The Longer It Takes To Fix, The Bigger The Impact
It’s Friday desk clearing time for this blogger. “Median condo prices dropped 24 percent, from $218,000 to $166,500, according to statistics released Thursday by the Coastal Carolinas Association of Realtors. Realtors said the price declines stem from the vast oversupply of homes on the market that’s forcing some sellers to slash prices to make their homes competitive.”
“‘Builders have cut back, but there are still so many [condos],’ said Brian Cook, a Realtor in Myrtle Beach.”
“The flagellation of Nashville’s urban market for condominiums has become a sport over the past few months. There are developers, even those with urban projects, who want to declare the market dead, except of course, their development, which happens to be the finest quality and better than all the others.”
“Realtor Jon Sheridon has seen a few condo cycles and he said this one is nowhere close to the early 1990s when the real estate market collapsed in the wake of tax law changes. ‘You couldn’t hardly give a condo away,’ he said. ‘The word condo even got a bad name.’”
“Sheridon said he wishes the builders had gone a little slower during this run. ‘Of course, builders will build,’ he said.”
“Bankruptcies in the Danish construction industry rose to the highest level in at least 15 years in January, indicating the economy is in the grips of a slowdown led by declines in the real-estate market.”
“Bankruptcies in the construction industry jumped 60 percent from December to 59, Statistics Denmark said yesterday. That’s the highest since the office started collecting data in January 1993.”
“‘The golden years in Danish construction are over and there are signs that not all companies are prepared for the cyclical shift we’re seeing,’ said Steen Bocian, head of global economic research at Danske Bank A/S, the country’s biggest lender.”
“New single-family residential permits in Lubbock fell 21 percent for the year and by 24 percent in the fourth quarter. Gary Lawrence, CEO of the Lubbock Economic Development Alliance, expected to see those numbers continue to struggle for the next 10 months.”
“Lubbock’s housing market is saturated, Lawrence said, and consumers needed time to assure themselves the city was protected from housing problems roiling other markets around the country.”
“‘They’re a little intimidated about going out and buying a new house right now,’ Lawrence said.”
“The recent surge in foreclosures apparently drew a larger than normal crowd at the monthly auction. By late morning, about 30 people gathered in front of the Bell County Courthouse Annex on East 2nd Street.”
“Expecting a long wait, Temple attorney Ed Laughlin unfolded a lawn chair and newspaper in front of the annex. ‘I’ve been doing bankruptcy law for 26 years, and I’ve been following foreclosures closely for nearly 20 years here in Bell County,’ Laughlin said. ‘This is the most we’ve ever had on a single day in 20 years at least.’”
“Contrary to obituaries being written for the real estate industry, mortgage bankers are getting along quite well these days in Grand Junction.”
“Housing prices are appreciating more slowly in the Grand Valley than previously, the mortgage bankers said. ‘Those values were going up exponentially,’ Fidelity Mortgage VP James Pulsipher said. ‘It was a lot like buying Yahoo stock in the ’90s — there was nothing to back it up.’”
“The business prospects appear to be strong, despite doomsaying nationwide, said Dennis Edson, Unifirst Mortgage chairman.. ‘This doesn’t smell like a bubble to me,’ he said. ‘We had a great year, the best in five years. And we’ve had a pretty good January.’”
“A developer plans to build worker housing, stores, restaurants and offices on a strip of town-owned land near Vail Village’s Covered Bridge.”
“The one-, two- and three-bedroom condos would range in price from $500,000 to $1 million, said Steve Virostek, a partner in Triumph Development, adding that free-market units would perhaps sell for five times as much. Professionals, such as doctors, are now priced out of Vail, he said.”
“‘Affordable is a relative term,’ he said.”
“More Fond du Lac residents could lose their homes to foreclosure this year than ever before. ‘In 2008, we’ll see more foreclosures than any time in history, probably even surpassing the number we saw during the Great Depression,’ said Len Bacon, owner of Century 21 Fox Valley in Fond du Lac.”
“In December 2007, Wisconsin accounted for about 1 percent of the 215,749 foreclosure filings reported that month nationwide. California accounted for 25 percent of the nation’s foreclosures that month, according to RealtyTrac.”
“‘It’s not all doom and gloom, said Steve Klapperich, an associate broker in Fond du Lac. ‘This isn’t California.’”
“While lower mortgage interest rates might help some Americans refinance their home loans, Northern San Joaquin Valley homeowners are finding it more difficult because house values have plummeted.”
“‘If your current home value is less than your outstanding loan, you’re dead meat,’ warned Paul Carroll, president of Carrollton Mortgage Co. in Modesto.”
“‘There are lots of people with excellent credit who cannot refinance because they are upside-down on their mortgage,’ agreed George Erbele, branch manager for Affiliated Mortgage Partners in Modesto.”
“Erbele’s example: A northeast Modesto house appraised for $585,000 about 20 months ago, and the homeowner took out a $414,000 adjustable-rate loan based on that value.”
“‘Now, the home’s appraisal is coming in at $375,000,’ Erbele said. That $210,000 drop was about 36 percent of the value. Since the home is worth less than what is owed on it, Erbele said there are few ways to refinance the loan.”
“The partygoers traveled to Sin City this week for an event that before the current credit squeeze might have been called the Predators’ Ball of this era. This time, with mortgage securities replacing the junk bonds of the 1980s, the gathering felt more like group therapy.”
“The occasion was, officially, the 5th annual conference of the American Securitization Forum, a celebration of the financial wizardry that supposedly turns risky mortgages and other loans into gilt-edged securities.”
“At times, the unease here was palpable. During one panel discussion, a money manager stood up and denounced credit ratings agencies, which many investors have criticized for underestimating the risks posed by securities backed by subprime loans. In the last 12 months, the ratings firms have downgraded many securities they had awarded high marks to only a year or two earlier.”
“‘In my 38 years this has been the worst capital destruction and the worst rating decline in history,’ Robert L. Rodriguez, the CEO of a mutual fund company based in Los Angeles, said to a panel of four executives from ratings firms. ‘All of you should be ashamed of yourself.’”
“Back in the great 1980s real estate crash, lenders and federal financial regulators wound up owning billions of dollars of North Texas property. Indeed, the Oil Patch property foreclosures were called the biggest land transaction around these parts since the Louisiana Purchase.”
“One lesson learned back then we might well consider with the current wave of loan defaults. It became obvious in the late ’80s and early ’90s that the real estate downturn here was greatly prolonged by efforts to put off the foreclosure and eventual resale of troubled properties, both commercial and residential.”
“Rather than get the bad loans wiped out and the properties in new, stable owners’ hands, years of financial industry and federal finagling added to the timeline of this painful process.”
“So what to do now, when thousands and thousands of homeowners are faced with losing their houses to a dicey mortgage mess? Do you go ahead and get the foreclosures over with so the market can heal? Or do you try to delay the often inevitable home loan defaults and hope for the best?”
“It’s a difficult question. My instinct is to get the foreclosures done with ASAP. But not a week goes by that I don’t hear about the heartbreak suffered by folks dealing with pending foreclosure.”
“All I know is the longer it takes to fix, the bigger the impact the foreclosure bubble will have on the entire property market.”
“Another thing I’m certain of – there’s no political solution to this huge financial problem.”
A great week folks. Much of the US will see some of the best weather in months this weekend, but if you get a chance, check in and see the housing bubble news.
WOW…HBB or good weather!
Hmm…how ’bout both!
Best to You and all You do…baaaaaaaaaby!
Leigh
The weather here in NYC is going to stink this weekend but I’m sure the HBB will be sunny and bright. As you know, I’m always an optimist.
Portland, too. ¡Viva La Niña!
I’ll be up on the mountain which has record snow. While nouveaux-Portlanders bitch about the rain, I’ll be in heaven carving some turns. (love when it’s rainy and dark)
Too bad it almost never gets cool here in south FL. I am gonna fire up the a/c again soon. Can’t wait to be outta here!
The flagellation of Nashville’s urban market for condominiums has become a sport over the past few months.
EDIT
The flatulation of Nashville’s urban market for condominiums has become a sport over the past few months.
Flagellation: definition from Dictionary.com
A masochistic or sadistic act in which the participants receive erotic stimulation from whipping or being whipped.
I guess buying a condo in Nashville (or anywhere) fits the definition.
Don’t know about the erotic part though, but it still hurts!
Oh those naughty Monolines.
February 8, 2008 11:41 AM EST
WASHINGTON–(BUSINESS WIRE)–
Notice is hereby given that Finkelstein Thompson LLP has filed a class action lawsuit in the United States District Court for the Southern District of New York on behalf of purchasers of Ambac Financial Group, Inc. (”Ambac”) (NYSE: ABK) common stock during the period between October 19, 2005 and November 26, 2007 (the “Class Period”).
The complaint charges Ambac and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Ambac is a holding company whose subsidiaries provide financial guarantee products and other financial services to clients in both the public and private sectors around the world. The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results related to its financial exposure on collateralized debt obligations (”CDO”) contracts.
Oh my naughty, oh my naughty,
Oh my naughty, Monoline!
Thou art lost and gone forever.
Dreadful sorry, Monoline.
There’s a boneyard on the hillside
Where the lawyers growl and whine
There grow lawsuits, mongst the losses
Fertilized by Monoline.
Somebody else take a verse…
Oh, com one, it’s easy:
Bogus ratings, bad investments,
Values dying on the vine,
Vultures circling, buyers gurgling,
Oh you naughty, Monoline.
20 pound trout test Monoline
Damn fine doggerel, SM.
I just got to listen to the two guys across (cube farm) from me discuss what a fantastic time it was to buy Real Estate and how one of them was going to go look at a foreclosed property in East San Jose this weekend as an investment and the other guy really ought to go along with him. Both these guys are highly educated tech workers who ought to be better informed.
Tech workers are morons on anything that doesn’t plug into the wall. Well, all except for one that I know.
LOL - is that one NYCityBoy???
Could be.
Yesterday I asked one of our consultants, “how’s life on the ostrich farm?” Boy, did that pi$$ him off. That’s my new name for those that don’t want to face the facts. They aren’t really sheep. They are ostriches.
LOL good one, NYCityboy
“Cube farm” conjures up a vision of all the living beings plugged into the “Matrix.”
They are plugged into the Matrix. They worship Steve Jobs. We call them little-Applets.
bollocks! I’m a cubicle dwelling techie, and I called the tech AND housing bubbles….it’s common sense… But yeah, you hear a lot of crap… but now I get to laugh in my rental at one quarter the mortgage….while biding my time for 09 and east bay foreclosure a
2009 is too early considering the final wave of mortgage resets will be in 2011. Youd be catching a falling knife from 10 feet instead of 30 feet.
Hey, I resent that. I am sure some tech workers might be morons, but at least they are well paid morons.
Tech workers are morons
If it wasn’t for the so called moron tech workers, you probally would not be posting on this site!
Instead, you should be changing the tune to the moron realtors, moron apraisers, moron mortgage brokers, moron Wall street investment bankers and the moron Fed who created this housing mess!
Pardon my lack of California knowledge, but isn’t that place like East Palo Alto?
It has some very nice areas built in the last 20 years and very expensive to boot. Not the Alum Rock Ghetto you may remember from low riding days.
Just show them this HBB and if they still buy, bet them they will lose their downpayment and walk away within a year.
If you win, they default, if they win you lose money. Fools bet.
Not looking good…………..
MUMBAI, Feb. 5, 2008 (Thomson Financial delivered by Newstex) — Standard & Poor’s (NYSE:MHP) Ratings Services lowered its long-term counterparty credit rating on Fremont General (NYSE:FMT PR) (NYSE:FMT) Corp to ‘CCC+’ from ‘B-’ and changed its credit watch placement to negative from developing.
The ratings agency said the downgrade reflects its view that liquidity at the holding company has deteriorated substantially. S&P believes despite strong liquidity at the bank level, the cease and desist order restricting dividends from the bank to the holding company has resulted in greatly decreased liquidity levels at the parent company.
S&P said it is concerned about Fremont’s ability to meet its debt obligations given its assessment of Fremont’s reduced cash holdings.
Copyright Thomson Financial News Limited 2007
“Erbele’s example: A northeast Modesto house appraised for $585,000 about 20 months ago, and the homeowner took out a $414,000 adjustable-rate loan based on that value.”
“‘Now, the home’s appraisal is coming in at $375,000,’ Erbele said. That $210,000 drop was about 36 percent of the value. ”
I hate this kind of reporting as it tells you nothing while trying to make you feel sorry for the house owner. It doesn’t tell us what the house was purchased for, wether the $414K was a first and that there was a 2nd. It doesn’t tell us wether there was any money paid as a down payment. And lastly there was not a $210K drop in value unless the initial loan was $585K, but let’s get real, the house never really had that valuation except on paper.
“Journalism” is French for, “I don’t know what the freak I’m writing about”.
You might realize by now that I live in New York City. If you haven’t figured that out then you are probably a government worker. I’ve also made it clear that following what the Manhattan market is doing is very difficult. This is a unique city where there are not “For Sale” signs in front yards. So I live vicariously through my old hometown in Minnesota.
The market is not doing so great and is continuing downward. I saw the first foreclosure in my old neighborhood 2 weeks ago. It turns out that there are actually two of them. Nothing seems to be moving and listings went down only fractionally in December and January. It is amazing how many homes are for sale in February. Anybody that has never experienced a bad Minnesota February might not understand why you would expect only a handful of homes for sale in February. Not only is the weather brutal but the snow and slush and sludge can be just miserable.
A friend of a friend is a real estate agent in my hometown. I get regular updates. It is grim. Buyers are not willing to make an offer on a house unless the offer is far under asking price. The Realtor is telling his selling clients to take any “reasonable” offer they get. We are talking about 10 and 20 percent under list. Yes, those prices are still 30 - 40 percent higher than they should be. This illustrates that the psychology is melting down. I figure there will be a complete breakdown of the system by the time the leaves are dropping in fall. The prices on foreclosures are falling fast. I’m waiting to see the other dreamers start to make serious drops in their wishing prices. Something tells me that they can’t do this.
I expect summer to bring a sh-tload of mosquitoes and foreclosures. The hiking of Fannie and Freddie is going to do nothing to save a city where not a single house is listed for over $417,000. I don’t understand why legislators in states like my home state aren’t screaming bloody murder about the raising of the GSE limits. Of course they are just bought and sold.
On one last note, it will be interesting to see if Minnesota Governor Pawlenty or Senator Coleman get serious consideration for the Vice President nomination. Both of them seem very plausible from what I’m hearing. I wouldn’t bet on Mitt.
The unit I’m renting in the two year old condo building was foreclosure #14 (just under 40%), and now 15 has been served up, as well. Wonderful place, good Denver location,but has an empty feeling to say the least. Speculated to death.
So if even doctors are priced out of Vail, who cooks the food, cleans the rooms and works in the stores? How many people who drive and hour to work a menial job for minimum wage?
I was in Aspen many years ago. I asked the same thing. The “workers” are bused in. They are bused back out as soon as their shifts are over. The bus goes far far away. The lowly plebs can’t be hanging around and depressing the elites.
Ironically, a number of these workers consider it “cool” to be able to work in these towns and lick the boots of the uber rich and be their toadies.
I guess Vail finally achieved the Morlocks and Eloi future envisioned by HG Wells. Fun for the rest of us when the Morlocks start eating the Eloi.
Fun for the rest of us when the Morlocks start eating the Eloi.
ROTFL
The true Eloi will survive. But I like the analogy.
Got popcorn?
Neil
We had a ranch on the western slope east of
Delta and a lot of people would drive to Aspen from our area, a two hour drive in good weather. The money was really good for a lot of people, ranch and coal mine worker’s wives. One fact always stood out. An awful lot of these houti-touti super rich, after two weeks of skiing, would leave the newly bought
$3000 ski outfits for the maids… true.
I didn’t know there was a 2-bag limit on private jets.
Maybe they were economizing on dry cleaning.
Besides, those $3000 outfits would be out of style by next season anyway.
Hmmm - east of Delta - sounds like you were out in the ‘Dobes. I have two horses currently boarded on a place out there. D Road.
they do that in Naples Fla too
My brother managed a restaurant in Aspen. He told me the businesses there subsidized a trailer park just on the other side of the Aspen airport (at the end of the runway) for the ‘workers’. BTW - the Aspen bus is free from Aspen to the airport.
“‘There are lots of people with excellent credit who cannot refinance because they are upside-down on their mortgage,’ agreed George Erbele, branch manager for Affiliated Mortgage Partners in Modesto.”
Could there be a point at which lenders choose to write down the existing principal so they could re-fi an existing loan (at the lower valuation) rather than go through the foreclosure process?
That’s no problem. A bank just moves it into loan write-offs and takes a hit against earnings. But if these loans start eating into their capital then the bank has some serious problems. For every $1 of capital that a bank loses it loses the ability to loan out about $10. Those capital ratios are very important for a lender. There is no simple solution for the lenders, except to try to dump this mess onto the public.
Could there be a point at which lenders choose to write down the existing principal so they could re-fi an existing loan
In some cases this would make good business sense. My impression though is that in most cases, folks are way in over their heads and short of agreeing to eat half or more of the loan amount would not make much of a dent in the overall problem. Now with unemployment ticking higher, the problems will only get worse.
Which process would be cheaper ? It seems like a wash either way though they might be able to stiff the current loan holder with a higher price. You have an interesting idea.
If banks are willing to refinance the principle, why should I not go out and buy a $250k house for 5% down(ill lose $12.5k) then every year, ill just get the bank to refinance the principle all the way to the bottom!
Shame that they are bailing out irresponsable people!
Really the best situation for almost all of these people is to just away from their homes. Why stay in a house that’s worth less than your mortgage, why put more of your savings into a house that you borrowed 110% against. Let the banks and investors sort it out, move to an apartment with an affordable monthly payment, and invest your money in anti-recession items like gold or oil.
“Really the best situation for almost all of these people is to just away from their homes. Why stay in a house that’s worth less than your mortgage, why put more of your savings into a house that you borrowed 110% against.”
From what we’ve been seeing in some articles this week, more people are doing just that. Without appreciation in value, the monthly interest payment amounts to an expensive rental. People are now referring to “walking away” as a business decision. As this thinking spreads, foreclosure s should really increase dramatically. We predicted, on this blog, that as foreclosures increased the stigma associated with it would dissipate and more people would feel comfortable walking away. It’s become the smart thing to do.
As folks start walking away, more things change. Tax revenues are already falling and public services and employees will have to face cutbacks. Vacant homes aren’t being kept up by the banks, so neighborhood values continue to fall, leading to more underwater mortgage holders and more walkaways. This may have it own momentum.
Funniest comment on the walkaways was from Lewis, CEO of BofA, who said people just walking away was “not in their models”. I guess the Boyz never expected the proles to make a smart business move on their own behalf.
“Funniest comment on the walkaways was from Lewis, CEO of BofA, who said people just walking away was ‘not in their models’.”
It’s not as if walking away hasn’t happened in the past. One wonders why they would choose to totally exclude that possibility.
duh! because house price goes up ALWAYS !
Also BofA is raising CC rates wether you have no dings to your credit at all..totally arbitrary.
http://tinyurl.com/247pod
CEOs have been reduced to cheerleaders. So, you must exclude negative possibilities, cuz ya know, that would be too N-E-G-A swish T-I-V-E swish swish
Yes, I see that attitude a lot, not just from CEOs. People insist that everything is fine and if I suggest otherwise I’m a “doom and gloomer”. I just call it “reality”.
Well, as I see it no big deal was made about manufacturing companies walking away from America who were made rich by us Americans. And people walking away from their homes can be a perceived notion that they have been “heartily brokebacked” by the political and corporate aristocracy. Walking away is a business decision. Corporations go BK all the time. And in business don’t you know what they always say, “Nothing personal, just business.”
“‘The golden years in Danish construction are over and there are signs that not all companies are prepared for the cyclical shift we’re seeing,’ said Steen Bocian, head of global economic research at Danske Bank A/S, the country’s biggest lender.”
Something is rotten in Denmark
“‘They’re a little intimidated about going out and buying a new house right now,’ Lawrence said.”
Would they please stop with the pychiatric analysis? We’re “timid”, “uncommitted”, “fearful”, “fence-sitting”, “nuts” and now - “intimidated.”
Aw, give ‘em a break — they’re REIC-ers. Amateur analysis is what they call deep thinking.
It’s the psychology of projection. Everything the REIC is accusing joe would-be homebuyer of is actually how the realtors are feeling about themselves: “timid”, “uncommitted”, “fearful”, “nuts” and “intimidated.”
…and we have a winner!
I’m a little intimidated about ever trusting anything a used home salesperson says.
NAR (or somebody) apparently decided that the word “home” was much cozier and more useful for psychologically encouraging people to buy. Now, it has infested our vocabulary. Could I make a suggestion that we, here, consciously switch back to saying “house” which does not have the associated connotation of “warmth and family and stability” or whatever NAR is pushing.
word “home”
Reverse their tatics by using the word home when discussing the housing mess. That causes house and homes to be associated with the housing mess in the view of the reader.
I’m a little intimidated about ever trusting anything a used home salesperson says.
The used home salesperson makes the used car salesperson look much better. In fact, realtors have now surpassed car salespeople as the most unethical and least trusting.
That should make the public believe the advertisments that “now is a good time to buy or as I heard this morning in Tampa on the radio, it’s not a good time to buy, but a great time to buy.
Of course, anyone who falls for this crap deserves to lose money for being stupid. Let’s see how they feel about realtors once they lost thousands of dollars by believing the realtor hype!
Fond du restaurants get old after awhile, kinda cheesy.
“‘It’s not all doom and gloom, said Steve Klapperich, an associate broker in Fond du Lac. ‘This isn’t California.’”
Didn’t we read someone else from WI say the exact same thing with regards to CA? I think it was right before the holidays.
“‘It’s not all doom and gloom, said Steve Klapperich, an associate broker in Fond du Lac. ‘This isn’t California.’
Nope it isn’t Stevie. You’re BURIED in upteen feet of COLD snow without a decent ski hill in sight, a pipe busting Artic chill is coming down this weekend and WE energy heating prices are going UP. Oh..and the Packers Fumbled the ball. But on the bright side, your NOT Florida either, but the Miami nightlife might beat Fond du Lac ALL to HELL tonight
Well, thank god Lubbock is ok. We’re all saved!
Fight Raiders Fight!
Did they have a gilt-edged sword swallower act @ the Forum?
S.P.Q.A.
“The occasion was, officially, the 5th annual conference of the American Securitization Forum, a celebration of the financial wizardry that supposedly turns risky mortgages and other loans into gilt-edged securities.”
“there’s no political solution to this huge financial problem.”
They don’t need a “solution”…the problem itself is political meat for any ambitious politician. Provides endless opportunities for them to promise to “save” desperate homeowners, or hardhit neighborhoods, or cash-strapped towns. The how or why really doesn’t matter much–whether mailing out rebate checks, or promising to “freeze” mortgage rates, or any other nitwit plan they can gin up. They’re just opportunists feasting on the downslope of a mania.
The walkaways at least are showing some business sense and a willingness to look after their own interests…And why not. There is no social contract anymore, there is only self-interest and self-preservation.
The walkaways, if there’s enough of them, will leave the pols and their “rescue” plans trailing in their wake, which might be the best thing for all of us, renters included.
Yes, and there is no shame to being a “walk away” in my mind. If I was in that situ, I would be doing the same damn thing. Its the equivalent of giving the middle finger to the banks and the stock market who are the effing bag holders. The priceless response would be, “hey, I wanted to live in a nice place, sorry that the bubble got out of hand, but I was lied to by MSM and every pond scum saying that “prices would keep going up forever and ever, amen” but alas the ponzi scheme crashed. buh-bye”
“Yes, and there is no shame to being a “walk away” in my mind. If I was in that situ, I would be doing the same damn thing.”
That’s because you are the same kind of ignorant bum that they are. Really, what’s wrong with you? If you sign a contract, you agree to pay. Don’t make excuses.
But I mean that in a very loving way.
“That’s because you are the same kind of ignorant bum that they are. Really, what’s wrong with you? If you sign a contract, you agree to pay. Don’t make excuses. ”
I used to feel that way, but now I can’t blame the homedebtors for not wanting to use up all their savings, 401k, kids’ college fund and work themselves to death at three jobs to benefit the idiot bankers who shouldn’t have made the suicide loans in the first place.
If a business bought a building it couldn’t ultimately pay for, you wouldn’t blame the businessman deciding that defaulting on the loan and moving to a cheaper rental location to save the business was preferable to blowing through all his working capital and ending up totally broke. Why should homedebtors decide any differently?
“It’s All Downhill From Here, Folks”
http://www.inteldaily.com/?c=173&a=5126
Great read. While there is many a frightening stat in the article, this one grabbed my attention:
“In the fourth quarter of 2007, new foreclosures averaged 2,939 a day, double the pace of a year earlier.” (RealtyTrac Inc.) The banks are presently cutting back on home equity loans which provided an additional $600 billion to homeowners last year for personal consumption. Bush’s $150 billion “stimulus package” will barely cover a quarter of the amount that is lost.
Ouch…
“The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts. So the impending financial tsunami is likely to be a crash-course in crisis management. Today some of the larger banks have more than 50 million depositors, which will make the FDIC’s job nearly impossible.”
I just don’t want to hear that! La, la, la, la, la! I can’t hear you!
Markets are stunk in a fv
February 8, 2008 8:26 P.M.EST
BULLETIN
Markets are stuck in a funk
Benchmark indexes all are down more than 4% for the week\
Dow losses accelerate with anxiety over the direction of economy. Nasdaq hangs in black.
http://www.marketwatch.com/
Its a cognitive trap.
I took derivatives of the Case-Shiller data and I noticed something interesting, five of the western markets have synced up and are now losing equity at the same rate! Of course I blogged it.
http://recomments.blogspot.com/2008/02/its-not-different-here.html
Its getting interesting!
Got popcorn?
Neil
Scanning the MLS, REO listings, and tax database for price of recently sold homes, I can conclude that your DC uptick (downtick?) in the rate of decline is not a fluke. If you go onto Yahoo foreclosures, you’d think that half of Manassas is in foreclosure (1174).
Of course, Manassas is way out there in the boonies (cue Deliverance jokes). So what about someplace inside the beltway? What about one of those fabled mega-rich areas? If you go to McLean, VA, you’ll find 90+ foreclosures. Sure, most of them are condos, but there are a few in the 1-million+ range (ignoring the obvious commercial foreclosures).
A little bit of digging reveals that the exurbs (PW, PG, Loudoun) are getting pounded, and the inner condos are townhouses are also taking a beating. SFH in some pockets may hold up better for a while, but eventually they will come down.
I think what has surprised me is how quickly things are turning. According to housingtracker.net, DC-metro housing prices* have fallen faster than Detroit over the past year! Yes, Detrott (-17.6% vs. -17.4% 12-month decline). Holy crap!
* = median asking price.
My coworker just bought a house in the DC suburbs (not inner suburbs but not *way* out). I guess he saw the look on my face because he started telling me why it’s different here. Apparently, the line the real estate agents are using must be “the federal government’s not going anywhere.” I just sort of gritted my teeth and tried not to bring up inventory or other annoying issues like that.
Ask him how he feels in a couple of years when he has lost 25-30% more is is now upside down. You will be able to see it on his face!
You should read the Feb 11 copy of business week. There is an article that uses the Case-Shiller data and it goes against what the realtor groups are saying.
It also details how bubble markets never recover and used the example of the NASAQ which was about 5300 + at the high and as of Friday, it was 2300 +. That is what the home prices will look like in a few more years!
NOW IS NOT A GOOD TIME TO BUY!
“A developer plans to build worker housing, stores, restaurants and offices on a strip of town-owned land near Vail Village’s Covered Bridge.”
“The one-, two- and three-bedroom condos would range in price from $500,000 to $1 million, said Steve Virostek, a partner in Triumph Development, adding that free-market units would perhaps sell for five times as much. Professionals, such as doctors, are now priced out of Vail, he said.”
Half a million for a 1/1 condo in Vail, CO? Why would anyone pay that when they could live in NYC or SF or Sunnyvale or some other much better location? Sure theres nice mountains and one can simply rent for a fraction the cost of owning!
“‘In my 38 years this has been the worst capital destruction and the worst rating decline in history,’ Robert L. Rodriguez, the CEO of a mutual fund company based in Los Angeles, said to a panel of four executives from ratings firms. ‘All of you should be ashamed of yourself.’”
Robert, you have just earned my eternal respect.
“Bear Stearns Is `Short’ Subprime Mortgages $1 Billion”
This is absolutely hilarious considering they had a couple of their hedge funds wiped out due to subprime exposure.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ap5RXayJzChk&refer=home
welcome to the Wall St casino
But, where are the customer’s shorts?
I thought that meant Bear couldn’t fine $1 billion in mortgages.
Can you say “Counter-party risk?”
Comment by In Colorado
2008-02-08 11:04:47
You just gotta love how Georgia did nothing to prepare for increased water requirements as its population doubled from 4 to 8 million. Maybe its time the US turn on the “No Vacancy” sign.
Lack of fresh water will become an ever greater issue as our population continues to boom. I can’t begin to imagine it when we reach 500 million by mid century.
Big biz wants immigration (both legal and illegal) to continue at its current breakneck rate, after all more customers means more profits. What do they care if J6P has to drink recycled waste water?
My comment: I should count all the rain in Pennsylvania as a blessing! It may be annoying to be outside, but thank mother nature for plentiful free water!
“…plentiful free water!”
Watch out where the Huskies go,
Don’t you eat that yellow snow.
With fresh water everywhere, the North shall rise again. My cuz in Reno said she pays about $120 a month for water with water restrictions, while here in the hinterlands of upstate NY, my average water bill is $20 a month. Fresh water is likely to become a battleground:
A nation’s growing thirst threatens a Great Lakes water war
http://tinyurl.com/2ndxcp
But their feelings harden markedly when they think about the way water is used in some of those places.
One such example is the Waveyard water sports complex recently approved for a 125-acre property east of Phoenix. In a state where a lack of rainfall and increasing demand for water exacerbate a decade-long drought, the new park will use 100 million gallons of groundwater a year.
“Sheridon said he wishes the builders had gone a little slower during this run. ‘Of course, builders will build,’ he said.”
WHAT THE HELL is wrong with this world? Nearly everywhere, declining housing costs are seen as a BAD THING.
As a Georgist, I think I’ve discovered the answer, but I find it funny how we’re all trapped into this racket that housing has to be an long-term investment or our major life expense.
http://www.english.uiuc.edu/maps/depression/photoessay.htm
Amazing Beachunter. Thank you.
It is easy to forget that our grandparents and parents were seriously involved in the day to day of this struggle.
Thankyouagain.
A topic dear to my heart:
NY Times reports: Japan’s Crisis of ’90s Offers Harsh Lessons for U.S.
In broad strokes, the parallels are alarming. After a long boom, the Japanese economy in the 1990s, as America’s today, was jolted by a sharp plunge in the real estate market.
In Tokyo, the government bankers and policy makers were slow to recognize the scope of the problem. Bad loans piled up. The financial troubles rippled through the economy as consumer spending and job growth fell.
The Japanese slump proved extraordinarily long-lived, ending only a few years ago, a stretch of stagnation known as Japan’s lost decade. It was a humbling and lasting setback for a nation once feared and admired as a model of economic dynamism.
The shadow of Japan hangs over the American economy these days.
As I pointed out the possibility about 2+ years ago on this blog, U.S. may repeat what Japan went through after all…
NYTimes: Japan’s Crisis of ’90s Offers Harsh Lessons for U.S.
In broad strokes, the parallels are alarming. After a long boom, the Japanese economy in the 1990s, as America’s today, was jolted by a sharp plunge in the real estate market.
In Tokyo, the government bankers and policy makers were slow to recognize the scope of the problem. Bad loans piled up. The financial troubles rippled through the economy as consumer spending and job growth fell.
The Japanese slump proved extraordinarily long-lived, ending only a few years ago, a stretch of stagnation known as Japan’s lost decade. It was a humbling and lasting setback for a nation once feared and admired as a model of economic dynamism.
The shadow of Japan hangs over the American economy these days.
I brought up the possibility that US will be like Japan about 2+ years ago in this blog and most people thought it would be impossible. How times have changed…
(sorry for the duplicate post.)
Well US price declines hopefully will be faster. If not we could be looking at around 2020 for the bottom
“..as for all those ‘walk away’ from my signed legal mortgage responsibility slackers, well perhaps our society should renew the debtors prisons of old. Let’s see how quick those irresponsible mopes would be then to walk away from their legal responsibility if they knew they had years of confinement stamping out license plates and having a big nasty bubba take their cafeteria tray away from ‘em. Hey! Criminal Justice and the U.S.Prison system is one of our few booming growth industries.”
We would not have enough prisons for 30 million Americans. Funny I have talked about making recreational mating illegal to the same effect, not enough prisions for non virgins.
Hemet RE agent who now handles over 40 props per week and turns other props down, is attending GMAC Las Vegas convention this week and the convention is expecting only 1/3 of usual RE attendees.
“Median condo prices dropped 24 percent, from $218,000 to $166,500, according to statistics released Thursday by the Coastal Carolinas Association of Realtors.”
Wow! Just wow! Although expected, it’s still unbelievable just to see it happening.
While I understand why borrowers would walk ,I’m still concerned about all the people who really put up the money for these loans in good faith, while the ratings on these investments were rated AAA or low risk .It’s hard for me to believe that very many of the people who are walking didn’t commit loan fraud to obtain their speculation opportunity to begin with .
it’s a very serious matter when retirement funds and peoples savings are wiped out . While I understand that the liar loan borrower is pissed that they didn’t get the equity appreciation they expected and were promised ,these borrowers willingly engaged in loan application fraud in a lot of cases. It might be a business decision to walk ,but if enough people do it than it could trigger some pretty serious problems and it’s unclear what that would unleash .
I like to use the example of my neighbor that walked on the flip they bought, in spite of having the money to cure a short escrow at the time . This couple had made money on a few flips before they bought the last one . This couple was willing to benefit from real estate appreciation ,and did ,but once they couldn’t gain they walked without any regard for the parties that will lose money . In fact ,this couple cleared over 100k on some flips, but were unwilling to pay the 30k to cure a short escrow in which they would still be 70k ahead of the game overall .
If to many people decide to walk ,the banks and lenders might not have any recourse but to go after people for loan application fraud .
I would think the banks would think that it would be in their best interest to work with a borrower that has a high interest rate who can’t refinance the rate in this market . Maybe lenders will see that its to their best interest to reduce a loan balance rather than go into foreclosure and re-sell the property at a lower value .
I also think about the fact that fraud usually has a 10 year statue of limitation on it , and it is always better if a borrower works out something (if possible )with the approval of the lender. Just my 2 cents .
People like to point out how greedy the banks and investment firms were and how much profit they made in making these loans ,but the people who are the real losers are the people who put up investment funds for these loans . Because so many investment dollars were directed toward these real estate backed investments , many dollars that your average Joe invested are at risk or have already been wiped out .
I don’t think I need to tell you there is always some explicit risk when investing. If enough in all strata get burned by this fiasco, maybe there will be a push for real change (or maybe housing will be nationalized…) . I think we are a minority here on HBB. Generally younger, prudent, saving types. Not enough of us. We need a big tent of suffering.
Housing Wizard, is that really you?
Yes ,it’s really me . Why do you ask? I am getting worried about a crash that might be to extreme and unmanageable . Prices are going to go down to true value with time ,but the situation is making me nervous in that if these losses get to extreme there will be more pain for the innocent people . I don’t think anybody here wants to get clipped for the crimes of faulty lenders and liar loan borrowers in the form of higher taxes or a total meltdown .
The people on this blog are the types that don’t deserve to be pulled down into a hole that was not of their making . I just think that some of these FB’s need to pay for part of this nightmare .