Falling Prices Are Part Of The Solution
Some housing bubble news from Wall Street and Washington. CNN Money, “Home prices continued their plunge during the last three months of 2007, setting a real estate trade group’s record for the biggest-ever quarterly drop. The national median price drop of 5.8%, to $206,200 from $219,300, was the steepest ever recorded by the National Association of Realtors (NAR), which has been compiling the report since 1979.”
“‘The continuing crunch in the jumbo loan market that began in August has disproportionately reduced the number of transactions in higher price ranges,’ said Lawrence Yun, NAR’s chief economist, in a statement.”
“Each of the four U.S. regions recorded losses compared with the fourth quarter of 2006. The West took the worst hit, at 8.7%. Prices dropped 4.8% in the Northeast, 5.4% in the South and 3.2% in the Midwest.”
“In Lansing, Mich., square in the Midwest Rust Belt, prices plunged 18.8% to $109,600. In Sacramento, Calif., prices fell 18.5% to $197,600, and in both Jackson, Miss and Riverside, Calif. prices dropped 16.8%.”
“Cape Coral, Fla., condo prices were down 26% compared with the last three months of 2006 to $202,300, and Tucson, Ariz., prices dropped 19.8% to $128,000. Atlanta prices fell 12% to $141,100, and Las Vegas was off 10.3% to $178,500.”
The Orlando Sentinel. “The International Builders’ Show in Orlando opened with leading economists warning that the nationwide plunge in residential construction and sales will continue at least until early 2009.”
“‘There are a lot of downside risks,’ David Seiders, chief economist for the National Association of Home Builders, told reporters at the opening of the trade group’s annual conference. He said falling home prices ‘are part of the solution’ for getting sales and construction moving again because they will help balance of supply and demand.”
The Herald Tribune. “There is something different this year: The mood of the builders. It is not good. Seiders acknowledged that after his unusually bleak market forecasts for 2008. Builders are concerned, he said. Gravely concerned. His forecast last year was for a mild decline in the housing market, but still a solid year. The same cannot be said for 2008, Seiders said.”
“It’s ‘a good time to buy a home … just not good enough’ in the eyes of a lot of potential home buyers, said Seiders.”
“In the category titled ‘vacant year-round single-family homes for sale,’ the numbers will soar from 950,000 in 2005 to 1.65 million in 2008.”
“‘The biggest problem for the economy is in the financial markets,’ Seiders said. ‘This easily could spiral downward as this thing feeds on itself.’”
The Palm Beach Post. “‘This really does look like something out of a Warner Bros. cartoon, where Wile E. Coyote has fallen off that cliff and still hasn’t hit bottom,’ said Seiders. ‘It’s pretty clear that the housing contraction is not yet over.’”
“The hard-hit areas all share a common characteristic: a glut of homes for sale. ‘Before prices can turn up, we have to get rid of the oversupply problems,’ Berson said.”
The Dallas Morning News. “‘It’s absolutely essential to get this thing moving in the other direction and get home sales going,’ Seiders said. He said the housing market must improve ’so this doesn’t degenerate into an absolute debacle.’”
“‘Home prices have fallen significantly in some parts of the country, and they are going to fall some more,’ said said David Berson, economist with mortgage insurance giant PMI Group.”
“Some recent studies have warned that the housing slump could drag on for several years. And educational programs offered to builders at their convention mirror the dour mood of the market. Seminar topics include ‘Unique Opportunities in Bankruptcy,’ ‘Selling in a Slower Market’ and ‘How to Compete With Resales and Foreclosures.’”
“Despite well-intentioned government programs and promises of forbearance by lenders, don’t look for any relief on the foreclosure front, economists said. ‘Sadly, I think the news is going to get worse before it gets better,’ said Frank Nothaft, top economist at Freddie Mac, the big mortgage company.”
“Mr. Nothaft estimates that 1.25 million U.S. homes wound up in foreclosure in 2007. ‘And we are going to see a higher number in 2008,’ he said. ‘It’s going to be a tough year to get through with further declines. We expect house values to continue to weaken nationwide over the year and into 2009.’”
“Mr. Nothaft said that if borrowers have good credit and employment and can make a down payment, it’s a great time to finance a house. ‘But certainly there are a lot of people who can’t do that,’ he said.”
The Chicago Tribune. “‘Home prices are going to fall more,’ said Berson. ‘From mid-2006, the peak, to the trough in mid-2009, the national average price will have fallen 15 percent, maybe more,’ he said. ‘California, Florida and Las Vegas will fall significantly more than that.’”
“The builders themselves appear to be getting more aggressive in pushing for relief: Association President Brian Catalde announced Wednesday that the trade group had voted to cut off further funding for congressional candidates ‘until further notice.’”
“‘Over the past six months, Congress and the administration have not adequately addressed the underlying economic issues that would help to stabilize the housing sector and keep the economy moving forward,’ Catalde said in a statement.”
The Washington Post. “The National Association of Home Builders, one of the top 10 corporate donors to politicians, has stopped contributing to congressional candidates after it failed to get what it wanted in recent anti-recession legislation.”
“The association had unsuccessfully pressed lawmakers to adopt a provision to reduce the tax liability of home builders by allowing them to offset their past profits with future losses. The lobby had also pushed to expand a program that allows states and localities to issue tax-exempt bonds that finance low-rate mortgages.”
“Election experts said the lobby’s move illustrated how closely interest groups tie their donations to the decisions they hope lawmakers will take on their behalf — a connection that usually goes unspoken.”
“‘This demonstrates in a starker fashion than we’re used to seeing how groups use political contributions to promote their positions in Congress,’ said Kenneth A. Gross, a campaign finance lawyer.”
“‘Lobbies like to pretend that congressional action and their donations aren’t tied,’ said Melanie Sloan of Citizens for Responsibility and Ethics in Washington. ‘But the home builders just confirmed that they are. What the home builders have done is expose the underbelly of the connection between money and politics.’”
“But lawmakers do not like to be reminded in public that lobbyists offer them money in hopes of receiving favorable treatment. ‘Many PACs use a carrot-and-a-stick approach,’ Gross said. ‘But just a stick can boomerang.’”
“One long-time association head said via e-mail that the home builders’ statement showed the ‘political instincts of spoiled children.’ The e-mail continued: ‘One would think that a savvy staff would have kept them from something that will make them the laughing stock of Washington.’”
“Others cheered the association’s choice. ‘This is what more industries should do,’ said Cleta Mitchell, an ethics lawyer. ‘Stop supporting officeholders who don’t support their views.’”
From Bloomberg. “UBS AG fell to a four-year low in Swiss trading after the U.S. subprime mortgage crash led to a record loss. Europe’s largest bank by assets fell 8.3 percent, the most in 5 1/2 years, after reporting a fourth-quarter loss of 12.5 billion Swiss francs ($11.3 billion). Zurich-based UBS took $13.7 billion in writedowns on assets infected by subprime mortgages.”
“CEO Marcel Rohner, speaking on a conference call with journalists, described the results as ‘unacceptable’ and said this will be ‘another difficult year.’”
From Reuters. “The Securities and Exchange Commission aims to increase the transparency of Wall Street’s disclosures and has more than 3 dozen investigations underway amid the fallout from the subprime mortgage crisis, Chairman Christopher Cox said on Thursday.”
“Investors have been ‘deeply affected’ by market chaos unleashed by subprime lending and securitization practices, Cox told a Senate Banking Committee hearing.”
“The SEC has set up an agency-wide subprime task force and is reviewing the role of the credit rating agencies, which have been accused of assigning top ratings to structured finance products like mortgage-backed securities without conducting due diligence.”
“The SEC is trying to determine whether the credit raters’ role in bringing residential mortgage-backed securities and collateralized debt obligations to market impaired their ability to be impartial in their ratings.”
“Separately, the FBI said on Thursday it had recently opened two more investigations for a total of 16 corporations now being probed as part of its crackdown on subprime mortgage industry fraud.”
“Treasury Secretary Henry Paulson said U.S. regulators plan to alter rules for packaging loans into bonds in the aftermath of the subprime-credit collapse.”
“Paulson, and Federal Reserve Chairman Ben S. Bernanke, and their counterparts at the Securities & Exchange Commission and Commodity Futures Trading Commission are ‘carefully’ reviewing loan securitizations, the Treasury chief said yesterday. The process magnified losses on subprime mortgage-linked securities because it reduced the incentive for lenders to ensure that borrowers could repay their debts.”
“‘You can’t have gone through the process we’ve gone through without knowing there needs to be some changes,’ Paulson said in an interview with Bloomberg Television yesterday. ‘First, we need to get through this period with as little impact as possible on our economy. And then secondly, we need a strong policy response.’”
From MarketWatch. “The months-long deafening silence in Washington about the causes and lessons of the on-going financial market meltdown won’t end Thursday when the principal members of the President’s Working Group on Financial Markets appear before the Senate Banking panel.”
“Paulson said the White House is still in the ‘first phase’ of minimizing the impact of the financial market turmoil on the economy and hasn’t moved to the ’second phase’ of a strong regulatory response. As a result, large and small questions about the ramifications for the regulatory sector as a result of the crisis aren’t being asked or answered, in public anyway.”
“The savvy practitioners of securitization that chopped up mortgage loans and sold them to other financial institutions went over, around, under, and through the regulatory structure. And the whole time Congress was cheering the financial industry on to increase homeownership to all Americans.”
“‘There is enough blame all around,’ said Burt Ely, a consultant on banking regulation. He saw some of the roots of the crisis going back to the rescue of the savings and loan industry when experts said that banks should ship risks to other financial institutions.”
“So, although a number of considerations have created what could only be described as a conspiracy of silence among the executive branch, the legislative branch and the independent regulators about the crisis, the principal reason is that no one wants to bring up something where everyone is at fault.”
“Washington ‘has been so far behind the curve in the last 10-15 years,’ said Joseph Mason, a professor at Drexel University. ‘There ought to be an investigation about where they have been,’ he said.”
“But what is becoming increasingly clear to experts is that the emperor has no clothes. In other words, the regulatory system in place is riddled with holes, long-standing assumptions have proved incorrect. It is like the bedrock has shifted under the philosophy underpinning the U.S. financial regulatory system.”
National Public Radio. “Foreclosure, we’re told, is a last resort, an option that no responsible homeowner would ever choose. But some distressed homeowners, no one knows exactly how many, are…voluntarily walking away from their mortgages, engaging in a practice the mortgage industry calls ‘ruthless default.’”
“But is it really ruthless — or just good businesses sense? Some economists argue it’s definitely the latter.”
“Sometimes, they say, walking away from your mortgage makes economic sense, especially for homeowners who find themselves ‘upside down’ — that is, they owe more on their mortgage than their house is worth. In those cases, ‘voluntary foreclosures are not by themselves evidence of a newfound irresponsibility on Americans’ part,’ says Nicole Gelinas, writing in The Wall Street Journal.”
“Separating the economics of foreclosure from the morality (and the stigma) is not easy, though.”
“‘We need a culture of responsible consumers and homeowners,’ says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, echoing a deep-seated American belief that one should always honor financial obligations.”
“The current housing crisis is different, argue some economists: Since some financial institutions sold these loans in a deceptive manner — for example, by approving people for loans they couldn’t really afford — then why should homeowners feel obliged to honor their commitments?”
“‘Walking away from one’s home should be the absolute last resort,’ says Gail Cunningham of the National Foundation for Credit Counseling.”
“But there is one category of homeowner, she says, where foreclosure does make sense: people who bought their homes ‘with their hearts and not their heads.’”
“‘For people who may never be able to afford their home, then walking away is a viable option,’ she says. ‘If long term, you’re not going to be able to sustain the mortgage payment, then you’re fooling yourself and should get out of that situation and move on to life after foreclosure.’”
Diana Olick had this twist on the NAHB lobbying:
‘I’m not often shocked on this beat, but I am today. I just got a call from a source at one of the big public home builders regarding my blog yesterday about the National Association of Home Builders cutting off PAC money to members of Congress.’
‘The source says that the big builders are respectful of the process on the Hill and appreciative of the access. In other words, my words, they did not expect a quid pro quo. While disappointed, the source says, they hope to continue working forward constructively with members of Congress, in order to work through the current difficulties. The source says some of the big builders are confused as to why the Association did what it did.’
The big builders kept local municipalities from keeling over, by buying off their governments, lock, stock and barrel, through use fees, and where’d it get them?
A one-way ticket to Palookaville…
All aboard!
From the NAHB perspective, thoroughly understandable. Once you buy a politician, they should stay bought.
“There’s nothing wrong with revenge - it’s the best way to get even!”
Archie Bunker
Someone once asked Howard Hughes what qualities he looked for in the politicians he supported.
“The ability to close their hand when I tell them to” was the reply.
ben,
The second they get you trying to figure something out…they got you. Maybe the NAOHB is trying to pull one over their member builders.
The timing couldn’t have been more perfect for the Calif. Coastal Commission to overwhelmingly deny the land grab of a portion of the wildlife preserve near the famous San Onofre surf spot known as Trestles. Contractors/land developers wanted to swipe this acreage along the northern edge of Camp Pendleton (San Diego’s natural buffer zone from LA) to build another toll road to supposedly “alleviate traffic” along the I-5 corridor and within south Orange County. As the public–in the largest turnout ever for a CC hearing– accurately pointed out, new freeways seldom alleviate traffic over the long haul since more lanes encourage more roadside develoment which encourages more traffic. If this toll road had gone through we would have seen yet another bumper crop of 1M bloat houses “with ocean views” to join the growing inventory of unaffordable houses. Folks are finally figuring out how lobbyists influence public policy, and how taxpayers subsidize private gain. In this case the housing/credit crash saved a unique open space for generations to come.
Bay Area #’s out - I will wait until Ben posts - let me summarize though:
TIMBERRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
And to think that some people might call you a doom and gloomer. Just look at the cheerful attitude emanating from that post!
LOL!!
Yeah, and you know, that’s not very compassionette.
I couldn’t wait. I looked. HOLY CRAP! I’m not going to let the cat outta’ the bag, but yes- I can’t wait for Ben to share this with the blog. Oh…. how rich this is…
LOL
“Home prices continued their plunge during the last three months of 2007, setting a real estate trade group’s record for the biggest-ever quarterly drop. The national median price drop of 5.8%, to $206,200 from $219,300, was the steepest ever recorded by the National Association of Realtors (NAR), which has been compiling the report since 1979.”
I so enjoy watching the cliff divers of NARcapulco, plying their trade.
The emperor’s new close couldn’t get funded.
“But what is becoming increasingly clear to experts is that the emperor has no clothes. In other words, the regulatory system in place is riddled with holes, long-standing assumptions have proved incorrect. It is like the bedrock has shifted under the philosophy underpinning the U.S. financial regulatory system.”
“The emperor’s new close couldn’t get funded.”
This is your best pun yet! LOL
“The emperor’s new close couldn’t get funded.”
This is your best pun yet! LOL
wholehearted agreement!! absolutley brilliant. Laddy, are you by chance a hollywood writer slumming here on the blog? If so, may I suggest stepping to help out a returned formerly favorite TV Series; Jericho.
Season 2 = what the BLOODY HELL is THIS ?? what a mess. they need you laddy. big time.
“voluntarily walking away from their mortgages, engaging in a practice the mortgage industry calls ‘ruthless default.”
Well keep ‘em coming.
Ben has CNBC contacted you to be a guest on the shows?
I’m working on that.
WOW!! Congratulations!
That would be BRILLIANT!!!
If you do, their viewership will be up by a whole blog!
Good luck, you’ve earned it.
That’s awesome Ben! You called it long before those asshats!
Yeah, ’cause I want to see what Ben looks like. I end up with conjured images of people, and I like to see if they match.
I have always imagined txchick to be in a combat helmet, for some reason. I was startled when she revealed she went to get her hair done, and that she HAS hair, and that it is long and reddish-brown.
I imagine that palmetto looks like Skink, in Hiassens’ books, and I imagine lost in Utah as having a finch on his shoulder that clings to him with love. I imagine Tom as sorting through his many speeding tickets. Haw! (That’s a joke, Tom.)
So, I want to see what Ben looks like, because I imagine him as looking a bit like Satan, only more agreeable, and in a plaid flannel shirt and Chinos.
I’ve never hidden that. Just click on my profile. It was taken in October 2004 and I haven’t changed too much.
Ben make sure you let us know prior
you deserve to be on there
maybe a sit down with cramer too?
Wow, Ben, you look so…”California.” I, too, thought you were the flannel shirt, bearded type. You also look a lot younger than I thought you were.
Oh, goody, Ben, you’re rather cute, although I do wish you had one of those forked Van Dyke beards, like Satan has, and all the better Eastern European heads of state. Also, what is that thing you are cuddling in your arms? A lantern? A little mummified head in a jar? Ooooh! I hope it’s that one!
Oh, goodness, that reminds me, I started organizing a local fun-raiser for a worthy project, and I have to gussy up some exciting items for auction.
bpark, that is what I was going to say, like a guy surfer.
Dude !
Wow, Oly, you have a good memory, the finch was last summer! (And I’m a gal, not a guy.) I imagine Chick as looking just like Wonderwoman, only with a more chick costume (ha) and carrying a fishing pole for those big trouts. Ben looks just like his photo, but he’s wearing a baseball cap that says “Bubbles Always Pop” or something like that. As for you, Olygal, I picture your rhinestone cowgirl boots kicked up on a chair in the front row of the county hearing on new subdivisions while writing to us all on your laptop between very articulate, confounding, and oratious objections.
Oh my GAWD, losty, you’re a chick?! I thought you were a guy, I guess, and I have to say it, although it makes me pretty mad to say it: because you sound tough and practical and clear-sighted. And with the running around in the back-country tidbits you sometimes let drop. Those wastelands are no joke, at all.
… where the sun beats,
And the dead tree gives no shelter, the cricket no relief,
And the dry stone, no sound of water.
(t.s. eliot, The Wastelands)
I used to run around in there, so I know. This is before I took up my current fad, which is: prancing around in rhinestone cowgirl boots kicked up on a chair in the front row of the county hearing on new subdivisions. I find that if I wear boots that farmers are more trusting. Plus, they’re cute boots.
Anyway, I like you even more now. And somewhere, a finch is excitedly telling all his/her buddies:
“Okay, guys, I once knew this tall evolved simian. She was just super. Fixed me right up, look at me, huh, huh?! I look great! So let’s put off this ‘The Birds’ re-enactment plan where we attack and eat all the humans, for her sake. “
Yeah, Oly, I love the desert, I’m a desert rat. Picture me in jod pants and a pith helmet, hiking around with an old-fashioned metal canteen and walking stick and you’ll have it! Ha - my wardrobe actually consists of jeans, hiking boots, denim shirts and a pack of Blue Heeler dogs. I wash my own dogs, do my own nails. LOL! It would be fun to see photos of everyone on this blog - the imagination is a great thing. And I just know your rhinestone boots are deep magenta, right??? LOL!
Totally funny, because I could’ve sworn Lost was a guy, too.
Man, is everyone on the HBB a female?
So much for the misogynistic “women are evil, emotional, irrational creatures who force us into house serfdom,” rants we see so often on here.
Cheers!
Nonesense, Tx looks like Renee Russo. I picture Leigh in blonde pig tails and an army helmet. Alad will have pine needles stuck in his hair and hiking boots. Prof looks like a cross between Paul Krugman and Al Pacino.
Palamento is the one I have an issue with since the name gives me Kafka like flashbacks and I know he can’t look like a bug >; )
Nahh…. TXchick= southern fried Fran Drescher
I hope they allow you to complete a thought without interrupting. That would be a first.
ben, you might want to avoid wearing a poofy shirt on national TV if offered by a friend. just sayin . . .
Ben should bring tissues and diapers for the whining, pandering Wall Street thugs.
“ruthless default.” - a perfectly rational response to years of “ruthless lending”
‘We need a culture of responsible consumers and homeowners”
Yeah, let’s start with responsible Treasury secretaries, SEC chairmen, investment banks, Congresspersons, presidents, corporate CEOs and federal regulators. We can worry about the peasants later.
I love this though. The walkaways are changing the facts on the ground faster than the generals can craft non-solutions and keep them paying interest on their underwater crackboxes. Who’d a thunk it…the proles are revolting. May their tribe increase.
Yeah, let’s try shaming everyone into making their mortgage payments.
One of my favorite sayings is “What goes around, comes around” (and it’s close relative, “Karma is a bit#h..”)
I’ve been watching the CEO/Wall Street crowd suck the lifeblood out of middle America for 15-20 years now. And now that J6P is wising up to the game (bailing out on underwater mortgages, improving their job mobility, keeping know-how to themselves, rather than letting the company keep it as “intellectual property”), they don’t like it. Sucks to be them. (well, sorta….)
“If I’m going down, I’m taking them with me!!!!!!”
My sentiments exactly Gulf….. Just a minor correction. The corporatists have been sucking the lifeblood out of the peasantry circa 1981, the inception of the failed policy of supply side economics.
Agree!
So agree, Spike. So so agree…
(picture tribal dancing and drumming and wild chanting around foreclosed houses…)
I’m actually going to disagree. It is a huge deal toe default on a commitment worth hundreds of thousands of dollars. It is because of an irresponsible and ignorant consumerism that people got themselves into this mess. It’s nothing to celebrate that these people don’t feel any compunction about lifting up and starting over. They should feel shame and pain — that’s what discourages this kind of behavior (when people don’t have internal scruples or, apparently, calculators). Instead, they’re being told this is the “smart” decision.
And of course supply-side works. When people had money, what happened? The economy went up, and it went up for everyone, unless you think only the super rich have iPhones and consumer toys. Doesn’t matter in a strict sense where it comes from — tax cuts, wage inflation, credit — the effect was there and it was real. It only matters in a sustainable sense, where, obviously, lower taxes and wage inflation are better than credit since that is real money.
“And of course supply-side works”
Of course it works when you borrow 9 trillion. Bernanke and Paulson both stated, under oath, in front of congress that it doesn’t work. Plain and simple, an idiot can look like a genius with borrowed money….. hmmmm…
The economy went up, and it went up for everyone, unless you think only the super rich have iPhones and consumer toys.
Based on WHAT do you make this assertion.
I don’t know anyone who has a iphone (if that is the thing that cost several hundred dollars and people stood in line to get it.)
If you base it on tangible wealth (real things people own and not just things that they owe money on), it didn’t go up.
Sure as bejesus didn’t go in income. The bottom 90% stayed flat or fell in income during the past 6 years. The wages of college grads (all that - go to school and have a good job forever garbage) have been steadily falling for the past 6 years.
You do not really ‘buy’ something if all you do is put it on the credit card or use borrowed money. Al your are doing is borrowing it until you pay it off.
No reputable economist anywhere - not even Bernake (sp) - claims that ’supply-side voo-doo’ works.
” It is a huge deal toe default on a commitment worth hundreds of thousands of dollars.”
Deon,
It’s contract law, pay the mortgage or the lender will foreclose on the house. So, the FBs are choosing to surrender said house to the lenders. And it is a business decision. The walkaways have learned from the pols and the Boyz on the Street, it’s not personal, it just all about the money. Let the lenders, who chose to make reckless loans to folks with zero resources, or even without jobs, with no downpayments required or any standards of prudent lending in place reap what they have sown.
By the way, do you hold the ibanks to the same standards of “shame and pain” as they write down billions in CDOs because of shoddy oversight in securitizing these mortgages. Or the builders who dumped tens of thousands of crackboxes in shoddy developments using illegal labor that will have to be bulldozed before this is over?
Forget it Spike. I just realized he’s the same knucklehead who insisted that working for WalMart is great in a post a few weeks back….. until AnnScott asked him if he’d trade places with a WalMart wageslave.
‘We need a culture of responsible consumers and homeowners”
I don’t condone the act of walking away from obligations but if it’s not illegal then the consumer has every right to do it. If CEO’s et al can fatten their wallets at J6P expense and then lays him off, why would J6P not watch out for himself in case he gets screwed by the man? Is it better to quit a job or be fired from it? Walk away I say….so that home prices can quickly correct. Let’s see how smart our fed bankers really are as they try to fix this mess. Maybe they can come up with some hocus pocus nifty product…….NOT. I thought that they were qualified to do calculus but in actuality all they knew were simple addition. They just make up these fancy acronyms for the financial products to confuse everyone so that noone questions their fake intellect and sleight of hand.
Disgusting.
How unfortunate it is for the masters when the peasants realize that the rules they have been shamed into following never apply to those who rule them; and with that thought, why should the rules apply to anyone?
“The continuing crunch in the jumbo loan market that began in August has disproportionately reduced the number of transactions in higher price ranges.”
Why didn’t the NAR mention last year that it’s median home price was artificially inflated by a crunch in the subprime loan market that disproportionately reduced the number of transactions in lower price ranges? What he is saying that the NAR number is not a real measure of market value when market value goes down, but the reverse is true as well.
I agree. He is just describing the way the median works. But I do think that when higher loan amounts start to get funded, it will tilt the median up. Statisistically, that would seem to be logical. But it doesn’t mean prices are rising, or anything else IMO.
“‘For people who may never be able to afford their home, then walking away is a viable option,’ she says….”
Brace yourselves!
No kidding. I just noticed a bunch of new for-sale signs on my way to work this morning. I took a route I haven’t taken in a month or so.
One that I thought was cute was just a block or so down from a new McMansion farm. 70’s era rambler-type single level house. Probably way overpriced, but the thing that I thought was cute was that the RE company selling it was called “Hope Realty.” Little doves on the sign along with “hope” in big letters.
I thought to myself “keep hoping….”
Dead loan walking!
Hope sinks!
The audacity of Hope Realty.
It’s just good money after bad. Maybe they figured out that there’s not a lot that congress can do to stop the inevitble and have decided to hang on to what capital they still have.
On a separate note, I would like to apologize for the disjointed appearance of my long post yesterday - the one with my “exchange” between myself and various congresscritters.
They should have begun “Dear [Congresscritter's name here]” but instead just showed up as “Dear ,”
That’s because I put the part in []’s in greaterthan/lessthan braces instead - which meant it didn’t show up since it got interpreted as html.
Sorry bout that.
Thank you for all your great comments though. And thanks to Ben for the blog!
“The continuing crunch in the jumbo loan market that began in August has disproportionately reduced the number of transactions in higher price ranges.”
The continuing Unwinding of the Over-Leveraged Debt Collapse.
Quit calling it a Crunch.
“…emperor has no clothes…”
“…on-going financial market meltdown..”
“…biggest-ever quarterly drop..”
“This easily could spiral downward as this thing feeds on itself.’”
“…subprime mortgage crash led to a record loss…”
“…Wile E. Coyote has fallen off that cliff and still hasn’t hit bottom…”
Ah, yes.
Game on.
“This easily could spiral downward as this thing feeds on itself.”
The scariest of the lot. Let’s see what this looks like on the other side of the (3rd silent) spring - by then some evidence of a wicked feedback loop might start to show itself.
Already happening IMO. Why did az_lender stop making 85% loans. Etc etc. Declining prices have already had the effect of increasing the rate of foreclosures, which necessarily pushes down prices etc etc.
Has someone seen the Give back today? yesterday WOOO WOOO and today OOps.Dow.
Give with one hand, take back with the other. Dow.
“‘There are a lot of downside risks,’ David Seiders, chief economist for the National Association of Home Builders, told reporters at the opening of the trade group’s annual conference. He said falling home prices ‘are part of the solution’ for getting sales and construction moving again because they will help balance of supply and demand.”
Balance is good. But only if the fulcrum is centered.
Winning over hearts, but never mind.
“But there is one category of homeowner, she says, where foreclosure does make sense: people who bought their homes ‘with their hearts and not their heads.’”
As in, the couple whose wife was so easily persuaded by Suzanne, who researched this?
Which is about 95% of home buyers.
Yeah, that really narrows it down…….
“He [Seiders] said falling home prices ‘are part of the solution’ for getting sales and construction moving again because they will help balance of supply and demand.”
The NAHB is embracing falling home prices. That’s just crazy.
Soon they are going to find out that thats not enough. Prices will keep falling but even once they are reasonable smart people won’t buy something they can’t sell regardless of if they can afford it or not. There are simply not enough responsible people left in America to buy the housing stock available. I could care less if housing becomes affordable again it does not matter. I have to consider the probability of if I had to sell how fast could I sell the home and at what loss ? Only a fool would buy anytime soon affordability or not.
True–and even if, by chance, you never had to or wanted to sale, you now must face the likelihood that the stability of your neighborhood could turn on a dime, as all the FBs around you bail. Who wants to be one of these poor souls stuck alone in the new subdivision full of half-built and abandoned Tyvek shacks?
“the stability of your neighborhood could turn on a dime”
In a global economy, where staying employed may demand being mobile, this point deserves extra consideration.
The urban decay of the 1950s-1970s occurred at a time when “jobs for life” were still relatively commonplace.
“There are simply not enough responsible people left in America to buy the housing stock available.”
This is something that no one seems to be addressing. The real estate industry keeps implying that there are hoards of buyers out there just sitting on the sidelines, waiting for prices to drop. With home ownership at its highest ever, how can that be?
Then there are all the people who lost homes through foreclosures. Don’t think they’ll want to get right back up on the horse called home ownership. Or, will they be able to even if they wanted to?
There will be some speculation, but with diminished returns or losses, won’t be as attractive.
If homeownership reverts to its normal 60%, that’ll add even more inventory.
Don’t think this wil be over anytime soon.
Perhaps the safest places to buy are those already occupied mainly by tenants. In such places, one can (presumably) rent out one’s property as needed. Of course, prices do have to fall a whole lot before buying-to-rent-out makes any sense. But it does put some kind of a floor on prices…therein lies my partial disagreement with Michael Emmel. I agree there is excess housing stock. But not everywhere. Mainly in exurbs.
it does put some kind of a floor on prices…therein lies my partial disagreement with Michael Emmel.
Thank you az_lender. I agree with your comment 100%, at least in areas where supply and demand are more in balance. I wouldn’t go near Florida for some time though…
“‘It’s absolutely essential to get this thing moving in the other direction and get home sales going,’ Seiders said. He said the housing market must improve ’so this doesn’t degenerate into an absolute debacle.’”
Hey Dave, look at it this way - it will improve, years and years and years and years down the road, when houses become affordable again. What a happy ending to the absolute debacle now unfolding, no?
Or just try this. Take off your NAHB dunce cap and look around. An economic DEPRESSION is steadily covering the land, like a spider spinning a cocoon around a doomed housefly. After a while, most of your NAHB buddies will have had their lifeblood sucked out. They won’t be around to complain any more.
“so this doesn’t degenerate into an absolute debacle.’”
Yo Dave, we’ve been waiting for years on this blog for it to degenerate into an absolute debacle, and couldn’t be more pleased with how things are going. Sit back, have a little popcorn, and enjoy the show.
“The SEC is trying to determine whether the credit raters’ role in bringing residential mortgage-backed securities and collateralized debt obligations to market impaired their ability to be impartial in their ratings.”
Barn door closed. Horses gone.
“Seminar topics include ‘Unique Opportunities in Bankruptcy,’ ‘Selling in a Slower Market’ and ‘How to Compete With Resales and Foreclosures.’”
ROTFLMAO! If these guys had a clue, they’d be fishing.
Yea, or maybe riding some roller coasters. Builders and bankers are going to hate they choose their career field, if they haven`t already. Banks are going to get their a$$ handed to them, with the RE and the CONsumer loans going south.
Lane
Wow. Jingle mail is the new black. So all those foreclosees will be joining our side soon also, cheering as prices continue to erode…
“In the category titled ‘vacant year-round single-family homes for sale,’ the numbers will soar from 950,000 in 2005 to 1.65 million in 2008.”
Ru-roh!
I really like this blog…….the economic version of “Mystery Science Theater 3000″.
LOL! That’s so true.
“‘There are a lot of downside risks,’ David Seiders, chief economist for the National Association of Home Builders, told reporters at the opening of the trade group’s annual conference. He said falling home prices ‘are part of the solution’ for getting sales and construction moving again because they will help balance of supply and demand.”
We’ve just entered into the Chicken Little denial phase, of the housing bubble crash…
Prices down 6% nationwide? That is huge! It may not sound like much, but keep in mind that much of middle America and the Mountain West have not cracked much yet.
There’s a reason we kept hearing that “nationwide median prices have never gone down.” Even in times of trouble, the nationwide sampling has smoothed over localized price drops. So for the countrywide average to be down 6% YOY, this is the start of something very, very big.
“But there is one category of homeowner, she says, where foreclosure does make sense: people who bought their homes ‘with their hearts and not their heads.’”
What if you bought with your head, not your heart, but didn’t know how rigged the system was at the time? There’s a very large group of borrowers than can and should walk away, not just those that “bought with their heart”. That group is probably already screwed anyway.
If/when lending goes back to being more reputable, then I’ll support borrowers being more honorable. Until then, it’s just bidness.
I don’t care about heads or hearts. How about people buying with their own money?
From MSNBC
Stocks have pushed lower to their worst levels of the session on news that FGIC has become the first major bond insurer to lose its coveted AAA rating, according to Reuters. Moody’s cut the company’s rating to A3
So glad I moved all shares in 401 in OCT to the CU fund.
Got the statement in the mail today and if I had left them in the funds allowed, it would be half of what it is today. Left at High mark.
thankyoubabyjesus.
Seiders said. He said the housing market must improve ’so this doesn’t degenerate into an absolute debacle.’”
Hey, I know! Let’s throw a debacle and see if everyone comes! I’ll bring the chips and dip.
When’s Neil having another popcorn party? Now that I’m in Calif I don’t see any events happening!
“Mr. Nothaft said that if borrowers have good credit and employment and can make a down payment, it’s a great time to finance a house. ‘But certainly there are a lot of people who can’t do that,’ he said.”
Yes, and ‘if’ I got a magic pony then I could ride to the moon and me and Rainbow Brite could battle the wicked Dust Bunnies together.
“But certainly there are a lot of people who can’t do that,” he said.
Most can’t do that, unless prices come down - a lot.
Speaking of magic ponies, digging in this room full of sht looking for that pony…
Do these people know the words Honesty,integrity, ethics?
Moody’s just downgraded FGIC from Aaa to A3 - the beat goes on.
For anyone that thinks Wall Street write downs are over, they are being absolutely torn apart. The only thing certain is the bottom is not in sight.
Feb. 14 (Bloomberg) — Freddie Mac, the second-largest provider of money for U.S. home loans, will purchase loans covered by mortgage insurers that don’t meet the company’s standards for the amount of capital backing their policies.
Freddie Mac’s suspension of its requirements applies to mortgage insurers downgraded below AA- or Aa3 by ratings firms, the McLean, Virginia-based company said in a statement today. The insurers will be required to submit a remediation plan within 90 days of a downgrade
The redemtion plan will be,
“We are not taking them back, let the taxpayers keep them so we can continue to get our bonus and stock options.”
This is a killing.
Where is BuffetMan?
Hahaha! Comical!
Must really hurt when the ratings agencies are suddenly stuck with a Hobson’s choice between continuing to paint lipstick on pigs or coming clean with what they know in order to salvage their tarnished reputations. It’s especially bad when even casual, disinterested observers (like me) notice the problem at first glance.
They would call me from time to time with “questions” about some of my securitizations (munis not subprime). Usually some guy straight out of school reading from a checklist. I dont remember any of the questions being addressed to the core of the deal and the economics associated therewith. Just check the box nonsense. Have you ever read the ratings letters? Most of the time they dont even identify the correct security, and that’s just reading as far down as the RE line.
And let the real bailout of the greedy begin
http://www.bloomberg.com/apps/news?pid=20601087&sid=apLs1l8SwsFA&refer=home
I have come to an ethical fork in the road. My landlord is going into foreclosure, hasn’t been paying the mortgage on my condo for months. The auction is coming up soon. He calls me and tells me he and his attorney have worked it all out, but lets go that it is a chance for him to reorganize financially under something of a reprive (Project Lifeline Bull$hit Package maybe, didn’t ask). I thought none of these pseudo-bailouts applied to an investment property, whicheads me to believe he used an owner occupant loan for the place I’m renting(beside the point). Also leads me to believe he has ded to be foreclosed on it regardless, but wants my next month’s rent check. I’m on a month to month and have recouped part of my deposit. Do I pay next month’s rent? If he gets a free 30 day pass, where is mine? I have never in my life even thought about not making a rent or mortgage payment, but then again, I have never been in a situation where I feel like a such a pawn.
Legally the terms of your lease apply even though this particular scenario will probably not be covered. He probably cannot find another tenant though, so you might use it as an opportunity to sign a mutually acceptable amendment to deal with the situation with such amendment being a condition precedent to any additional payments (at least to the extent you are not contractually obligated to pay, which would be a breach on your behalf).
“when you come to a fork in the road, take it” (Yogi)
Decisions are made better with verified facts. What even makes you think someone in default has your deposit in “escrow”?
Verified facts, total agreement. However, there is no way for me to get those, as I am dealing with a desperate individual with the keys to that information, and he WILL act in his own best interest at my expense.
Deposit isn’t in escrow, but I didn’t pay a months rent as soon as I get the foreclosure notice in lieu of part of the deposit.
I am leaning towards paying the rent, and sleeping better at night. However, I feel like I got dragged into a financial dogfight and I don’t like losing.
Sorry for the typos, exhausted today….
I cannnt sntand tpos.
Denver, don’t pay in lieu of the rest of your deposit. When all’s equal, revisit the situation and then decide what to do.
I’m so tired of moving, maybe I’ll trade my truck for a small”ish” place on the Western Slope and simplify my life. Know any takers?
I’d pay him a week at a time. certified letter. that way if it all blows up you can show good intent on yer part but possibly avoid losing a large amt of money. I’d be annoyed at having to jump through rediculous hoops to get any money back while at the same time being forced to move quickly. why let the morally bankrupt landlord have his way at yer expense by trying to do the right thing?
Scumbags dont care about anyone else, so I damn sure will not sacrifice me or mine in the name of some morallistic situation in which they refuse to participate. just like my long posting yesterday re corps. scumbags always think that rules are only for their benefit, and when they have to follow the same they kick n scream to high heaven. the minute someone deliberately tries to screw me over is the minute the gloves come off & the old rules are out the window. you have my admiration for trying to do the right thing. dont let it bite you in the azz, comprade.
eff em. eff em all. with a 20ft drought stricken joshua tree after a trout waterboarding!
Try this guy, 40k in Naturita.
http://tinyurl.com/2gz9mo
So aquius, according to yesterday’s post, I guess it’s OK for an FB to walk away from their condo (and I don’t necessarily disagree with that), just so long as they aren’t a landlord. All of a sudden, ethics apply?
cayo ron
how did you arrive at that concusion regarding what I said?
Well, it seems FB/landlord is morally bankrupt if he walks away from his condo/breaches his contract with lender and tenant, and I would agree. But if he just walks out on his mortgage contract, he’s “stickin it to the man.” Both are breaking contracts and have their potential consequences, but if the FB is hurting his tenant, it seems you draw the line there. So, if we go back to yesterday’s condo owner, it’s a business decision to walk away and leave the bank holding the bag, but here if the renter loses his deposit (again, I’m not saying that’s good), then he’s morally bankrupt. How is that not a business decision as well (albeit a bad one)?
cayo ron
ok so after reading & re-reading yer post a few times, I think it all boils down to this; people should treat each other fairly, no matter if they are on main street or wall street. however, we all live in the real world, where large corps & small landlords let their greed for every last penny overrule fair moral responsibility.
The posting(s) speak for themselves.. .. ‘res ipsa loquiter’ in lawyer speak. feel free to disagree of course but I stand by my statements.
small landlords let their greed for every last penny overrule fair moral responsibility.
Only someone who has never been a landlord would throw a statement like that out… go buy a rental property and manage it for a year or two, then get back to me. It’s a business, like any other. Morals have nothing to do with it.
Pay 1/4 of the rent, week to week. It may not be in the lease, but going into foreclosure invokes the CYA clause, IMO.
‘Do I pay next month’s rent?’
I’ve honored all my debts all my life, too, so I can sympathize with your quandary. And….let’s see….Nope. Is what I say, but that’s just me. I think your landlord “wants my next month’s rent check”. That’s all.
Put your rent into a special (newly created) saving account at the bank and then send a letter to the landlord by registered mail explaining that you will not be paying rent based on his statements regarding foreclosure but that the rent is in escrow and you will pay the rent (plus interest) if and when a court so orders. Then wait for him to file suit. If he does and you were evicted due to foreclosure in the meantime, he won’t have a leg to stand on. The pseudo-escrow account will make you look infinitely better in the judge’s eyes than just not paying.
You’re on a month-to-month so in effect your landlord can kick you out on the same 30-days notice that the former lender can. Your position hasn’t changed at all (unlike if you had a lease). Continue to make your payment and start looking for a new place. Don’t pay in advance though; if the rent is due on the 1st pay on the 1st, not the 25th of the prior month.
Denver-
This happened to me.
I got a lawyer to write letters to get me half back.
I was wondering if I can use the $1800.00 loss as a tax deduction.
Opening up that part of my life is a Pandora’s Box.
Denver lawyer - First off, all the advice I’ve read is DO NOT stop paying rent - until finalization of foreclosure, it’s just like any tenant default, leaving you without a leg to stand on if the landlord starts eviction proceedings. Maybe that’s just one more thing he doesn’t need, but why take the chance. Especially since there are lately plenty of reports of lenders dragging their feet to foreclose, and tenants sometimes enjoying multiple months rent-free after foreclosure sale.
So one big question is: how flexible are you? Can you live with the uncertainty? (I live in a pretty tenant-adverse state, for these situations, but even here, once the sheriff comes, if you show your keister up in court and plead that moving on X days notice would be a hardship, the court will generally grant an extension. It’s the tenants who panic and dodge the sheriff, the court, everyone, who are going to wham, bam find their stuff on the street. If I was single/childfree and could deal with a short eviction notice, I think I’d be tempted to see if there’s a financial upside for me, here. (As an aside, be sure not to pay rent to any new owner or entity until you’ve secured something legal from the court that says it is their’s, a clear legal paper trail showing you are paying the right party and that you have an agreement with them. I think I’ve seen a few mentions here that servicing rep types sometimes play games with trusting tenants.)
What can you verify through your own efforts as to where the foreclosure is in the pipeline? Has there been a foreclosure notice in the local papers (Figure out which papers publish these notices, go to library, it shouldn’t take long as I believe it has to be published for something like 3 or 4 consecutive weeks prior to auction?) Short of getting his cooperation so that you can see exactly where he stands “on paper” or speak with the mortgage servicer, you should still be able to figure out how long you really have.
If you can find the proof that the house will go to auction on (arbitrary date) March 24th, you may want to consider “lawyering up” to require the rent to go into an escrow account where it is recoverable – you say you’ve recouped part of your deposit, so knowing that it’s just the remainder at stake might cover a lot of your worries. Of course I wouldn’t expect things to be quite as chummy with the LL after that. And if you are month to month, and he’s not getting cash in hand from you, could you end up being forced to leave sooner than the actual foreclosure sale?
Probably important: if he is playing some BS game that he’ll get a bailout as owner/occupant, just be sure you don’t get talked into perjury or something like, whatever he’s offering you.
Don’t envy your LL’s “free pass”. If you’re guess about “owner occupant” loan is true, he is hip deep in something he won’t enjoy. Just be sure you don’t get talked into perjury or anything else that isn’t kosher – you’ve already got his number and you don’t want to get dragged into his business in any way. Disclaimer bookend again – this is not advice, IMNAL…
— And just thinking out loud, some legal eagles is going to get very rich in ‘08 or ‘09 writing a book for the “bitter renter” crowd on how to negotiate and/or modify a lease agreement with FBers, protect against unwittingly renting from one on the edge of foreclosure (at least without a plan), etc.
They person who writes that book must interview me.
I agree with Memphis, adding that showing up in court is crucial. Judges will respond favorably to responsible behavior–also,keep a pen and paper near the phone and keep notes, dates and times of any phone calls or conversations you have with your FB landlord.
Agree to no deal that he offers, do not even think of colluding with him in any scheme. Personally, I would pay a week at a time by registered mail, but I would also look for another place right now, and not screw around with this fool any longer than necessary.
Has there been a foreclosure notice in the local papers (Figure out which papers publish these notices, go to library, it shouldn’t take long as I believe it has to be published for something like 3 or 4 consecutive weeks prior to auction?) Short of getting his cooperation so that you can see exactly where he stands “on paper” or speak with the mortgage servicer, you should still be able to figure out how long you really have.
___________
At the end of the auction notice will be the name and contact info for the firm handling the foreclosure for the lender.
Call them.
Contact an attorney NOW. It won’t cost you all that much to meet with him and have him deal with your LL and the lender’s attorney. He will be able to get the answers and send a letter to all spelling out to all what your position is on the matter of additional rent and deposit. Shouldn’t take more someone more than 2 or 3 hours.
BTW, the minute the lender hears from a current tenant who inquiring about the status of the foreclosure, they will clue in real fast that it is NOT owner occupied. Be prepared - just play innocent with the LL when he starts screaming that you blew up his ‘deal’ by them finding out that there is a tenant and do the ‘how was I to know’ routine.
“just play innocent with the LL when he starts screaming that you blew up his ‘deal’”
This makes me nervous. There are too many FBs who are armed and drunk. Or stoned. Or enraged. Seriously, I would not get in the way of a guy that desperate and angry over a lousy month’s rent.
“I thought none of these pseudo-bailouts applied to an investment property, whicheads me to believe he used an owner occupant loan for the place I’m renting(beside the point).”
Make sure the lender is aware of this fact.
Now, they’re all crowing about repudiation… playing the blame game. A little late at this stage… the FUBAR is hitting the fan. This whole mess is turning into a classic greek tradegy! Absolutely believable now!
“But there is one category of homeowner, she says, where foreclosure does make sense: people who bought their homes ‘with their hearts and not their heads.’”
The new defense to contract formation: “my heart made me do it, where’s your humanity? feel my pain…”
Lenders beware!
What happened to the horrible days when the only thing going up was health ins. and celery?
What are we going to do with all these broke families/consumers?
Is every pension and every equity down the tubes?
Ben are you going to start watching CnBc now?
Home Sales Fell in 45 States in 4Q
http://biz.yahoo.com/ap/080214/home_sales_realtors.html
There is a bright side to all this:
South Dakota was the lone state to show a sales increase. Existing home sales there rose 8.9 percent from the same quarter a year ago. Sales were unchanged in North Dakota.
Siuox Falls is a bit nicer city than Fargo, so I can see why SD real estate won this Dakota battle.
“Barn door closed. Horses gone.”
Yep. Add to that… “even the flies are gone now, too!”
When the horses leave, fly die-off is soon to follow.
“Treasury Secretary Henry Paulson said U.S. regulators plan to alter rules for packaging loans into bonds in the aftermath of the subprime-credit collapse…First, we need to get through this period with as little impact as possible on our economy. And then secondly, we need a strong policy response…Paulson said the White House is still in the ‘first phase’ of minimizing the impact of the financial market turmoil on the economy and hasn’t moved to the ’second phase’ of a strong regulatory response.”
Paulson is saying “lending tightening and risk aversion is making it harder for us to keep the economy going, so the first step is to find ways for the federal government to actually loosen lending and keep the party going a bit more. After that, when everything is ‘ok’, then we can then talk about tightening lending standards to where they should be”.
“…….with as little impact as possible on our economy.”
Replace “economy” with “my Investment Bank buddies”
I’m guessing that they will work the “first phase”, but will never get around to the “second phase”
To Serve Man
In lieu of Warren Buffett being able to do anything, everybody gets 30 days worth of troughing it @ the Hometown Buffet…
So much is clear to me now. The Bush League approach is to fix a problem, then keep it from recurring. And since they don’t fix any problems, they can’t ever get to stage two.
So, they aren’t totally disconnected from governing. They’re just working with a wacky paradigm.
Bushzarro World makes sense, to sum.
It’s the secret of their success. LOL
Last time delusionals vote for a CEO Prez, eh? What were people thinking, that someone weaned on a silver spoon and bailed out and taxpayer subsidized (like all good ‘lil corporations) was going to understand/practice good fiscal policy? What color is his parachute? Drink up, mates.
“What color is his parachute?”
Golden
“Mr. Nothaft said that if borrowers have good credit and employment and can make a down payment, it’s a great time to finance a house. ‘But certainly there are a lot of people who can’t do that,’ he said.”
If prices are falling and everyone knows it, why is it a great time to finance a house? Wouldn’t it make more sense to wait until prices bottom out, especially when they are falling at double-digit annual rates?
Anyone in San Diego who followed similar expert advice one year ago could now easily be sitting on a $50,000+ capital loss.
If prices are falling and everyone knows it, why is it a great time to finance a house?
Because the Nar and other realtor associations told the sheeple to do it.
‘Many PACs use a carrot-and-a-stick approach,’ Gross said. ‘But just a stick can boomerang.’
So can a carrot if you don’t watch for people sneaking up behind you.
What do you call a boomerang that doesn’t come back?
A stick.
My non-retriever dogs got a kick outta that one, Lad.
BTW, the auction bond problem for student loans has hit Montana’s MHESAC program.
Any other states besides Michigan having trouble?
In the last 4 years, home prices went up by about 80%. Now when the prices have fallen 10%, there is panic in the market and the news is “The Home prices plummets”.
To hell with the sensational journalism.
Just got a flyer in the mail from my friendly local federal savings bank loan officer. According to him, once the FHA limits rise (permanently! he emphasizes) to $729k, we’re done with price declines in the housing market. Here’s his spin:
The headlines tout the tax rebates of $600 to $1,200 as what is needed to stimulate the market and prevent a recession. There are many other important items in the package that have largely been ignored and will have a greater and more immediate impact.
The biggest may be the proposed changes in the mortgage market. Currently, conforming loan limits are set at 417,000. During this credit crises, little disruption has occurred with this level of financing. Mortgages are available and rates are low. This is due to the fact that they are purchased by Fannie Mae and Freddie Mac. The problem exists with the larger loans and the rates being charged for them by investors (banks). The plan provides for increasing the current limit to $729,750 for the remainder of 2008. Suddenly, jumbo loans at conforming rates. I am sure there will be pressure to extend the increase as that date approaches.
Even more striking is the increase in FHA limits. Currently at $386,650 it will also be raised to $729,750, but the change will be PERMANENT. It is also proposed that the down payment required be reduced to 1.5%. For those wanting 100% financing, this will be the best way to finance using Down Payment Assistance programs. The bill has passed in the house, and even though the Senate has proposed its own plan, the mortgage provisions are the same. The goal is to have the plan on the Presidents desk by February 15th. With this law in place, we can expect a rebound in the local real estate market sooner rather than later.
Buyers should be aware that once this takes hold, house values will stop declining and start increasing in value. The serious buyer should start looking now.
Fannie Mae and Freddie Mac will not be able to buy any loans with an LTV of greater than 90% so I don’t think the dead cat will start bouncing any time soon. People will no longer get loans where they will be paying more than 40% of their income towards housing starting on Feb. 16th.
It’s all about an election year and how the bones are being thrown to the dogs to keep them from biting the had of the tax rebate givers..
those banker types will do anything to avoid losing their jobs & returning to college era employment as shirt folder @ Macys.
Yawn……read the details.
Debt to income limits. FHA uses 31% gross for mortgage, taxes and insurance; and 43% for all debts (mortgage, taxes, insurance) plus credit cards, cars, student loans…… Credit scores over 620 or a LOT ofpaperwork toexplain why it is low. They have to establish the source of any money for the downpayment and closing costs. (No money back here on these loans.) At least 2 years out of Chpt 7 bankruptcy and 3 years past a foreclosure or deed in lieu. Evidence of Social Security Number, copy of Driver’s License, Credit Report, Verification of Income, Income Tax Affidavit (SFH 108), and Verification of Assets…..
Yep, they are just going to be crawling out of the woodwork to put down $10,800 - 21,600 on a $720,000 house that will need a $206,171 income to stay within that 31% DTI. (And only $1,781 a month in other debts like credit cards, cars and student loans…..)
Similarly, a $400,000 house will need $6000 -12,000 in cash and around a $114,500 income. (And only $954 a month in credit cards, car loans/leases, student loans etc.)
Down Payment Assistance (DPA) is ONLY available to low income households and that is through state housing authorities. Household income limits are approximately 80% of the area median income and vary depending on location and family size. Also there are sales price limits (here they are $195,000 to $224,250 depending on location and this is a state in line with the national median). And the buyer STILL has to come upwith 1% down.
This is getting TBFW (too boring for words). Those iluusory buyers/borrowers can not come trotting into borrow jsut becasue the FHA limits for insuring loans has gone up. They can NOT meet the DTI requirements for the loans.
“With this law in place, we can expect a rebound in the local real estate market sooner rather than later.”
Great, the government found a way to switch off economic cycles and invented the infinite period of constant growth and wealth. This sounds like a dream or communism.
But back to reality. We are in the down cycle of RE. Peak 1990 - bottom - 1996 - peak 2006 - and so on. These cycles are slow ! Nothing can stop it except a nuclear war. The only thing what the government can do is to make you feel a little bit better in these times.
Lifeline = Debtor Alive
it’s a great time to finance a house.
But, it is not a great time to buy! So rush out and finance that fututre home, but just don’t buy the place!
A new quote from an industry insider; “Separating the economics of foreclosure from the morality (and the stigma) is not easy, though.”
The old quote it replaced is; “Separating the fools from their money is very easy, though it may not be moral…but what the hell, who really cares!”
Geez…for 4 years I had to read in the paper how the housing boom(aka housing bubble) was good for the economy and now I have to read every day how this same housing boom(aka housing bubble) is dragging the economy into the tank. I’m sorry folks can’t have it both ways, but then again who really pays attention to the laws of cause and effect…..certainly not the NAR and others inside the REIC.
Caveat emptor!
“Separately, the FBI said on Thursday it had recently opened two more investigations for a total of 16 corporations now being probed as part of its crackdown on subprime mortgage industry fraud.”
Let the fishing contest begin!
The first fish to be caught will be the mortgage brokers who have the highest number of foreclosures. Once these little fish realize they are about to be baked in a hot oven, they will point out the medium fish (lower management) who will then be caught and also realize that they are headed to even a more intense and hotter oven to which they will point out where and how the big fish (senior management) can be caught if they are allowed to be simply dipped for a short time in the fryer.
That is what is going to happen over the course of the next couple of years or within the statue of limitations. There will be a considerable amount of fishing stories to be told in the next several months!
Hello,
I own a home in South Carolina that I purchased for 145,000 and now I have to move due to a job transfer! I put no money down and have been here less than a year, can I walk away and let the bank have the house? I realize my credit will be shot but Im not that concerned at the moment and dont plan on buying in the near future. Can the bank sue me or come after me? Whats the best way to go through a forclosure?
Thanks yall,
Sue
youwalkaway dot com
Wahoooo!!! Right here on Ben’s blog!!! You rock, Walkaway Sue (to h-e-doublehockeysicks with Renee).
Isn’t it “Runaway Sue”?
http://lyricsplayground.com/alpha/songs/r/runawaysue.shtml
I’m not familiar with your state’s rules, Sue, but start by calling your mortgage company and ask to do a short sale.
LMAO… Whining (r)’s walk out because (d)’s refuse to allow them to continued wiping their lard a$$es with the constitution. Gotta keep the turrrrrist boogeyman alive to keep yourselves relevant? Think again.
1 down 9 to go. How can we get the rest of these bribing bstrds to lay off and perhaps recover a glimmer of democracy again?
Bought and sold. Houses and, uh, Houses and Senates.
“But is it really ruthless — or just good businesses sense? Some economists argue it’s definitely the latter.”
“Sometimes, they say, walking away from your mortgage makes economic sense, especially for homeowners who find themselves ‘upside down’ — that is, they owe more on their mortgage than their house is worth. In those cases, ‘voluntary foreclosures are not by themselves evidence of a newfound irresponsibility on Americans’ part,’ says Nicole Gelinas, writing in The Wall Street Journal.”
Like it’s some major surprise when you push an ownership society on people that would have naturally rented forever for a monthly nut, and a focus on the monthly nut, below rental rates, that these same people will treat their housing the same way they treated their rental housing before, that is, no skin in game, no real personal investment, no incentive to take care of the place and a penchant to just walk. You can lead a horse to water, you can’t make it drink. You also can’t lead a rental class to ownership and expect them to act like actual owners. Just doesn’t work that way. The same is, the people who responsible enough to be of actual owner character have to bail these idiots out.+