘Once again, instead of thinking of ways to further protect the American taxpayer, we are actually considering ways to further expose them for the benefit of those making healthy six-figure salaries,’ Shelby said Thursday.”
“Exelon Corp., one of the largest U.S. power companies, disclosed Thursday it owns securities backed by subprime mortgages in the company’s investment trusts.”
“The falling value of these investments could require Exelon to contribute additional funding to the trusts, which support the company’s pension plan and the future cost of shutting down nuclear power plants, Exelon said.”
“The disclosure, contained in Exelon’s 2007 report to the Securities and Exchange Commission, highlights how widely subprime investments sold by Wall Street banks have found their way into global investment pools.”
“‘Due to recent market developments, including a series of rating agency downgrades of subprime U.S. mortgage- elated assets, the fair value of these subprime-related investments may decline,’ Exelon said.”
“A review by Moody’s Investors Service of the top ratings of bond insurers is taking time because ‘we’re taking a great deal of care to get the answer right,’ Moody’s Chief Credit Officer Andrew Kimball said on Thursday.”
“Ratings agencies are under fire for failing to signal risks in mortgage-backed securities and in structured deals that include them, which had previously been considered very safe and in many cases held top ‘AAA’ ratings.”
“Kimball added that there is ‘hysteria’ in the markets over the expected cumulative losses from subprime residential mortgages, but at the end of the day no-one really knows how large they will be, saying ‘it’s a crapshoot,’ he told a conference organized by the New York Society of Security Analysts.”
“Kimball said that rating agencies, like markets, have been susceptible to ‘group think,’ and ‘fashionable think.’”
“Had the rating agency stepped back from its analytical models and looked at residential mortgage backed securities with its gut feeling, it may have been better able to predict the market downfall, he added.”
“‘I have to believe we could have done better,’ he said.”
“The woes in the U.S. financial sector are ‘poetic justice’ for bankers who designed and sold complex investments that have since gone sour, billionaire investor Warren Buffett said.”
“Buffett appeared to see irony in the fact that many of the banks who marketed complex investments which have now crashed are bearing much of the fallout.”
“‘It’s sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end,’ he said.”
“He added: ‘What has happened is a repricing of risk and an unavailability of what I might call ‘dumb money,’ of which there was plenty around a year ago.’”
From Bloomberg. “The estimated 1 million homeowners with $500 billion of option ARMs are beyond the help of interest-rate cuts by Federal Reserve Chairman Ben S. Bernanke. While subprime borrowers face an average increase of 8 percent or less when their adjustable-rate mortgages reset, option ARM homeowners may see their monthly payments double after their adjustments kick in.”
“‘We call them neutron loans because they’re like a neutron bomb,’ said Brock Davis, a broker with U.S. Express Mortgage Corp. in Las Vegas. ‘Three years later the house is still there and the people are gone.’”
“Once option ARM borrowers’ loan balances reach a predetermined limit, called a negative amortization cap, usually 110 percent to 120 percent of the mortgage amount, their payment rates immediately increase.”
“‘These could be called long-fuse, exploding ARMs,’ said Kathleen Keest, former assistant Iowa attorney general. ‘I’ve heard people say they are the most complicated product ever offered to consumers. They are the real liar loans.’”
“The loans accounted for 8.9 percent of the almost $3 trillion in U.S. home loans made in 2006, up from 8.3 percent in 2005, according to Inside Mortgage Finance.”
“One in five option ARMs packaged into bonds last year covered more than 90 percent of the home’s value and required no proof of a borrower’s income, according to UBS AG, Europe’s largest bank by assets. Two percent required no down payment at all from the borrower, the analysts said.”
“Delinquency rates on option ARMs tend to be low in the early years, misleading some investors to think they will remain safe, said Sean Kirk, a debt trader at Seaport Group LLC.”
“Sophisticated borrowers can take out option ARMs and avoid problems, said Ira Rheingold, executive director of the National Association of Consumer Advocates. It’s just that mortgage sellers marketed them to people who didn’t understand the terms and couldn’t afford them, he said.”
“‘It was used to cheat people,’ Rheingold said. ‘It helped artificially keep housing prices higher than they should have been.’”
“Joe Ripplinger took out a $184,000 mortgage in 2006 and makes his payments every month. Now he owes $192,000.”
“The 66-year-old Minneapolis house painter has a payment- option adjustable-rate mortgage. It allows him to write a check for $565 a month even though he owes $1,300. The difference is added to the mortgage, and when his total debt reaches $212,000, or after five years have passed, he said his monthly minimum could jump to about $2,800, which he can’t afford.”
“‘We’re barely making it right now,’ Ripplinger said. ‘I never heard of a payment-option ARM before. We thought they were putting us on a 30-year fixed.’”
“Andrew Laperriere, managing director of (a) New York-based research firm, estimates that 85 percent of option ARM borrowers owe more than their original loan balance. ‘The problem is, you can refinance an option ARM to a 30- year conventional loan at a 5.5 percent interest rate, and you’re still looking at your payment going up 150 percent,’ Laperriere said. ‘That’s pretty ugly.’”
“About $460 billion of adjustable-rate mortgages are scheduled to reset this year, with the next spike in resets coming in 2011, when $420 billion in mortgages will adjust to new interest rates for the first time, according to New York-based analysts at Citigroup Inc.”
“That’s the year that Joe Ripplinger’s interest rate will jump, provided he doesn’t reach his negative amortization cap before then. ‘It’s the worst thing we could have done,’ he said.”
“‘[GSEs] have become the system for secondary mortgages,’ said Senator Richard Shelby, and that creates a risk to the general economy.”
Ahem, the reason the federal government created Fannie and Freddie was to create a secondary mortgage market, which had previously not existed. They were later privatized. The private issuance of mortgage-backed bonds has not gone over well. But now the crap is gone.
The risk is that Fannie and Freddie will go under too, eliminating access to normal mortgages. Should they be bailed out? No. The federal government should just create new ones, with reasonable requirements for purchased loans. It did it once. It can do it again.
A lot of stuff gets passed over with the GSEs in the media. They have trillions in hedges with some of the biggest, most solid firms in the world. Not all their loans will go bad. They have a lot of collateral they can sell off. They are giant, greedy, self-serving corporations stuffed with political cronies.
Oh, and Shelby, it’s 7 figure incomes. And you have had an opportunity to put and end to this taxpayer nonsense without even passing a law. You still do.
Shelby’s a cobra, as in snake-in-the-grass.
Of course he’s a snake, he’s pointing out that raising the limit only helps very high income borrowers….precisely the opposite of the alleged “mission” of GSEs.
On behalf of reptiles everywhere and the fine Shelby Cobra automobile, I must protest that remark, and any implied association with sleazy politicians.
Hard to tell exactly who the cold-blooded ones are, nowadays…
I think his “6 figure income” remark is directed at the people that will be able to qualify for loans above $400K.
Up the GSE limit from $400K to above $700K, and the only extra people getting benefit are people that can qualify for the higher liit loans… people with 6 figure incomes.
I don’t think he was talking about employees or stock holders of Freddie and Fannie.
One thing I’m rather curious about is exactly how many people like myself were fairly pro-democratic presidential candidate before both Obama and Hillary started pumping the “save the homeowners” crap. Their comments totally turned me off enough to have 2nd thoughts in regards to voting for them.
I don’t particularly like John McCain, and maybe it’s just his general aloofness towards economic matters, but he’s about the only one of the candidates whose policy, as far as I can tell, will to be let ‘er burn and hang the Wall Street securitizers upside down by their unmentionables.
Here’s one, jetty.
But I’m hoping they’re both just full of crap and blabbering about bailouts to get votes, and secretly know there’s nothing to be done. Because, of course, there really is nothing to be done. Like finding a giant muddy mastodon in the backyard and getting a lemon-scented towelette packet out of your purse to dab around its ears with, and it’s the only packet you’ve got in there, and the mastodon is meanwhile trampling up and down all over your shrubs wrathfully and trumpeting through his giant nose. It’s just like that.
Oh, my heavens, did I hear what I just said? What is wrong here, that I hope presidential candidates are just devious and vote-grubbing, instead of sincerely stupid?
Also, are mastodons really extinct? I forget.
jetson, had that same thought, but for me the obvious other choice is a no starter PERIOD. McC? no way.
AND it all depends on who they pick as their Vps, look at Darth now. Do we want another IF one of them goes to the great beyond?
What they all say now, is , just Now.
Ron Paul tried the honesty route, and it was a one-way ticket to Palookaville for him.
Yeah, I’m a very liberal Dem but this bailout rhetoric makes me vomit. This is going to be too far down the road to do anything meaningful by next January though, at least that’s my hope.
http://rabbit-hole-journey.blogspot.com/2007/11/campaign-contributors-of-media-anointed.html
Obamba, McCain, Hillary - they’re all cardboard cutouts for the Wall Street plutocrats who bought and paid for them.
Maybe honesty and integrity didn’t get Ron Paul anywhere, but that’s a reflection on the herd creatures called the American sheeple, not Dr. Paul.
Considering the way Beranke & Co. are cranking up the printing presses and flooding us with helicopter money, pretty soon we’ll all have seven-figure incomes - kind of like they did in the Weimar Republic, circa 1923.
why do it again ?
no bail, no more big gov sht
no fed gov programs work
0 ,nada,zip
I wish we could just get rid of the GSEs altogether. It makes no sense to create agencies designed to prevent house prices from going “too low”, while the unspoken agreement is that house prices can never be “too high”. Of course, they were instituted during a time of extreme bank stingyness, and were never really intended to kick in during these “hard times” (when banks are demanding 5% down and pulling 5.5% interest).
If the GSEs helped to cause the boom, then by reason of default, they also helped to cause the crash. We should eschew any agency that has been proven to cause economic crashes (even if those crashes were preceded by high-flying euphoria).
Moodys beginning bond insurer downgrades. XL Capital Cut. Others falling fast in after hours trading. This will get ugly.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aa43omPcLC1M&refer=home#
“In a fresh sign that the nation’s housing crisis will worsen, home prices are likely to decline in 2008 for the second straight year, the NAR said Thursday.”
Not true, Not true! My wife and I looked at a house two days ago and the ‘Real Estate Counselor’ splained to us that rates are as low as they will go and come spring the buyers will be out en mass, so better buy now! I said, bye now.
P.S. Our foreclosures & BK’s are creeping up here in the midlands of S.C.
Cramer said so too… The Fed needs to lower interest rates to 1.5% or below to force people to buy MBS to reignight the housing market to get house price appreciation.
House price appreciation cures all ills.
So what is prices are still way above cost of buying…. So what is prices are crazy high…. So what if it will just cause a bigger bubble that will crash harder at some point in the future.
Moron!!!!
He needs to wake up and realize that the root of all probelm is the consumer. The consumer has too much debt for their income. They either need half their debt to go away, or then need their income to double.
Now you sad clown… figure out how you are going to fix the CORE problem and keep it from coming back. Lower fed rates will NOT fix the debt/income ratio!
Very simple Mr Cramer, you have $5 dollars in your pocket you are hungry you go and order a happy meal for awhile you are satisfied, but if you have no money in your pocket try and get a happy meal by telling the kid behind the counter the Fed rate is 1.5%?
Jeeze man… With rates at 1.5% the liquidity will be flowing so fast and deep that anyone will be able to get a $1 million loan.. no job, no assets, no income.
Who needs a job to make $5 for a happy mill if you can borrow as much money as you want, and then just roll it over.
Did I really type happy mill????? I SOOO need to get some more sleep. Of course I kno it is spelled meal.
Why doesn’t Cramer run out and buy a bunch more houses, and top annoying the rest of us?
I got a kick out of this:
“About $460 billion of adjustable-rate mortgages are scheduled to reset this year, with the next spike in resets coming in 2011, when $420 billion in mortgages will adjust to new interest rates for the first time, according to New York-based analysts at Citigroup Inc.”
Who invents these number out of thin air? The real adjustable figures are in the trillions, not billions, and the resets should the current subprime mess look like fun. According to the NYT two days ago, 34 million U.S. households refinanced to extract make-believe equity, WHICH THEY SPENT, and there is no way hundreds of billions will patch this rip in the baloon. Citygroup Inc. is full of it, as usual.
Isn’t Cramer a drug addict?
Nope, that’s Kudlow, smokin crack out a stripper’s crack in the back of his Gangstalade…
lol.
But… but… real estate only goes up!
Prices will decline nationally through 2009. These predictions of a recovery just around the corner make me laugh. The company I work for is quietly opening new buildings, even campuses, in ‘non-bubble’ areas as that is where the young ‘non-homeowners’ want to start out. I thought they’d do a big move… instead they’ll do six to twelve ~1,000 person moves that attract no headlines. Cest la vie.
Got popcorn?
Neil
So is that a hit to So Cal area? Is the co leaving anything behind?
Anything in Savannah?
Or where would you keep your eye trained on?
Mark to Modestly
“‘We’re seeing a pattern that is consistent with skimming along the bottom of the cycle, and sales could ease modestly,’ said Lawrence Yun, the group’s chief economist, in a statement.”
“We’re seeing a pattern that is consistent with skimming along an iceberg.” Said Lawrence Yun, captain of the Titanic.
I think it’s more like one of those turds that can’t decide whether to float or sink — we all know the kind I’m talking about — so it just kind of hovers there.
Don’t these people get tired of being wrong?
Note to Larry Yun:
Read here for a few days. Then you can make your comments from an informed perspective. Sheesh…a few more comments like that and someone might think you are a shill or something.
Although, I have not grown tired about being right about this bubble. Much of my extended family is now seeing the light.
I guess there is some comfort in consistency.
Sheesh…a few more comments like that and someone might think you are a shill or something.
Or perhaps even a retard!
lol
Reply got eaten. Try again:
“The Realtors, in its monthly economic and sales outlook, is forecasting a 1.2% drop in prices of existing homes sold this year.”
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Ooops! You made a little typo there, Mr. Yun. It was supposed to read 12.0%
Doesn’t matter too much really. You’ve already lost all credibility anyway.
Whatever became of the late departed “Flyover Larry” model?
since some deals are 50% off the modesty means you see the top half and the bottom half is covered ?
The NAR needs an official theme song to go with its spokespeople. My nomination is “Send in the Clowns.”
Kool-aids still flowing in CNY. Onandaga County median YOY SFH is up 20% in December. Sales up 3% if you believe NYSAR numbers.
What is up with that?????
Maybe they hired a lot of workers to start mining the mercury off the bottom of Onondaga Lake?
As prices start to decline, the young and poor are shut out of the market, as they are no longer being offered 0-down loans, while a few of the relatively rich think that they have a once-in-a-lifetime chance to purchase their dream home. Also, brand-new McMansions are still being sold. So, very few houses are actually selling, but the houses that ARE selling are those that are larger and more expensive than average. This phase of the downturn won’t last long.
“And Daniel Mudd, Fannie’s CEO agreed. ‘Our business is meeting the increased demand for liquidity and our overall credit book has held up relatively well,’ he said. ‘Yes, these are tough times, but that is when you want a Fannie Mae.’”
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“A man has one hundred dollars and you leave him with two dollars, that’s subtraction.”
Mae West
Does anyone know if Deutsche Bank has put up their REO listings on their website? Most other banks have their own page…
Thanks!
“Donald R. Horton, Chairman of the Board, said, ‘…and buyers continued to approach the home buying decision cautiously…’”
Is there any other way I should be approaching the single largest purchase of my life?
And in other news home-buyers continue to approach the cliff cautiously. Few make the jump however…
Anyone buying today is making a huge mistake in bubble areas, where prices remain sky high and overpricing continues to be the order of the day.
Real estate commissions are at stake. They don’t want this told.
I was watching a “flip this house” episode last night. Morons bought 3 condos in L.A. They live in Hollywood, and the condo they were flipping for the show was 2 hours away in Palm Springs. They didn’t even show up at the condo for the first 6 weeks. They then spent 10 more weeks painting, replacing old carpet with tile, new vanities and sinks in the bathrooms, paint and new hardware for kitchen cabnets.
Bought for $140K, planned to put $10K in and sell for $220K. Ended up putting $20K in, including 4 months carrying costs. At the last minute they decided to raise the price to $250K. 3 full price offers.
Walked from closing with a check for $85K. Their other 2 condos that they did even less on each sold for $50K+ gains.
I about crapped myslef, thinking this was a new episode… Wait, this HAS to be from 2004 or 2005. Watched throught the credits for the copyrights. 2005.
ANYONE saying we need to go back to that, is INSANE!!!! How could ANYONE have expected that to continue forever. Idiots with no clue stumble into $85K profit simply be taking 4 months to do a week’s worth of work?????
SOMEONE now has to pay that $85K as a loss. Multiply by millions. There will be TRILLIONS in losses on defaults.
Why are they showing such a out-dated programs of flippers making profits in spite of being A-holes . There ought to be a law against showing out-dated programs that could lead the public to believe a economic outcome could happen . At the very least there should be constant disclaimers in big bold print saying the programing is from 2005. People are dumb . A post came out the other day about some jerk who bought 2 places to flip .
I can just see it now ,”Buy a Foreclosure to flip ,and buy your materials at Home Depot .”
Oh… we’re now getting a load of foreclosure ads in my neck of the woods ( Cali) and they show all these huge homes for 40-50k. Of course in small print it mentions that they’re in middle of nowhere Ohio… whoopee!
Outdated shows, shows not picked up for seasons, it is called a Writers Strike. The PTB at networks/cables are struggling for ANYTHING to put on to satisfy their advertisers. Otherwise, wouldn’t it be nice to see a blank screen and 15 minutes of ads, then blank screen!
Or one long interminable Infomercial after another.LOL gag.
LOL
I saw an episode of “Flip This House” this past weekend and was pretty suspicious of the profit… So I paid attention to the credits at the end of the show. The copyright notice (in tiny print) said 2005.
I glanced at the TV this AM as I was rewinding a tape and saw a http://www.teachmeforeclosure.com — whoa.
Either that or they’re filming in TN and AL. There used to be A LOT of California and Northeast episodes. I suppose the Cali episodes weren’t as spectacular. One episode was for this woman who bought a royal POS in East Nashville, which is an area where you’d better have bars on the windows for 60k. I think she sold it for 90k… which made her 10k. How stupid is that? After taxes, she MIGHT make 6k. Hardly worth it.
Ironic since HGTV is actually from Knoxville, TN.
I have Digital Cable and when I see the “Flip this House” show I instantly click on the “info” button. It shows the year it first came on. I never watch the ones that were made before 2007. If you watch the ones that was made in 2007, all of them were not sold. They either tried to rent it and failed or they moved in. Funny stuff…
It’s all leftover propaganda. Fine Living’s “What You Get for the Money” does the same darn thing. As the people sat in their homes and smugly talked about how much they paid for the house and how much they’ve put into it for x % return, I wonder if they’re still as smug today?
Saw the same show a month or so ago, and did some recall.
The Rain,was my clue, was over 2+ yrs ago.
Right at the tip of everyone paying way to much. Now it is fairly quiet, but Canadians are in town enmasse.
Idaho, Washington, Illinois, Manitoba, Oregon, Minnesota, Missouri, and others have descended and are driving so badly,slowly, or erratically. Hope they buy a house and pull over! lol
WOW! This just was published as a foreclosure today. It goes to auction on March 7.
Talk about trying to make money on a ‘flip.’ They bought it March ‘06. It has been listed for sale since Aug. ‘06.
Here is the MLS listing: http://www.taar.com/mlssearch/
MLS#: 1679497 Price: $2,700,000
Address:
5415 E SUGARBUSH LN
Leland, MI 49654
Township: Leland
County: Leelanau
Loan going into foreclosure is $1,907,990.24 at 8.875% interest,
They started off asking $3,900,000 - down now to $2,700,000.
(And yes, if you load the 2nd and 3rd pictures of the water (Lake Michigan), it really is that beautiful here. The other pictures are of the inner lake that the property backs onto.
Recently, one of the big magazines did a story on these flipper shows. They’re very popular with retarded viewers, even though they’re years out-of-date, and bring in huge advertising revenues from Home Depot and others, so the networks are not only not going to get rid of them, they’re going to increase them.
“Buffett added: ‘What has happened is a repricing of risk and an unavailability of what I might call ‘dumb money,’ of which there was plenty around a year ago.’”
….
Dumb money == cheap money == excess money == devalued money == disrespected money == monopoly money.
This is a pet peave of Buffet’s.
“Buffett appeared to see irony in the fact that many of the banks who marketed complex investments which have now crashed are bearing much of the fallout.”
“‘It’s sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end,’ he said.”
Its only sad it will have such an impact.
Got popcorn?
Neil
My biggest pet peeve is the misspelling of peeve. Wait a minute, I have to go pea, be right back.
“Dumb money == cheap money == excess money == devlued money == disrespected money == monopoly money.”
Vanishing money == less money == more buying power for those who have it.
Speaking of dumb money…I got rid of the Am Ex card with the fee in favor of an Am Ex card without a fee. The new one has a credit limit, because you don’t have to pay it off every month. The woman I talked to warned me that the initial limit would be very low, and I shouldn’t be insulted, and they could raise it in a few months so just be patient. When she told me the limit, it was about 2% of the income I stated to her. When the card finally came, the limit was 20% of the income I stated to her.
Either Am Ex isn’t trying to lower their credit exposure much, or a lot of people who switch cards have terrible credit.
“The Company’s cancellation rate (cancelled sales orders divided by gross sales orders) for the first quarter of fiscal 2008 was 44%.”
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Um, you guys wouldn’t happen to be driving by Horton habitat, and thinking, Would’nt it be fun to pretend to buy a house? No… more likely we have the bottom of the barrel being told it’s a good time to buy, and the financing falling through. You all think?
cheers,
MacAttack
Horton Hears a Who…
“Andrew Laperriere, managing director of (a) New York-based research firm, estimates that 85 percent of option ARM borrowers owe more than their original loan balance.”
If that doesn’t scare the shiatsu out of you, I don’t know what will. Anyone who thinks california will only get away with a 20% drop in house prices is absolutely clueless. For the next few years, we are going to party (and buy houses) like it’s 1999.
I think the article said the percentage of option arms in the US was 8.9, so I googled percentage of option arms for CA and came up with this scary map. I know it’s already been discussed here, but cripes, CA is going to crater big time.
Fun map isn’t it?
50% of interest-only ARMS are in California. That map is ONLY option-ARMS. There are also:
(1) interest-only fixed rate loans
(2) ARM -interest only loans
Neither are negatiely amortizing but both WILL balloon in ti payments that include principal.
Of all jumbo mortgages, as of loans made in 1/07
Fixed rate amortizing (traditional) = 26%
ARM fully amortizing = 4.2%
Interest-only fixed rate = 18.9%
Interest-only ARMS = 34.8%
Option ARMS = 12.3%
The Bloomberg article is only talking about the 1,000,000 properties with the $5,000,000,000 OPTION ARMS.
If those are only 12.3% of the jumbos, how much more is sitting there in the 53.7% of jumbos that are interest-only fixed and ARM without option?
Any further breakdown?
For instance, how many of the interest only ARMs had teaser rates?
It’s the teaser rate situation that is going to bite people. It was an artificially low rate that allowed artificially high prices. Teaser rates are now gone, AND down payments are needed…
Nothing causes stress in the bank account like the doubling of a mortgage payment…
… and now that they have removed the barrier of the 1099 tax, what percentage of the 85% OF MORTGAGE HOLDERS UNDERWATER do you think will walk?
read the article carefully, Wachovia has $ 120 BILLION and Wash Mutual has $ 58 BILLION of this debt on which 85% of borrowers are underwater on.
……..hmmmmm…..
Disaster does not begin to describe what will happen to the housing market or the US dollar or both!
“Andrew Laperriere, managing director of (a) New York-based research firm, estimates that 85 percent of option ARM borrowers owe more than their original loan balance. ‘The problem is, you can refinance an option ARM to a 30- year conventional loan at a 5.5 percent interest rate, and you’re still looking at your payment going up 150 percent,’ Laperriere said. ‘That’s pretty ugly.’”
Oh boy, 85%. Compare this comment to the Credit Suisse chart and it’s lookin’ like 3 more years of “ugly.”
“you can refinance an option ARM to a 30- year conventional loan at a 5.5…..”
Only now you’ll need a downpayment.
You’ll also need to pay those refi closing costs.
I think Slim recommended posting the chart every month or so, so here goes!
http://www.smugmug.com/photos/136440158-O.png
Leigh
I thought it might be 40% underwater, but 85%?
Correction: this might pass “ugly” and “fugly” and go directly to mother fugly.
“The Realtors, in its monthly economic and sales outlook, is forecasting a 1.2% drop in prices of existing homes sold this year.”
========================================================
Ooops! You made a little typo there, Mr. Yun. It was supposed to read 12.0%
Doesn’t matter too much really. You’ve already lost all credibility anyway.
More borrowers walking away.
http://money.cnn.com/2008/02/06/real_estate/walking_away/index.htm?postversi
This should be looked at as a market-based redistribution of income and affordable housing program. Per Fair Issacs, if you stay out of trouble for two years after a foreclosure, your credit is repaired. So save up a downpayment and buy a home at a lower price. The investors and Wall Street take the hit, but they’ve been redistributing income from J6P to themselves for years, so it’s karma.
Just remember on whose side those who want intervention are on. Unless the financial system will collapse, I don’t see a problem. And having existing firms go bust, reorganize, and keep working or get replaced by other organizations is not a collapse.
“‘We call them neutron loans because they’re like a neutron bomb,’ said Brock Davis, a broker with U.S. Express Mortgage Corp. in Las Vegas. ‘Three years later the house is still there and the people are gone.’”
One of the best descriptions I have heard!
Oppenheimer option-ARM?
Oppenheimer had clearance revoked in 1954. Neutron bomb developed in 1958 at LLNL and tested in 1963.
Actually, if I remember correctly, someone had used that term before way back in late-2004-ish (on Ben’s old blog before he got his own domain.)
Of course, it was way too early.
Hah, it’s back in vogue now.
Except that the interior of the house is trashed. Friends had a foreclosure across the street. Water was left on, heat wasn’t. OOPS!
Where I used to live, there was a foreclosure right next door. My landlady bought the property at a courthouse auction, then spent years catching up on repairs and deferred maintenance that the foreclosed owner didn’t do. He was too busy building a property management empire.
The foreclosure was just the start of his empire’s collapse. He also had to sell an apartment complex in order to settle a tax bill with the IRS. A couple of years after that, his property management company closed, and he had to return to his previous career field, property appraisal.
My (now former) landlady reports that he’s still in the appraisal business. And I can’t help thinking that, for a time, he was the best number-hitter in Tucson. He was that kind of guy.
“The 66-year-old Minneapolis house painter has a payment- option adjustable-rate mortgage. It allows him to write a check for $565 a month even though he owes $1,300. The difference is added to the mortgage, and when his total debt reaches $212,000, or after five years have passed, he said his monthly minimum could jump to about $2,800, which he can’t afford.”
“‘We’re barely making it right now,’ Ripplinger said. ‘I never heard of a payment-option ARM before. We thought they were putting us on a 30-year fixed.’”
Dude, 565/mo * 12 months = $6780 per year and a grand total of 203,400 over 30 years. Notice I did not even add interest, just paying principle. And even with 0% interest you still could not pay off that loan in 30 years. You are not fooling anyone. Nobody but nobody thought this was a fixed 30 year loan.
darkmatter,
I was thinking the same thing. (see below) You beat me to it.
That guy is going to have a hard life; 66 and getting evicted? Maybe he can live on his job sites. Forget retirement, just try not to starve.
Maybe he can take up face painting like the couple in one of Ben’s other posts.
All kidding aside, this guy will likely end up homeless or living with his kids.
Living with his kids? Like King Lear? LOL
Yeah, I love you like bread loves salt, daddy-o.
And next thing you know you’re on the beach waving a scepter and wondering why your jingling jester guy is going through your pockets while they’re still on you.
Or, turn it around. $200K loan at 5% is $10K a year. That is $833 a month. You thought you had a 30 year fixed that had a total payment of about 60% of the inteest??? Or, did you think you had a 3% interest rate for 30 years?
I agree. NO ONE is that clueless. PLAYING the victim now that they lost their bet.
Yes, some people are this stupid. All they look at is the monthly payment.
“People are Smart” NOT!
Maybe this guy’s painting specialty is lacquering cabinets without a respirator.
Don’t fool yourselves or let the MSM do it for you with these “I’ve been used and abused” SOB stories.
You CAN’T have 2-3 million FB idiots without ONE asking for an amortization schedule of HIS LOAN
Or…CAN we ???
Some people are truly numerically illiterate. That is why Rent to own and payday loan places get away with charging so much.
I don’t know how borrowers could be that dumb ,but I’m beginning to think that some of these borrowers just listened to the lies of the greedy loan agents who said ,’Yea ,right , the loan is fixed . If you ask the loan agents they would say ,”Yea,right ,I told him it was fixed for 2 years “. The bottom line is that your a fool if you trust sales people and you don’t read your loan documents . I think most of the borrowers knew they were getting a adjustable loan , but they were either lied to about the features of the loan , or they just wanted a loan payment that was low in a appreciating market,or they knew they couldn’t qualify for any other type of loan .
Have any journalist asked these FB’s why they thought they qualified for a better loan than they got in that in a lot of cases they didn’t even qualify for the toxic low down loan or refinance they got ? Did the person making 20k a year think under any circumstance they could qualify for a no down 500k loan ? These FB’s were getting a gift of speculation or unearned ATM money and they went home after they signed the loan documents and said ,”I hope the lender buys that phony income we listed .”
It didn’t matter what the terms of the loan was, it only mattered that he get the house because prices always go up and he didn’t want to be left behind.
Exactly!!!! They knew they were taking out a loan they could never make the payments on. And the people giving him the loan knew he wasn’t going to be able to make the payments.
But, it didn’t matter. He was going to sell for huge profit, and the guy giving him the loan was making a fat comission on him and would make a fatter one on the guy he sold to in a year!
DO NOT believe it was stupidity. It was simply gambling with other peoples’ money. This is why so many are walking even while keeping up on their credit cards.
People tend to hear what they want to hear.
My friend has an Option Arm. Don’t know why he got it. You must be an idiot if you thought you got a 30 year fixed. Actually you have the “Option” to pay the 30 year rate. So my friend has these coupons every month. I think he has three to four payment options. 1. Less than Interest 2. Interest 3. Interst plus some principle 4. Pay as if it was a 30 year fixed payment.
Guess what he chooses. RIGHT! the first one.
If this guy says he thought he got a 30 year mortgage, he flat out lying. Those coupons says it all.
“…It allows him to write a check for $565 a month even though he owes $1,300. The difference is added to the mortgage, and when his total debt reaches $212,000, or after five years have passed, he said his monthly minimum could jump to about $2,800, which he can’t afford.”
Forget the “or after 5yrs” option - not at his present burn rate. He’s building “negative equity” at $735 per month. He now owes $192,000. Full payments start at 5yrs or when he owes $212,000. At his current rate it will take him 27 months to hit the “or owes” trigger.
I’m a recovering Californiaholic…
Can somebody point me to a 12 step program?
“‘I don’t see a recovering California in the next 12 months,’ Donald Tomnitz, D.R. Horton’s CEO, said on an analysts’ conference call.”
Dang it Aladin,
now I envision Mr. Tomnitz going to meetings with Ms. Spears.
I’m the Donald, (no, not that one) and I overbuild too much…
How can a person think that a monthly payment of $565 sounded right for a house that cost $184,000????
Even at 4%, the payment would be over $800 on a 30 year fixed, and I’m using 4% as a very low interest rate example.
House painter or not, doesn’t the guy have a computer? Couldn’t he look up a mortgage calculator and see that something didn’t smell right?
Is this guy really this stupid or is he jumping on the “please bail me out” bandwagon?
Can anyone recommend a good book or program for kids to learn about fiscal responsibility? Thinking it’s time to start teaching my kid before she hits high school.
A good program is for the kids to earn their own money. This is how they will relate the cost of money to what the money will buy.
Earned money is valued much higher than easy money.
It’s called “parents.” You either learn it from them (the easy way) or you learn it on your own (the very hard way). It’s not learned from books or Suzie O.
Can anyone recommend a good book or program for kids to learn about fiscal responsibility? Thinking it’s time to start teaching my kid before she hits high school.’
Use the one I was schooled in. It’s called, ‘Get born to a worthless dad who doesn’t like to work but still agrees with the Mormon theory that he should ‘multiply and replenish the earth’ (8 kids), and a hopeful mom who thinks Jeebus will provide, if only you pray hard enough. (Still praying. But evidently not hard enough.)
Boy–nothing teaches respect for money like being 11 and saving up babysitting money so you can buy your little sister a pair of shoes for winter, since her sandals don’t work so good in them thar Utah snowdrifts.
But you say your kid’s already born? Probably too late for that program.
Hmmmm. Jeeze, I got nothing. Some verbal abuse, maybe?
LOL…verbal abuse might help.
She is learning respect for money by having to earn it for the frivolous things she wants.
I’m thinking more along the lines of how interest works, both paying and receiving it.
I learned my lesson at 18 when I bought my first car (used), and got screwed on the interest rate and terms. Fortunately the car only cost $2500, so it was not too expensive a lesson.
My parents had taught me about the value of money, but are there some things you can only learn from experience? These days, the lessons cost a lot more.
A little story about compound interest you might want to try:
A horse owner gets his horse shoed and balks at the $250 price the blacksmith charged. So the blacksmith offers a deal; he’ll charge one penny for the first nail he used, two pennies for the second nail, four pennies for the third nail, eight pennies etc. for the thirty-two nails used.
So, how much was the bill?
Or …
Manhattan Island was purchased for $24 in 1626 and is now worth billions of dollars.
How much would that $24 be worth today if it was invested at a 6% compounding interest rate?
It could buy the whole island back fully developed at 7.5% interest. Seems like the native americans ripped off the settlers. Real estate only goes up.
I think that there have been some “improvements” made to the place since it was first purchased.
How much would that $24 be worth today if it was invested at a 6% compounding interest rate?
According to Excel: ($111,442,737,812.29)
=FV(6%, 382,0, 24)
Comment by combotechie
2008-02-07 15:33:22
A little story about compound interest you might want to try:
A horse owner gets his horse shoed and balks at the $250 price the blacksmith charged. So the blacksmith offers a deal; he’ll charge one penny for the first nail he used, two pennies for the second nail, …
So, how much was the bill? ‘
You go on and on about nails here, but the pertinent question, to my mind, is: what it a cute horse, and was it named ‘Muffin’ or ‘Buttons’? Did it like bread, or else corn kernels most? Substantive things like that.
Sorry, I meant, ‘was’ it a cute horse. And what color was this horse, anyhow? Was it dappled? Grey? Brown with a forehead blaze? Like I said, substantive points.
How many currencies or investments have not gone bankrupt or fully devalued for more than 100 years, let alone 283 years. Probaably zero.
I think DaveRamsey.com has a kids program. It is pretty good. Not selling, but seriously, many of us babysat,did yards,laundry,errands,ironed for ppl and got real jobs. And paid for all our own stuff.
Actually all the FBs should sign up for DR’s classes and learn a thing or two. Otherwise they wouldn’t be in this mess.
Looks like your dad multiplied and replenished the earth, the moon, Mars, and half of Venus.
Oi, it’s about time the backstory came out…
I rec:
Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist (Hardcover)
by Tyler Cowen
“…The book is full of fascinating stories in which psychology meets economics. The author applies the above concepts and ideas to a wide, wide variety of everyday situations, such as chess, doing the dishes, UN diplomat parking violations, bonuses in the workplace, petty crime, exercise programs, student drinking, tardiness, RSVP’s, meetings, going to museums, buying paintings, reading, buying music, toilet seat positions (a very, very important topic), gift giving, pickup lines, personal ads, marriage, being tortured, recognizing liars, gym memberships, shopping, eating and restaurants and getting the best food, “The Seven Deadly Sins”, sexual intercourse, beggars, charitable giving, and tipping. WHEW! WOW!
What a ride…what a great book!
Highly recommended, entertaining, original, and fun!”
An Amazon Review that caused me to buy. It is fun to learn how to go to restaurants!
Olygirl
I hear ya about the shoes thing. I didnt have it that bad but a different take on the same subject;
my father was so effin cheap, I mean cheap, no really, he was CHEAP, that he bought me a pair of plastic shoes from Kmart when I was in the 8th grade. yeah, PLASTIC SHOES !!! I was so embarrassed to wear em, (I think the price tag read $2.00)and I knew I’d be in fights all day long on the schoolyard that I just had to get rid of ‘em ASAP.
had my brother tow me on a skateboard behind his bike while scuffing a hole in the soles to ruin ‘em. did it in about … oh… 10 minutes. showed dad later on that afternoon . . gosh darn it, they just didnt hold up. he was furious & suspected foul play but we both knew he couldn’t send me to school barefoot. (thank god it was 1979 and not 1879).
had a new pair of decent white-striped blue adidas the next day.
(we havent spoken in over 20 years. no loss - not missed - good riddance. rock-on Olygirl, I enjoy yer posts)
Thanks, Aquius.
Well, you appear to have grown up sound, plus with lots of initiative, so it’s clearly your dad’s loss. Hey, maybe he used his hoardings to buy himself some love when he needed it later? Count up the pennies, my good fellow! HAHAHA!
I haven’t seen my own dad for about 17 years, excepting a fairly spectacular attempt at a surprise reunion on the part of my grandma. Sweet, dear, grandma. By ‘spectacular’ I mean, ‘really super bad’. I had already decided that my dad wasn’t going to behold my dear sisters and brothers, no matter what, even if it meant deputies in large amounts. For verily, ‘the purposefully wicked shall not refresh his wretched eyes with the sight of those whom he hath injured.’ That’s Leviticus II, or something, I believe.
Anyway, I hope you got lots of nice shoes now.
“And Daniel Mudd, Fannie’s CEO agreed. ‘Our business is meeting the increased demand for liquidity and our overall credit book has held up relatively well,’ he said. ‘Yes, these are tough times, but that is when you want a Fannie Mae.’”
____________________________________________________________
“An ounce of performance is worth pounds of promises.”
Mae West
Mudd and the CEO of FHLMC probably understand that there is no need for their corporations. The government can simply let them go under and expand GNMA’s power by allowing GNMA to certify loans other than FHA and VA loans. These GNMA IIs, which would carry “US full faith and credit” guarantees, would provide the same liquidity to the home loan market as FNMA and FHLMC PCs. Also, there would be little risk to taxpayers if the underlying loans were underwritten to FHA standards and a 20% down payment was required. The 20% down could be reduced to 5% down with PMI from a viable credit insurer (such as Buffett’s new company).
The executives at FNMA and FHLMC understand the above and will soon wrap the flag around themselves and proclaim loudly why their companies are necessary for the “American way of life.”
http://www.miamiherald.com/business/story/407914.html
Ex-SunTrust worker challenges firing
A lawsuit accuses SunTrust Bank of firing a mortgage loan coordinator in retaliation for exposing mortgage fraud at the bank.
just for thr hell of it i googled “housing bubble”
# of matches 1,420,000 for housing bubble
#1 item- the hbb blog by ben jones
You go, Ben!
Fo’ shizzle, y’all.
Surrounded by pilots/mds and always refer this site HBB to them as of course we all know pilots/mds think they know it all and what to invest. Hopefully some of my referrals are reading HBB
That is exactly how I came across this site in late 2005. I was so glad to see that people had opinions similar to mine, especially during the era of “buy now or be priced out forever!” Plus, many of the quotes I’ve come across here have been priceless. The neutron bomb one today (although not made by a HBB regular) is definitely a keeper, as was the so-called “NINJA” loan. Thanks everyone and especially Ben!
“‘I don’t see a recovering California in the next 12 months,’ Donald Tomnitz, D.R. Horton’s CEO, said on an analysts’ conference call.”
Take this message to my brother
You will find him everywhere
Wherever people live together
Tied in povertys despair
You, telling me the things youre gonna do for me
I aint blind and I dont like what I think I see
Takin it to the streets…
“A review by Moody’s Investors Service of the top ratings of bond insurers is taking time because ‘we’re taking a great deal of care to get the answer right,’ Moody’s Chief Credit Officer Andrew Kimball said on Thursday”
Pure and unadulterated BS. Moody’s AAA ratings on CDO’s were rubber stamped in less than an hour. Where was the due diligence then? Do you think Ambac or others would have guaranteed these CDOs if you had not given them a AAA rating. I hope Moody’s goes under from lawsuits.
Hey Hoz,
Do these comments explain which side of the trade you’re on………..just joking
Oh BTW, I opened an account at the Bank of Sealy yesterday……….just in case.
You found my bank!
How?
And I am spread in the bond insurers. But I need movement to make moneys. Preferably down.
And I thought it was only Bay Area homedebtors who were arrogant. Read this article from CNN. It just showed up on their site.
Home owners: What price slump?
Survey shows 3 of 4 homeowners believe their home has gained or retained its value, despite evidence of price decline.
By Chris Isidore, CNNMoney.com senior writer
February 7 2008: 4:08 PM EST
More than 3 out of 4 homeowners think their home has not declined in value, despite evidence to the contrary.
Colorado suffered a 30% surge in foreclosures last year and the numbers keep rising.
America’s largest homebuilder reports a hefty loss and warns of more challenges ahead.
NEW YORK (CNNMoney.com) — Despite numerous reports and estimates showing home values undergoing historic declines in 2007, more than three out of four homeowners believe their own home has not lost value in the last year, according to an online survey.
The survey was conducted by Harris Interactive for Zillow.com, a Web site that gives estimated home values. The survey of 1,619 homeowners found 36% believe their home has increased in value, and another 41% believe their value has stayed the same. Only 23% believe their home has lost value.
“This survey reveals that despite the data to the contrary, people either aren’t paying attention to their housing market or are in denial about their own home’s value,” said Stan Humphries, Zillow.com vice president of data & analytics.
Zillow’s own estimates are that home values declined 5% on average last year, with many markets posting much steeper declines.
Home prices set to slide again in ‘08
Humphries said that even in markets where sharp declines in home values have caused a significant number of new homeowners to owe more on their mortgage than their house is currently worth, “most people are not really affected by declining values unless they absolutely must sell or need to immediately refinance or withdraw equity.”
Zillow is not alone in seeing a decline in home values in the last year. Figures from the National Association of Realtors show that the median price of an existing home sold in 2007 fell 1.4% from 2006, the first decline in that key price measure the trade group has ever recorded. The Realtors released an economic outlook Thursday that forecast another 1.2% decline in prices in 2008.
And those price readings under represent declines in the nation’s weakest markets, which have taken a big hit to sales volume.
The S&P Case/Shiller, a closely watched index that tracks home values of all homes in the nation’s largest markets, not just those that are sold, showed about an 8% drop in home values in November compared to a year earlier, the worst on record.
Hugh Moore, a principal at Guerite Advisors, a research and financial advisory firm, said he wasn’t surprised by the denial demonstrated in the survey results. He said research into previous housing busts shows homeowners are slow to accept that their home has lost value.
“It’s a visceral reaction; you lock into the highest price you ever heard, and you’re going to hang onto it,” Moore said. “It’s a grieving process. First you go through denial and disbelief. Acceptance is the last step you get to.”
Moore said that it’s important to remember that only a small fraction of homeowners try to sell their home in any given year, and unless they are trying to get new financing or a home equity line of credit, there’s no reason most will be confronted with the decline. It’s not like when a stock market declines and they see it in the 401(k) or mutual fund statements, he said.
“For the vast majority of people who aren’t hit in the face, they’re going to remain in denial as long as possible,” Moore said.
Moore said that might be partly a good thing for the U.S. economy, in that it could keep people spending when they might be tempted to pull back if confronted by their decline in wealth. But he said it will make recovery from this current housing slump take longer and be more difficult because home sellers will be slow to adjust their asking price to the new market reality.
How they got housing wrong
“Studies have shown stock markets have public markets that realign themselves rather quickly,” Moore said. “But housing busts affect the economy twice as much, because home ownership is so much more widespread, and they take twice as long to correct themselves.”
The survey also showed that homeowners are looking to spend more on renovations in the coming year, with 82% saying they will spend the same or more on minor home improvements, such as new appliances or repainting, while 67% say they will spend the same or more on major home improvements, such as a new roof or kitchen remodeling.
Moore said while it might seem counterintuitive to spend money on more renovations when a home is declining in value, that can be an example of the homeowner realizing that moving into a better home is now out of reach and deciding to try to improve the home they have.
I got a letter from my county appraiser that my property “value” had declined 5%. Isn’t that just like getting a 401k statement?
It’s a plus for us, lower taxes. If we sell it’s less realtor(tm) fees we have to pay, and less $$ we have to pay for another house if we repurchase. If we chose to rent lower property prices means that landlords can afford to charge less rent.
Moore said that it’s important to remember that only a small fraction of homeowners try to sell their home in any given year, and unless they are trying to get new financing or a home equity line of credit, there’s no reason most will be confronted with the decline. It’s not like when a stock market declines and they see it in the 401(k) or mutual fund statements, he said”
Or when all their neighbors move out and leave them with brown lawns, or when they watch news on TV or when they read the papers.
Actually, I think this guy has it right - for the rural sections of flyover country where there hasn’t been a bubble and where there simply aren’t as many foreclosures and where the local papers have either not run anything or have only published NARaganda. For most of the country though, he’s making excuses.
If your a homeowner and not about to sell for the next 10 years or not take out a HELOC, you can believe all you want how much your house is worth. $1mil, 2Mil, 1Gazillion. But once you have to sell, you face reality.
“‘I don’t see a recovering California in the next 12 months,’ Donald Tomnitz, D.R. Horton’s CEO, said on an analysts’ conference call.”
I prefer Tomnitz’s 2007 analysis:
“I don’t want to be too sophisticated here, but ’07 is going to suck, all 12 months of the calendar year,” Tomnitz said.
http://www.msnbc.msn.com/id/17507350/
been renovating my house for the past 2 years - very leery of calling anyone to do any work as I fear they will be pissed off at havng to take a small job, work for less than usual wage, and/or might possibly cut corners out of anger, fear, or retaliation at their cirmcustances at my expense.
I’m a pretty easygoing guy myself, and hand out tips to people who do good jobs, like tire installers, childcare workers, and more, but I don’t want to have to go over someone’s work to doublecheck for quality. sorry, but thats just my conservative nature. and seeing all the angry subs @ Lowes in line to check out, grumbling about work … racing their F9000 mega-dually through the parking lot mowing down anyone in their path doesnt do much to want to make me dial em up for a job. unless I can’t get around it, like electrical (to code) work.
oh yeah, lot of anger out there among the blue collar crowd. too bad joe homeowner is collateral damage of their misdirected wrath for the contractors/builders.
That will probably help to hasten the return to protectionism here in the United States.
From the Bloomberg article:
“1 million homeowners with $500 billion of option ARMs”
My math says that is an average of $500k per loan. I would pay to see a distribution of of these loan amounts. I guess there are a fair number of
Can’t put “less than”s in your posts. the server sees them as html and ignores everything after as bad html
got it…damn…
Let me summarize.
High average loan amount means for every $200k loan, there’s going to be a $1MM loan.
85% of borrowers owing more than the original loan amount means that lots of people are marching toward that 110-120% debt limit.
Which means a whole bunch of people are going to have their payment amount jump far before their 5 years are up.
Therefore, whoever says the next reset spike is in 2011, is missing the boat entirely. Lots of the folks who borrowed aggressively in 2006 are going to have their lunch handed to them in 2008-2009.
2008 is going to be bad enough, 2009 is going to be really rough.
Refinancing won’t work either, as LTVs fall back to the more traditional 80% range, and people have to PROVE their income.
Patience will pay off…
See my reply above with the map.
Thanks cayo. I recall seeing that map before–I appreciate the refresher…
“‘We’re seeing a pattern that is consistent with skimming along the bottom of the cycle, and sales could ease modestly,’ said Lawrence Yun, the group’s chief economist, in a statement.”
The public is seeing a pattern that is consistant with the NAR missing it’s forcast over and over and over to the point you no longer have credibility. Keep up the excellent work Yun, you and the NAR may be setting a record for the most failed and incorrect forecasting in the US housing market! I’m sure your customers are pleased with your poor work!
Could you still get a liar loan in Truth or Consequences, N.M.?
“‘These could be called long-fuse, exploding ARMs,’ said Kathleen Keest, former assistant Iowa attorney general. ‘I’ve heard people say they are the most complicated product ever offered to consumers. They are the real liar loans.’”
Joe Ripplinger took out a $184,000 mortgage
It allows him to write a check for $565 a month
“I never heard of a payment-option ARM before. We thought they were putting us on a 30-year fixed”
Let’s see, 565 x 360 = ?? Uh, carry the one… no, that’s not it… geez math is hard.
I was going to write a big long post about the evils of option -pay loans ,but I decided not to . It’s pretty clear why the gambler borrower went on these loans ,that had the option of paying payments that were even cheaper than rent ,while at the same time the borrower got into the prospect of making easy money from appreciation .
No wonder the lenders want these loans refinanced ,they are killers for the lenders in a price declining market with all the negative amortizing that is building up .
No lender that was sane would make a pay-option loan unless they had a big big big down payment to off-set the risk of negative amortizing build up .
Does anybody question why Joe Ripplinger went on this pay-option loan? The real question is why was the lender so stupid that they let Joe Ripplinger only pay $565 per month on a 184K loan ,in addition to most likely not putting any money down .
Stimulus Plan Helps Wealthier Homeowners
Groups representing Realtors, bankers and home builders, which have been hit hard by the mortgage market downturn, have been lobbying hard for increases in the Fannie and Freddie limits.
http://biz.yahoo.com/ap/080207/stimulus_housing.html?.v=1
of course those are the ones who stand to gain the most at the expense of the taxpayer! why wouldent they want to lobby for this change? they have nothing but gains comming with this move!!
“…there are several measures that the Fed, or any central bank, can take to reduce the risk of falling into deflation. … the U.S. government has a technology, called a printing press … that allows it to produce as many U.S. dollars as it wishes at essentially no cost.
A money–financed tax cut is essentially equivalent to Milton Friedman’s famous “helicopter drop” of money.”
Gov. Ben Bernanke, National Economists Club
I’m sorry I love Mr. Bernanke’s words. lol
Why do we get so upset with forgers?
“…there are several measures that the Fed, or any central bank, can take to reduce the risk of falling into deflation. … the U.S. government has a technology, called a printing press … that allows it to produce as many U.S. dollars as it wishes at essentially no cost.
Hey Hoz,
And pray tell…….What will the bond market do?
Note the spike today !!!!!!!
Hey Hoz, I think you get kick out of this.
http://www.youtube.com/watch?v=37pal-PYTUQ