Where Is The Bottom To This Housing Free Fall?
The News Press reports from Florida. “Foreclosure actions stayed high and single-family-home building permits stayed low in Lee County in February, statistics showed. Foreclosures were being filed at a rate of 83 per day, according to data released by the Southwest Florida Real Estate Investors Association. One thing association president Jeff Tumbarello said he’s noticed, is foreclosure has lost some of its stigma as so many people do it: ‘In ‘05 you were a leper. Now it’s cocktail party talk: ‘I had to let something go.’ ‘Oh, so did I.’”
“The bright-green foreclosure bus pulled up Sunday afternoon to the bedraggled little house on Apple Street in San Carlos Park, victim of a real estate boom turned bad. In May 2005, near the height of Lee County’s real estate frenzy, it had sold for $153,000 — a bargain at the time.”
“Now the bank is asking only $59,900: 38 cents on the dollar.”
“For the most part, the houses he showed the investors were being offered by a bank at about 50 cents on the dollar for the prices paid in 2004 or 2005.”
“‘They’re driving prices down,’ said Marc Joseph of Marc Joseph Realty in Fort Myers. ‘The banks are able to compete’ because they simply want to sell quickly and aren’t burdened by having to meet the price of an existing mortgage like many private sellers.”
“Joseph said that as more homes are taken back by lenders and put back on the market, they’ll be a bigger and bigger part of the action. Some people trying to sell and pay off a mortgage may be out of luck, he said. ‘Those sellers cannot compete with the banks.’”
The Tampa Tribune. “Mark Spector liked the Bridgewater community so much he convinced his in-laws to buy a house down the street. That was in 2004 when Lennar Corp. was in the early stages of developing the 760-home community just east of the Wesley Chapel school complex.”
“‘We were expecting a real nice, clean community,’ Spector said. ‘We’d moved from California, and we were expecting the planned communities to be similar to the planned communities we’d lived in in California.’”
“Spector says what he got instead was a community dominated by renters and out-of-town investors. Residents say the community is plagued by drug dealing, gang graffiti and poorly maintained properties.”
“‘It looks very much like an apartment complex on the weekend where you see a lot of rental trucks moving in and out,’ Spector said.”
“Binge-buying investors, many of them now stuck with homes they can’t flip and can’t afford, are either filling those houses with short-term tenants or simply abandoning them. ‘My wife and I would love to move,’ said Jim Martin, Spector’s father-in-law. ‘We can’t sell our house. I don’t know if we could give it away.’”
“Lennar sold Bridgewater as a great place to raise a family. They sold quickly, even as prices passed $300,000. At the time, Spector said, Lennar’s sales staff promised no more than 30 percent of the homes would go to investors. The sales contract required buyers to promise they would live in their house for at least a year before selling.”
“‘The reality, though, is that Lennar sold to a lot of investors,’ Spector said.”
“County property records shows that nearly two-thirds of Bridgewater’s 760 homes lack homestead exemptions - a key sign they’re owned by non-residents. Californians, New Yorkers and other Floridians did most of the investment buying, property records show.”
“Cory Jarriel, a Hillsborough County firefighter, bought his house in 2005 with plans to live in it for a year then sell it. The deterioration of the neighborhood and the housing market has foiled those plans. Now Jarriel lives next to one of Bridgewater’s empty houses.”
“‘It’s never been lived in as long as I’ve been here,’ Jarriel said.”
“He’s weighing his options. ‘I have perfect credit,’ Jarriel said. ‘I thought about letting the house go back [to the bank]. It wasn’t worth letting my credit go to hell.’”
“Standing in his driveway on a bright afternoon, Bobby Martin, 29-year-old financial planner, says half-jokingly that he enjoys the quiet provided by the empty investment properties on either side of him. But more seriously, he notes: ‘The only thing you worry about is the fact that they’re basically abandoned.’”
“The HOA took down basketball hoops at the community park on Wells Road after the park became a site of drug dealing and alleged gang activity. ‘Roughly 130 homes in a community of 763 homes have never paid a single penny towards our dues,’ Spector said. ‘It’s been difficult to maintain solvency because of that.’”
“Spector tries to be upbeat. He hopes the collapsing housing market will drive out investors in favor of more owner-occupants.”
“‘These are the people who are going to move in and actually live in the community,’ Spector said. ‘These are the people who are going to take care of the community. It doesn’t matter if they had a $200,000 discount from what I paid.’”
“At the peak of the housing boom, Lennar Corp. was building more houses than anybody else in Pasco County. At Bridgewater, homeowners like Bobby Martin live beside empty houses, some apparently abandoned by their overextended owners.”
“‘They fooled a lot of people,’ Martin said of Lennar. He and his wife were first-time homebuyers in 2004 when they bought their 1,700-square-foot home.”
“Lennar still owns hundreds of acres…in central Pasco. It also owns dozens of vacant lots that are ready to build on in town house communities near Zephyrhills. In November, Lennar sold its Epperson Ranch project to Tampa-based Metro Development Corp. Epperson was the largest chunk of 8,300 potential home sites Metro bought from Lennar in November.”
“Metro has yet to say what it will do with the 1,700-acre Epperson family homestead. The same day, Lennar sold another 11,000 home sites across the country to Morgan Stanley. The two companies created a development partnership, according to documents filed with the federal Securities and Exchange Commission. Lennar sold the land to Morgan Stanley at a 60 percent loss.”
The Sun Sentinel. “A California company today is auctioning roughly 100 foreclosed homes in Palm Beach, Broward and Miami-Dade counties, with starting bids from $25,000 to $625,000. All the properties are vacant, and some are in rough shape. In each case the lender is looking to unload and move on.”
“‘The banks are very, very motivated to sell,’ said Rhett Winchell, president of Kennedy Wilson Auction Group.”
“In this depressed market, the glut of available homes, exacerbated by the foreclosure crunch, means that one doesn’t stand out from another. Frustrated owners who list their homes for sale the traditional way sometimes sit for weeks, months and even years waiting for offers.”
“Tom Granata, of Venice, auctioned his mother’s two-bedroom Plantation condominium on Friday for $110,000. He said he first considered selling it through a real estate agent, but those he interviewed insisted on him listing it with them for a year.”
“‘The property already has lost value, and I didn’t want it losing any more,’ he said of the condo, which was appraised at $134,000. ‘I think this was the way to go.’”
“Bidders also can choose from among houses and condos in Palm Beach County, including a 5-bedroom, 3 1/2-bath home with a pool in Wellington’s Black Diamond development that once was listed for $474,900. The starting bid today is $205,000.”
“Paul Bannister is one of the registered bidders for today’s auction in Fort Lauderdale. He scanned the list of available properties and is eyeing a three-bedroom home in Lauderhill with a minimum bid of $170,000. It originally was listed at $393,900.”
“‘This might be a better way to get a good price,’ he said. ‘I’d like to get it for $250,000. If it goes much above that, I’m going to put my hand down.’”
“Real estate agents are trying to capitalize on the trend and become accredited auctioneers, said Chris Longly, spokesman for the national auction group. ‘I think people are starting to see the benefits of the whole process,’ Longly said.”
The Times Union. “Redeveloping downtown Jacksonville was rife with risk when Cameron Kuhn and his helicopter swooped in. He leapt into Jacksonville ready to buy - gobbling up three buildings and a lot in late 2005 and a crumbling trio of buildings about a year later.”
“In all, he paid $55 million - not including any money he’d need to overhaul the structures. ‘FOR US, THIS IS NO RISK.’ Cameron Kuhn to the Times-Union shortly after buying his second downtown Jacksonville building in less than a month, Oct. 30, 2005.”
“‘WHEN I COME INTO A MARKET, I MAKE IT SNAP, CRACKLE AND POP.’ Kuhn to the Times-Union, Dec. 16, 2005.”
“‘I NEVER HAD ANY DOUBT. I DON’T FUNCTION IN FEAR.’ Kuhn, after reaching a preliminary deal with the city and the Landing on parking spaces, to the Times-Union, March 24, 2006.”
“The days ticked off the calendar. And, unbeknownst to Kuhn and other developers, so did the profitable days in Florida’s real estate market. ‘I WILL LOSE SOME BUILDINGS.’ Kuhn to the Orlando Business Journal, Jan. 24, 2008.”
“The souring real estate market certainly didn’t help Kuhn, observers say, and he’s not the only developer in a crunch these days. ‘MY EGO WAS TOO BIG … QUITE FRANKLY.’ Kuhn to Orlando News 13, Feb. 7, 2008.”
“Kuhn’s offices in Jacksonville are gone. He sold the helicopter. Kuhn moved out of the prime offices on the top of the Plaza in downtown Orlando, even though the address is the same on the company Web site.”
“And, from a trip to the 21st floor last month, it’s clear others have been looking for him there, too. A woman just off the elevator directs another visitor to Kuhn’s new offices, where all but one of the handful of entrances was bolted shut last month.”
“‘124 West Pine Street,’ she says, the way a flight attendant rolls through another pre-flight message.”
The Pensacola News Journal. “A single mom with a 2-month-old infant called the other day with a question. She was confused and looking for some advice. Seems the young woman, a Warrington resident, wanted a home equity loan to add on a bedroom, consolidate credit card debt and buy new furniture.”
“But, as it turned out, she was in for a shock. ‘Someone told me I couldn’t get a home improvement loan because I was upside down,’ she said over the phone. ‘What does that mean?’”
“I tried to explain that her house is now worth less than what is currently owed on the mortgage.”
“‘But I still don’t understand,’ she said. ‘I put $20,000 down on my house when I bought it. I’ve been making my mortgage payments every month for the past three years. How could I have lost all that money?’”
“In her case, the bank lost business and she’ll continue paying 19 percent on her credit card debt. Plus, the carpenter didn’t get a job adding on the new bedroom and the local furniture store still has that new bedroom suite she wanted.”
“The Federal Reserve announced this week that Americans’ percentage of equity in their homes fell below 50 percent for the first time since 1945. And economists expect this figure to drop even further. All of which brings up the question that’s on the lips of nearly everyone, especially Realtors: ‘Where is the bottom to this housing free fall?’”
“I turned to resident housing guru Al Muller, whose Metro Market Trends Inc. tracks residential and commercial sales data in the Pensacola Bay Area. ‘To me, the bottom isn’t when things turn around and start getting better,’ he said. ‘It’s when things stop getting worse and basically stay there for some period of time.’”
“And the way Muller sees it, there’s a lot more downside to come. But if you think it’s bad here in the Pensacola area, Muller suggests spending some time in Miami. He says it’s the worst housing market in Florida, and one of the worst in the nation.”
“One can only take so much bad news, so I asked Muller to lay some good on me. Anything will do, I pleaded.”
“‘The good news for Pensacola is that the typical median price of a single family home is now selling for about $185,000,’ he said. ‘We’re getting much closer to being affordable.’”
who can guess where the bottom is but lots of people will be getting a graduate degree in the school of hard knocks. it’s joshua tree time baaaybeee.
“I tried to explain that her house is now worth less than what is currently owed on the mortgage.”
“‘But I still don’t understand,’ she said. ‘I put $20,000 down on my house when I bought it. I’ve been making my mortgage payments every month for the past three years. How could I have lost all that money?’”
You mean the value of an asset is dependent of what other ppl are willing to pay for it, and not what you were duped into paying? That is almost unfathomable.
Thanks for the morning laugh.
After reading her comments, one could say that of all the clueless FB’s we’ve read about here, I think we have found the winner.
Oh puh-leez!
Never short stupidity. That’s as close as you’ll come to a surefire investment winner.
Profunds coming out with some ETF’s that let you play human stupidity. DAR is 200% of an index tracking the number of “people falling off ladders and makeshift scaffolding” videos on youtube, and WIN is 200% inverse of the same index.
AP reports that Drugs are found in Drinking Water…Thank Goodness because the screwed RE minons WON’T even be able to AFFORD the KOOLAID anymore.
Must be part of the NAR multiMillion “Buy Now” Spring (WATER) Offensive
http://news.yahoo.com/s/ap/20080310/ap_on_re_us/pharmawater_i;_ylt=AlKgo1AfYoLtmH5o1uXTQGSs0NUE
Probably thinks she wins the UK lottery each day..
The Pensacola News Journal. “A single mom with a 2-month-old infant called the other day with a question. She was confused and looking for some advice. Seems the young woman, a Warrington resident, wanted a home equity loan to add on a bedroom, consolidate credit card debt and buy new furniture.”
“But, as it turned out, she was in for a shock. ‘Someone told me I couldn’t get a home improvement loan because I was upside down,’ she said over the phone. ‘What does that mean?’”
we have a lonnnnnnnnng way to go
How did this person ever managed to come up with $20 grand in the first place?…
lap dances?
Who cares how she came up with the money? At least she’s paying her mortgage. Lots of judging going on here without the facts.
“Lots of judging going on here”
True! She may be a dumb$hit, but at least she’s paying her bills!
The sad fact is, this young woman was probably so busy just trying to make ends meet and raising her child that she was completely unaware of how badly the housing market has tanked. And of course, back in 2005, given the other pressures she was under, she was probably all too willing to place her trust in the nice man/lady in a suit that coaxed her into signing a mortgage for a place she really couldn’t afford.
Problem is, there’s plenty like her out there walking around. They have no clue that the housing market is tanking, even with all the media reports.
Ghostwrither is so right. I can’t get over how few people we encounter in our social network that are clueless as to what is going on in both the real esate market and stock market. The majority of these people are very well educated people no less. Truely scary.
One thing …Jeff Tumbarello said he’s noticed, is foreclosure has lost some of its stigma as so many people do it: ‘In ‘05 you were a leper. Now it’s cocktail party talk: ‘I had to let something go.’ ‘Oh, so did I.’”
And this was MY morning laugh. Well, more of an extended joyous cackle. Can we all take a moment to imagine just how many lenders are a’fillin their pants with a stinky, over this sort of phrase and the attitude it reveals?
Heckfire…here comes another cackle!
Being foreclosed upon is the new black.
I still like TxChick’s “broke is the new black.”
Its amazing how many people honestly believe real estate never goes down. Now they are finding out the piggy bank is shut off. Time for them to live within their means. No recession? Just cutting MEW in half will cause a recession.
Got Popcorn?
Neil
I think it’s human nature to try to recast your failure in terms of making the best of a bad situation. They may even feel clever about making their problem the bank’s problem.
I sometimes run a report to look at sales in my old neighborhood in Florida (I sold to a buyer who must have got the last 120% liar loan). This was not my neighborhood, but across the street from me. This is one street - there are many more streets like this in the community. Notice the prices for roughly the same house vary from $775,000 to $300,000.
Even if they gave you the home for free on this street would you buy it know that most of the homes on your street are vacant and may never find buyers.
This by the way is a very nice area with a nice golf course. It is amazing what speculators have done to some of these neighborhoods.
2202 RIDGEWOOD CIR Royal Palm Beach, 33411 $543,000
Beds: 6 | Baths: 6 | Sq. Ft.: 4,215 | Lot Size: N/A
Year Built: 2002 | Entered Date: 02/15/08
Description: Renovated and updated 5 bedrooms with the sixth bedroom off the mastersuite,interior just painted… more
2204 RIDGEWOOD CIR Royal Palm Beach, 33411 $495,000
Beds: 5 | Baths: 3 | Sq. Ft.: 3,498 | Lot Size: N/A
Year Built: 2002 | Entered Date: 02/14/08
Description: Beautifully upgraded from the gourmet kitchen to the master bathroom. This home offers a double… more
2213 RIDGEWOOD CIR Royal Palm Beach, 33411 $539,999
Beds: 5 | Baths: 3 | Sq. Ft.: 3,497 | Lot Size: N/A
Year Built: 2002 | Entered Date: 03/07/08
2217 RIDGEWOOD CIR Royal Palm Beach, 33411 $450,000
Beds: 5 | Baths: 3 | Sq. Ft.: 3,497 | Lot Size: N/A
Year Built: 2002 | Entered Date: 07/02/07
Description: This immaculately kept monticello home by minto home builders is a true five bedroom home with… more
2232 RIDGEWOOD CIR Royal Palm Beach, 33411 $399,000
Beds: 4 | Baths: 3 | Sq. Ft.: 3,442 | Lot Size: N/A
Year Built: 2003 | Entered Date: 08/24/07
Description: Walden - short sale - great price - come and see!! Lowest priced meridian model by minto. Pool… more
2254 RIDGEWOOD CT Royal Palm Beach, 33411 $499,900
Beds: 4 | Baths: 3 | Sq. Ft.: 3,497 | Lot Size: N/A
Year Built: 2003 | Entered Date: 12/06/07
Description: A perfect blend of stylish design, location, amenities, and landscaping combine to make this… more
2262 RIDGEWOOD CIR Royal Palm Beach, 33411 $470,000
Beds: 4 | Baths: 3 | Sq. Ft.: 3,497 | Lot Size: N/A
Year Built: 2003 | Entered Date: 10/17/07
Description: Partial lake views, freshly painted white throughout, this is a very large home in madison green… more
2268 RIDGEWOOD CR Royal Palm Beach, 33411 $300,000
Beds: 5 | Baths: 3 | Sq. Ft.: 3,497 | Lot Size: N/A
Year Built: 2003 | Entered Date: 03/05/08
Description: Bank/owner says “get rid of it” so don’t miss out on this short sale opportunity. Property is in… more
2269 RIDGEWOOD Royal Palm Beach, 33411 $619,000
Beds: 6 | Baths: 5 | Sq. Ft.: 3,958 | Lot Size: N/A
Year Built: 2002 | Entered Date: 11/05/07
Description: Largest lakeview w/estate sized lot. Stunning view when you enter this home. Gorgeous foyer… more
2270 RIDGEWOOD Royal Palm Beach, 33411 $595,000
Beds: 6 | Baths: 5 | Sq. Ft.: 3,976 | Lot Size: N/A
Year Built: 2002 | Entered Date: 02/27/08
Description: Very nice home in a gated community close to good schools and shopping more
2282 RIDGEWOOD CIR Royal Palm Beach, 33411 $450,000
Beds: 5 | Baths: 3 | Sq. Ft.: 3,497 | Lot Size: N/A
Year Built: 2002 | Entered Date: 02/20/08
Description: This lake front monticello model has some of the best finish trim, crown and picture molding… more
2286 RIDGEWOOD CIRCLE Royal Palm Beach, 33411 $537,999
Beds: 5 | Baths: 4 | Sq. Ft.: 3,602 | Lot Size: N/A
Year Built: 2002 | Entered Date: 11/23/07
Description: $$$$ 2,000 bonus for buyers closing cost !!!!!!! Impresive entrance at this 2 story foyer with an… more
2288 RIDGEWOOD CIR Royal Palm Beach, 33411 $774,777
Beds: 5 | Baths: 5 | Sq. Ft.: 4,215 | Lot Size: N/A
ear Built: 2002 | Entered Date: 12/10/07
Description: If you have discriminating taste, if you enjoy the finer things in life, if you have an attention… more
2303 RIDGEWOOD CIR Royal Palm Beach, 33411 $350,000
Beds: 4 | Baths: 2 | Sq. Ft.: 2,362 | Lot Size: N/A
Year Built: 2002 | Entered Date: 12/30/07
Description: This home has great views down the 9th fairway of the golf course and across a small lake. Extras… more
2310 RIDGEWOOD CIR Royal Palm Beach, 33411 $399,000
Beds: 5 | Baths: 3 | Sq. Ft.: 3,496 | Lot Size: N/A
Year Built: 2002 | Entered Date: 02/25/08
Description: Bank accepting short sale - bring your offer and on this beautiful home! more
“Notice the prices for roughly the same house vary from $775,000 to $300,000.”
This is very typical in the market right now. You’ve got sellers and wishers. The sellers are actually selling homes right, the wishers just watch as their home sits on the market. I don’t understand the real estate agents who even take those kinds of listings.
My neighborhood has homes that are priced from $150K to $299K for the same house. The ones that get priced in the $150K range go pending in a few days. Some of the $299K’s have been up on the market for pushing 2 years.
I wish I saw this in my markets. They are down maybe 3-10% depending on location. Patience. I know.
This is the make or break summer. All signs point to break. Or is that POP?
“‘WHEN I COME INTO A MARKET, I MAKE IT SNAP, CRACKLE AND POP.’ Kuhn to the Times-Union, Dec. 16, 2005.”
Think the reporter got that wrong. It was “SNAP, CRAP, AND POOP.”
It was “SNAP, CRAP, AND POOP.”
AHahahahaha! Funny!
This is very typical in the market right now. You’ve got sellers and wishers.
It looks more like sellers and those who are Desperate wishers who hope to get some money back.
“nice neighborhood with golf course”
Hmm, when I lived in FL 35 years ago, Royal Palm Beach was new, and the salespersons were worthy of Glen Garry Glen Ross (a play that probably hadn’t been written yet). To get to the actual ocean beach from RPB is about 12 or 15 miles, right? I am surprised if even the $300K prices are attracting buyers.
“Real estate agents are trying to capitalize on the trend and become accredited auctioneers, said Chris Longly, spokesman for the national auction group. ‘I think people are starting to see the benefits of the whole process,’ Longly said.”
They really are creepily adaptable, aren’t they? I guess next they’ll be selling Joshua Trees and knife-catching mitts.
In other news, the constant stream of stories of people “tapping equity” for home improvements put me in mind of my grandparents–who simply waited until they had saved up enough money to finish their basement and add a sunporch onto the two-bedroom, one-bath bungalow where they somehow managed to raise SIX kids. Does anybody just wait and save anymore? Or am I hopelessly out of touch?
Taping equity for home improvement created another problem during bubble years. The contractors raised prices too much. They continue to persist with those prices even though the business is drying up in MA. Ideally, people should save up money and then do the improvements, like your grandfather did. Tapping home equity indirectly encouraged contractors to fleece the FBs. For a simple bathroom renovation they quote 16 - 20 K. Unbelievable! Just like the RE agents, a lot of contractors have little opportunity to make money in 2008.
tried to get a new tub, tiles and window installed in masterbath in 2005. contractor kind of laughed, “we don’t take bathroom remodels less than 30k”
did it myself for less than 1.5k in hd purchases and tool rentals.
I agree with that…just contracted to put an addition onto our home..planning on not moving for a LONG LONG TIME…anyway..quotes we got are 60% less than what we were quoted 1 year ago..
‘They really are creepily adaptable, aren’t they? I guess next they’ll be selling Joshua Trees and knife-catching mitts.’
They really are, aren’t they, aimee? Like those freakish globby slime-molds I recall from botany/biology classes. Except that I recall that there’s some merit to slime-molds, like they’re useful for decomposing detritus and filling college student’s lab hours and for bacteria to look at and feel superior to, things like that. Infinitely more valuable organisms than realtors are.
Yes Olympia you are so out of touch with today’s world.
Back in the old days most people i knew bought a 2 family house for that purpose, so the kids after marriage would live in the other apartment and save up for their own house. My parents built a 2 family house, after we lived in my grandmothers 2 fam. house for the first 6 years of my life.
—————————–
Or am I hopelessly out of touch?
“Spector tries to be upbeat. He hopes the collapsing housing market will drive out investors in favor of more owner-occupants.”
Well… You’re half way there Mr. Spector. Now just lower the price by 50% to get across the finish line.
I actually think Spector is an honorable guy. I dont think he is selling, and said he doesnt mind prices going down to get some stability. He blamed no one despite the fact he is in a bad situation. I give him two thumbs up.
Spector said. ‘These are the people who are going to take care of the community. It doesn’t matter if they had a $200,000 discount from what I paid.’”
For his sake I hope he is that happy with his house, nonetheless I’m skeptical of his flippant attitude regarding the $200k. That’s the kind of number that will gnaw on a fella over the years - that’s an awful lot of wasted opportunity - a mighty big misallocation of time and labor.
Plus he convinced his in-laws to buy in to. That has to be uncomfortable.
He sounds lonely. All alone is his own little subdivision wiff no one to play wiff. I’ll take one when I can get a job there making $60K/year, wife too, and the asking price hits $100k. Till then I’m a renter. There are too many idiots that used the system to their (and my) peril. To buy now will only affirm (and continue) the stupidity of banks and owners who put 20 thou down and paid for 3 years. New furniture? Wait till they go out of business, and buy at their auction of assets.
Anyone see the DOW, S&P, etc this morning? It looks like an A.D.D. 5 year old removed from meds. Prop it up? Naw, I’ll buy when there is blood in the streets. After this dismal summer…
As a long-term reader and believer of this blog (Back to the “archive” days) I still purchased a home in late 2006, (at an inflated price) knowing it would likely be worth less in the future. We sold a smaller, less costly home (also at an inflated price, to minimize the potential loss), and then did $200k in renovations to our new home. While I have no plans to relocate anytime soon, the potential loss of a couple of hundred grand does not worry me. Why not? Two reasons: the new neighborhood is where I want to be, and rentals are unavailable, and second, if we do relocate, our next home will also be at a discounted price. (A possible third reason is that we have no mortagage on this home, so this may also be a “mental” factor).
Point is, not everyone is motivated entirely by money when it comes to housing, and individuals each have their own threshold for what is a lot of money, and what their tradeoffs will be.
Hey…. It’s your funeral buddy.
What’s important is that you made an informed decision.
One thing association president Jeff Tumbarello said he’s noticed, is foreclosure has lost some of its stigma as so many people do it: ‘In ‘05 you were a leper. Now it’s cocktail party talk: ‘I had to let something go.’ ‘Oh, so did I.’”
Here is your Gin & Tonic Mary. Say, didn’t I see you at the auction yesterday? How did that go for you?
Oh, I got a major ass-pounding on that house I was flipping over on main street. How did it go for you?
Well, the bank bent me over pretty good on that house I invested in over on lake street. Oh well, that’s the real estate game. Say, how do you like my new loose-fit jeans?
Who knew there was such a group as the “Southwest Florida Real Estate Investors Association”? They even have a website. Check this out:
http://www.swflreia.com/in2008abetterway
My favorite quote: “The most important thing is … I trained my mind during this down turn.” Help me, Obi-Won Kenobi, you’re my only hope!
A US housing market ?
No..We might as well call it what this has become. A Financial Combat Zone, with bewildered FB’s and GF’s wondering HOW DID I get sucked into this fight for life and WHAT am I doing HERE?
Welcome to “Apacalyhouse Now” with a bunch of 5 star clowns running the circus
I love the smell of napalm in the morning.
I logged into the SWFL REIA’s site and found our hit total was thru the roof, I am glad many of you enjoyed the cocktail party quote.
My favorite quote: “The most important thing is … I trained my mind during this down turn.” Help me, Obi-Won Kenobi, you’re my only hope! I could not be Obi-Won, as the light saber missed me and, I still have a robe to wear, unlike most of my counterparts in real estate. If anyone was a real estate investor in star wars, it was the Jawa’s, it looked like the Jawa’s and the speculators shared the same fate. Laid to waste in an epic struggle, instead of good versus evil, its greed versus common sense.
The above is a reference how all the get rich quick crowd, now sells, every MLM scheme know to man, I am glad they are not into real estate anymore. I used to love to ask them to describe, why a deal they were pushing, had any intrinsic value, LOL.
I got a wonderful “Black Swan” out of all of this. I just was offered a consultant position with the Florida Housing Data Clearinghouse, Shimberg Center for Affordable Housing, University of Florida.
I have focused on breaking down every detail of this market to understand, how to make money in the aftermath and more important how to see these bubbles coming.
Someone above touched on the boomer migrations
Locally all the shrills were yelling about the boomers coming, well they did just the simple math
The complex math shows, that the entire cycle showed one downward trend 2005 thru 2007. The age to focus on for retirees’ is 62 years of age. Do the math, subtract 62 from 2005. “The stud was too far from the mare”, to quote a dear friend and mentor. They did not buy any houses in Florida or AZ because they were not conceived.
This coupled with the mortgage market. Thus we priced the wage earners out of the market. The mania then continued within the real estate community. The spec houses were then sold to each other. In 2005 the trend line for Price per SQFT goes thru the roof, this was due to, speculators who never intended to buy the home.
In the end the mania was due to
1. The mortgage market
2. Not enough retiree’s
3. Inability to working class to buy and sustain due to (artificial) price increases
4. The herd like mood trend of” there’ gold in them thar hills”, which resulted in home sales, without any intent of end use. In 2005 you could not pay cash and get an acceptable return, “Houston we have a problem”
The housing market here has started to gain some traction sales wise. The money is back in motion, at prices that make sense. It’s a great market to buy, terrible if you are a seller.
When will the market return? I am more concerned with the financial markets. Anyone seen what M3 looks like post 2006? There is a reason why they are not telling us, it’s bad.
To quote the above mentioned friend and mentor, their was a Clydesdale behind the couch in 2006 that everyone pretended not to notice, now its an elephant, we may have to cut some of the wall out to get it out of the house, if we do not do this, it will walk down the street with the house.
That’s the short version. I have longer ones. I have a webinar of the above mentioned foreclosure trend, email me for details.
Jeff Tumbarello, SWFL REIA
jeff@swflreia.com
Dude, was that English?
I guess not
“Oh well, that’s the real estate game. Say, how do you like my new loose-fit jeans?”
Oh man - now that’s funny!
Lol
I would say that the correct pricing for those homes run between the bank owned and the short sale..anything above that they are waiting for fools…
“Paul Bannister is one of the registered bidders for today’s auction in Fort Lauderdale. He scanned the list of available properties and is eyeing a three-bedroom home in Lauderhill with a minimum bid of $170,000. It originally was listed at $393,900.”
Captain…they be sure pirates waiting for your treasures in that crime ridden murder loving city….go ahead and go out to sea..and see what will be left in your “investment.”
This Florida foreclosure post is probably the best place to ask this question. I know someone in a foreclosure situation. The bank won’t take the deed without the home being listed for sale. The house is worth about 50% of what’s owing and the bank is convinced that the home is worth about 80% of what owed. I can assure you that the home is worth the 50% because I watch what sells in the neighborhood.
The question is this. When the bank finally gets the keys and the deed and are forced to sell at 30% of what’s owed, what are this person’s odds on getting a judgement ordered against them? Am I correct in believing that the bank is acting in bad faith right now?
That’s a silly question. How can the Bank being acting in bad faith. The “owner” took a loan from the bank with a promise to pay the money back.
The borrower owes ALL OF THE MONEY to the bank.
The bank can use any legal means, including forclosure to recover its money.
It is obvious that the borrower is acting in bad faith because the have failed to make timely payments on the loan. The bank should refuse to take the deed, proceed with foreclosure and then sue the borrower for every penny they can get to recover their losses, all cause by an unreliable borrower.
I don’t get your thinking. Just because the borrower owes more than they can supposedly get, you are thinking the bank is under some kind of duty to help them lose money? The property should have been listed for sale as soon as it was apparent the “borrower” was in trouble. Why didn’t the borrower act in “good faith” and do everything they could to recover the banks money, instead of allowing it to go into foreclosure??
“I don’t get your thinking. Just because the borrower owes more than they can supposedly get, you are thinking the bank is under some kind of duty to help them lose money?”
As with all secured loans, the bank is responsible to mitigate damages in the event of a default. To me it is like someone trying to hand the keys to Ford Motor Credit, Ford saying “NO” and then trying to stick them with the bill for the wrecker and repo company 2 months later.
My mother in law defaulted on a car loan. She owed 13k and they repoed the car. She could have sold it for 8k and sucked up the rest but SHE DIDN’T. So, they sold the car at aution for 2400. They made her reponsible for 8k which she paid….very slowly. They agreed to forgive 2600.
There is obviously more to the story than that = there’s a reason my husband married a boring person like myself = but no matter how you slice it, SHE needed to be held responsible for her actions. SHE borrowed more money than she could repay. It’s not a big stretch to insert the word house for car.
Totally agree, Bad Andy. A mortgage contract is an agreement between two parties; one gives the other money to purchase the house, the purchaser agrees to repay the loan. If the purchaser defaults on the loan, the recourse the lender has is to repossess the property. That’s it. The property is the collateral for the loan. The bank is betting the house is worth more than the loan amount if default occurs.
So, diogenes, the bank can’t “… use any legal means, including forclosure to recover its money.” It can only use foreclosure.
“So, diogenes, the bank can’t “… use any legal means, including forclosure to recover its money.” It can only use foreclosure.”
Wrong! Your wages may be attached, other property you own may have liens placed on them, your credit ruined…
Sure your credit may be ruined, but I’m pretty sure that in a non-recourse state the only thing the bank can do is take the house. A second mortgage, a re-fi, or other stuff may let the bank pursue other avenues of collection, but in a non-recourse state, with no second, the bank gets the house and you get a mark on your credit report.
IMO, Bad Andy has a good point. I believe, all parties in a dispute have a responsibility to mitigate losses.
For instance, the borrower is not responsible for negligence by the lender. The question really is, does a bank sitting on a foreclosed property while its market value rapidly deteriorates constitute negligence?
I believe a case could be made that it does. However, I’m not a lawyer I’m a software engineer so what do I know.
“The question really is, does a bank sitting on a foreclosed property while its market value rapidly deteriorates constitute negligence?”
And that was really my question. I’m not taking sides, but rather trying to get a feel for a worst case scenario.
In FL they can sue separately for a judgement after foreclosure. At that point, I don’t know if the banks actions, or inactions as it may be can be used as a defense.
Actually, Ann has the correct understanding of mortgages in Florida. This is a recourse state.
That means that the Mortgage is a plead to give up the house as collateral for the loan. It doesn’t mean if you trash the house, or its value declines that you can walk away from your obligation to pay the DEBT that you incurred.
The bank is responsible for nothing, except recovering the debt for its shareholders. In this instance, the house in going into the foreclosure process, which means the BUYER or DEBTOR still has title. They have offered to walk away at 50% on the dollar, if I read it correctly, and the bank is saying they won’t accept a short sale if the Borrower has not tried to sell the property. IT’s not even on the market? So, who is lacking in due dilligence. The defaulting party has made no effort to discharge the debt, rather than holding the bank hostage by not paying the mortgage (the reason for a foreclosure), and watching the market values fall. I see this as trying to force the bank’s hand. “we aren’t leaving, we aren’t paying, and if you won’t let us walk away clean, we won’t do anything until you force us out and take possession of the property”.
At that point, all “rights” of the Borrower have been “foreclosed”. It’s a legal term. LOOK IT UP.
I’ve wondered wether the scale of this problem is so big that lenders will not have the capacity to seek judgements against borowers.
The cost is not trivial and the banks know that most of the judgement targets are already busted.
Could be that the heard of zebras get to run safely past the lion together. Maybe he’ll only go after the big ones.
Then again, I suppose judgments could be sold in the secondary market to help the balance sheet. If I were a zebra I wouldn’t sleep well - not a zoologist just a software engineer.
The bank can issue a deficency judgement for the balance between the mortage amount and what the house sells for on foreclosure..that stays on your credit, not including the liens they can place on other properties that you own…
“‘We were expecting a real nice, clean community,’ Spector said. ‘We’d moved from California, and we were expecting the planned communities to be similar to the planned communities we’d lived in in California.’”
Think again, bozo. It’s not included in Ben’s snippets, but the article also details how this particular development wasn’t even Mr. Spector’s first choice: he’d lost out in lotteries conducted by two other homebuilders with respect to nearby subdivisions. My prediction for several years has been that Wesley Chapel will one day be a slum.
Think again, bozo.
That reminded me about what a realtor told me last year while mentioning the new mall by I-75 and CR56. The realtor explained to me that the new mall stores would attract high end retail management jobs to the Pasco county area and buy up all of the inventory. Most of the positions pay $40K or less and would not qualify income wise at the current price levels of homes. As for the higher paying executive posistions, companies like Macy’s, Dillards, etc. have been eliminating these jobs.
I talked to the same realtor this past weekend and asked her if she had sold out of her inventory of new homes. The place was vacant and not much had sold since last year, yet inventory continued to climb. I told her don’t worry, the $35,000 a year retail person should be able to buy the inventory of $300K homes in due time!
35K * 2(married working couple) = 70K *4.5 (multiple of salary) = 300K. They will sell out soon…better hurry….0% interest only teaser loan…all you need is your signature and last week’s pay stubs.
Regarding that mall, with what’s looming on the horizon I think the area will be hard-pressed to support it, much less the other two shopping centers being built in the immediate vicinity. The only hope is that traffic from existing Hillsborough malls is cannibalized brutally. All I see in commercial real estate is vacancy after vacancy.
The whole idea that shopping mall jobs can support a local economy is stupid.
The problem with the US economy in a nutshell.
The mall was being built on what they thought was growth inthe area, but it turned into an area full of speculators/flippers.
There is no possible way that area can support all the retail stores going in. Wesley Chapel is a joke of a suburb, it doesn’t have anything but overpriced crapbox houses. The Cypress Creek mall will not do well, and neither will the wiregrass mall.
I couldn’t help buy laugh reading this story. Expecting it to be like California. What a joke. Prospective buyer should have researched other Tampa suburbs to find out they are only havens for blue collar truck driver types, who could care less if the house is replaced with a trailer, as long as there is a place to park the Sears, Verizon, or other kind of company van.
Where Is The Bottom To This Housing Free Fall?
78 million retiring boomers starting in 2011 will not make this a easy call.
Let suppose there are 78 million boomers. Lets narrow that down further to 39 million couples owning one house. Lets narrow it down further. At 70% homeownership thats.. 27 million homes. 27 million homes potentially hitting the market starting in 2011 for a decade or more.
Remember it is simply unfordable today to live in a highly taxed McMansion as a fixed-income retiree on average savings. In fact, it doesn’t even make sense. So most will sell or be forced to sell when they see the upkeep, snow removal, maintenance, taxes and hit on their savings.
Most McMansions are two-story, right?, only way to inflate the SF on a small lot. Old folks aren’t keen on stairways, if they can, they will be “right-sizing” to smaller, one story ranch style homes.
I’ve watched the Orlando, Kissimmee area for awhile now. A big percentage of houses being built are 2 story and few have a first floor master BR. This eliminates a lot of buyers.
Or they will be forced to work longer or at a lesser part time job to help expenses. One can’t expect a person to sell their house just because they turn 67.
“Let suppose there are 78 million boomers. Lets narrow that down further to 39 million couples owning one house. Lets narrow it down further. At 70% homeownership thats.. 27 million homes. 27 million homes potentially hitting the market starting in 2011 for a decade or more.”
But what about the second home market? (I mentioned this in the Bits Bucket.) Aren’t most of the second homes also owned by Boomers? So, the number of homes hitting the market would be even larger.
27 million homes potentially hitting the market starting in 2011 for a decade or more.
You really need to work on your math. The ‘Boomer” generation starts in 1946 and goes through around 1964.
Soc Sec retirement age for that group (starting with those norn in ‘48′49) goes up to 66 and eventually to 67/68.
Born Turn 65/66/67
1946 2011
1949 2015
1952 2018
1955 2021
1957 2024
1960 2027
1963 2030
There is a ninteen year period when the so-called ‘Boomers’ reach retirement age. That is TWO decades.
The whole demographic is not going to go rushing off and selling their homes. Studies show that only 10-20% are even considering relocating upon retirement - and, like anythingelse, more ‘think about’ doing something than actually ‘do it.’
So divide your 27,000,000 by 19 years. That is 1,421,000. Multiply that by 10-20%. That is 142,000 - 284,000 who would be ‘thinking’ about moving. It would be less than that who actually do it.
Why one earth do you have the idea that because people reach the age of 65/66, they are all automatically going to sell their home and move somewhere? (And where on earth doyou think they are going?)
Didn’t happen with my parents generation.
Didn’t happen with mygrandparents generation.
A few went moving off to Florida or somewhere like that but 95 -98% stayed put in retirement.
BTW, my village has a median age of 45 as compared to the national median of 35. I don’t see McMansions around here -except for the summer houses.
Demographics show the biggest buyers of the McMansions in x-burb hell are those who are the now 30-somethings and the early 40-somethings.
Ann, Observer’s math may be off but the point has validity.
SF Chronical
Lew Sichelman, Special to The Chronicle
Sunday, March 9, 2008
“The common perception among economists is that the current housing bubble will be a relatively short-term affair that should see a return to normal within the next few years.
But according to a study by two University of Southern California researchers, a bubble of even more monumental proportions lies just ahead. They call it the “generational housing bubble,” and maintain that it will be fueled by the same Baby Boomers who have been bidding up prices since 1970 as they moved higher and higher on the housing ladder…..”
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/03/09/REDHVBQ2L.DTL
“BTW, my village has a median age of 45 as compared to the national median of 35. I don’t see McMansions around here -except for the summer houses.”
I thought that stat was interesting so I checked the median age of my own village: 42.7. We also have no McMansions. Summer houses are generally the oldest, because it takes so much money to restore and heat them. (My husband’s family joke: our job is to bring hard currency across the border.) BTW also found out for sure what I had long suspected: there is not a single non-white person here. Only in Maine.
“The HOA took down basketball hoops at the community park on Wells Road after the park became a site of drug dealing and alleged gang activity.
I’m sure that’ll take care of the problem…wonder why don’t more cities didn’t think of that??
my thoughts exactly — take down the hoops, “force mow” people’s yards and all the gangs and meth freaks go away.
Really good question, why don’t ppl mow other yards to protect their own? Occasionally put fresh flowers in yard while doing your own..etc. Just like always picking up your neighbors newspapers to keep ppl from thinking ‘no one is home’. Just a protective device for you and entire neighborhood.
I can’t understand that either..If I had a “vacant” home next to mine..and I have a family…I would run my damn mower right over the lawn and clean up the front..why should I have to suffer because the bank is too cheap or doesn’t care..I wouldn’t want to drive up and see some squatter or drug dealer in the front yard along with my kids…
If you got hurt doing unpaid yardwork for the lazyass bank, you could sue, right? It seems to me that if this became a fad and a lot of enraged homeowners started busting off mowing neighboring lawns, banks might become even MORE motivated sellers b/c of the risk of incurring “frivolous lawsuits.”
Out here there is no point, becuase if the sprinklers aren’t run the lawn will simply die and be replaced by all sorts of weeds.
I’ve been mowing and maintaining the nuisance home next door for more than two years - I’m weary, fed-up and tired of it. I hate to mow my own place on 95 degree 90% humidity days - now it takes nearly all of a weekend day to do both - no end in sight with an empty overpriced family feud estate battle with out of town family. This spring - I’m just going to call the county. AAAARRRGHHHHHH!!!!!!!!!!
I recall reading some years ago that convenience stores that had loitering problems solved the problem by playing “old fogey” and classical music outside the store.
“The Federal Reserve announced this week that Americans’ percentage of equity in their homes fell below 50 percent for the first time since 1945. And economists expect this figure to drop even further. All of which brings up the question that’s on the lips of nearly everyone, especially Realtors: ‘Where is the bottom to this housing free fall?’”
Anyone got a link to this actual data from the Federal Reserve? I’ve seen plenty of articles - it’d be good to see the historical data.
Thanks.
Found it (thanks Jay from other thread).
http://www.federalreserve.gov/RELEASES/z1/
http://www.federalreserve.gov/RELEASES/z1/Current/data.htm
Wow - amazing stats. All these stupid articles last week used absolutely wrong phrasing -
“The Federal Reserve announced this week that Americans’ percentage of equity in their homes fell below 50 percent for the first time since 1945.”
This implies that that was the last time the rate was below 50%. BS!!! What they don’t tell you is THE RATE WAS 84% IN 1945. 1945 was just when they started collecting stats!!!
Looking at those stats (I love creating graphs) - it’s amazing how the banking PR machine has bilked us out of so much money all these years. Incredible. We have become an amazingly consumptive society - all fed by debt, and encouraged by advertising.
We are screwed.
“…’My wife and I would love to move,’ said Jim Martin, Spector’s father-in-law. ‘We can’t sell our house. I don’t know if we could give it away.’”
As pointed out on this blog countless times, Mr Spector can sell it for one penny or more. “Giving it away” should mean not even taking a penny for it, but I doubt Mr. Spector understands that. For him ‘giving away’ means selling for less than what it cost him, which he apparently thinks is ridiculous.
Give away, walkaway let the gangs in da hood take it…. Is there a difference?
Read the comment Neil -andstop making suppositionsas you read.
The man said he wouldn’t even be able to give the house away.
The article was about how the developement has turned into a pit because of speculators - and now he couldn’t even give the house away in order to be able to move out as no one will wnat it.
Nothing about the cliche interpetation to which you refer.
True, but you have to stop putting all that starch in your panties.
LMAO
Really? Panty starch causes you to LYAO? Wild.
Now Ann is lying? How cowardly of an accusation.
Betamax
Funny, for sure !!
It sounds to me the bank will be taking a hit either way. I don’t believe the bank could be acting in bad faith since in a perfect world rational banks would prefer to take less losses than bigger losses with a bigger claim against someone in financial trouble. Rather than acting in bad faith, the bank probably has too many foreclosures to deal with specifics and doesnt want to get into the habit of accepting big haircuts as it may put them under. I know they will have to do so eventually, but too many foreclosures, not enough experts, and not much room for more losses on the bank’s balance sheet prevents them from agreeing to extreme fire sales. When the regulators come in and force liquidation, that’s when the real fun will come in. I dont know enough about FL foreclosure law to speak as to the validity of a deficiency judgement.
This was a response to Bad Andy. I was sure I hit reply to comment.
There is no such thing as a “bank”; there are just a bunch of people who run a bank.
Since the “bank” doesn’t make the decision, and people do, and there’s not much of an incentive to pointing out the truth, the mouth-breathers will just keep making their salaries rather than “taking the losses”.
The success of a bank REO department employee is gauged by how many foreclosures they can sell. Their incentive is to beat down the price as much as possible so that they can sell the property. An REO dept. employee who isn’t selling foreclosures won’t be “making their salary”; they’ll be standing in the unemployement line.
The bank as a whole does not want foreclosures on their books so they also want to dump. The Bank has policies that may need to change due to the severe change in market conditions and the lag time for changing a bank policy is atrocious.
I think the real problem is lack of knowledge and lack of staffing. The market changed so fast and so bad that I think that it caught the banks by surprise, and they are scrambling to catch up.
True. Bad faith is usually a term reserved for when someone acts unreasonably to gain an advantage in a contract dispute. I don’t see what advantage the bank would get by not minimizing its losses. If there some reason to think the bank is trying to get unfair leverage, or is the bank just not giving serious consideration to your friend’s situation?
“…or is the bank just not giving serious consideration to your friend’s situation?”
Bingo. I’m not defending the situation at all. Who gets an I/O ARM and expects their income to increase enough to cover an adjustment?
Bad faith is usually a term reserved for when someone acts unreasonably to gain an advantage in a contract dispute.
This term is used mostly against the insurance industry by trial lawyers.
“This term is used mostly against the insurance industry by trial lawyers.”
Agreed and probably where I end up with a lot of my terminology. That said, in further research today I’m finding that many property lawyers are using bad faith as a defense for both foreclosure proceedings and for defense of those being sued for a deficit after a foreclosure sale.
The banks will realize this summer that moving slowly to hide the loss makes it worse as they could have found a knife catcher wiling to take a JT enema at a higher price months ago, as they sit and rot, the market gets worse, and thus the prices must fall. How many auctions where the home goes back to the bank because they have a minimum, before they realize IT IS THE MARKET THAT DICTATES. Try to get a loan for less than the going rate and they no doubt repeat the aforementioned statement verbatim. Why is it any different in the REO business? Let the market determine the price.
I haven’t posted since the days of anonymous, but thought some might enjoy my house selling saga… sorry it’s long.
I sold my investment properties in South Florida in late 2004 and early 2005. I wanted to sell my house as well, but my wife didn’t like the idea of moving…
We had looked at all 36 houses for sale in the area and bought our house in December 2002. At the time I thought we were over paying, but with a 20% down payment and a loan 5.75% fixed for 30 years, our total payment was within a couple hundred dollars of renting an equivalent house… a small premium for owning. After the hurricanes hit in 2005 our insurance skyrocketed to almost 2% of our purchase price. Rents went up at the time as inventory was bought up by investors who kept houses empty during “renovations” or waiting for a flip. Right now typical Miami Beach taxes and insurance seem to be hovering around 3 - 3.5% of purchase price.
Fast forward to the end of October 2007. The house was built in the 1940’s and needed new electric, plumbing and other updates. Rather than do the work, we decided to list our house.
I put the house on the market for 1% less than the most recent comp. We had 6 prospects view the house in the first two weeks, then nothing. The first week of December we lowered the price 8%. At the time there were 4 houses with a lower asking price in the neighborhood. These houses were all at least 250 square feet smaller than mine. In the next week the house showed 9 times. The last couple to look at the house was the only prospect that came back for a second showing.
They made an offer that was 10% below my asking price. Their offer included a 20% deposit at the effective date. While I was tempted to take the deal and run, the gambler in me countered. We quickly settled for a price 7% lower than the asking price.
During inspection they found all the items that required work. They came back and said that they need a 7% deduction. I countered with 3.5%. The asked for an additional 1.5%. This is when it got fun… I told both the buying and selling agents that they need to eat the last 1.5% to close the deal. Which they did in a heartbeat.
At the end I made 9.2% a year on the sale of the house, and a 34% annualized return on my 20% down payment.
We now rent a house that is 50% larger and on the water for 35-40% what it would cost to purchase.
After the buyers made their initial offer, not one prospect called to view my house. Currently there 32 houses in the same area that have a lower asking price than my February sale price. The lowest is asking 28% below my sale price. There are 80+ houses for sale on MLS in the area, and that does not include at least 20 FSOB and at least 30 foreclosures. So much for my nice Miami Beach enclave.
God bless the knife catchers. Without them how would we know prices are falling off a cliff?
thanks for the story, it was interesting to read! the knife-catchers are important because they allow for two owners to take, say a 20% loss on the value of their home, which is much easier than one owner taking a 40% loss.
Not to pick knit’s, but if the first owner takes a %20 loss, the second owner needs to take a %25 loss- to get the same effect as the single %40 haircut.
Start with $100. First sale (%20 off) gets you to $80. The second sale, at $60, represents a $20 loss on $80, or %25.
why does the statement “not to nitpick” always end with someone nitpicking?
just kidding
point taken though
Thanks for the story. It looks like you got out just in time by playing it smart and not chasing the market down to the very bottom like many homeowners seem to be doing.
I was smart to price it aggressively. At the same time I was very lucky to find a qualified buyer that liked my house after the first price reduction. It seems prices have slipped at least 3% in the last month.
You were one of the luck ones…as I say to my husband..we saw the train out..we ran up, grab the last car and held on for dear life right out of the state of Fl…
Sold our house one year ago..to a buyer who swore at that time that property taxes were going to be eliminated in Florida..felt he had to buy our house because it was going to go up in value when this happened..never happened and now he is $200K underwater…
1 short sale pending right now in the community and a foreclosure a few doors down…
He and several other who bought in our old community in 06/07 are hold their breathe as the water continues to rise higher and higher each day…
All of which brings up the question that’s on the lips of nearly everyone, especially Realtors: ‘Where is the bottom to this housing free fall?’
I’m confused: If prices only goes up, what do the words ‘free fall’ mean?
I’m confused: If prices only goes up, what do the words ‘free fall’ mean?
It means realtors are not selling and you are screwed if you bought or are buying as prices will continue to fall.
Here is something to consider. Many of these loans have been packaged and securitized. Now who is going to take the hit in this situation. Lets keep this simple, the security was divided into two parts, one interest only (IO) and the other principal only (PO). For those of you not familar with this, it basically means that the IO holder get all the interest and the PO holder gets all the principal.
The borrower has this loan, $200,000 Priincipal, 8% interest, 30 years and the monthly payment is $1467. Say this borrower gets in trouble and the servicer and borrower want to renegotiate the loan to get the monthly payment down to $1200. There are two ways of doing this: reduce the principal down to $163,540 or reduce the interest rate to 6%.
Having holders of IO and PO pieces with totally different objective and cash flow issues and depending on how you renegotiate the loan one bondholder may take a much bigger loss than the other. Only thing certain here is that there is going to be a lawsuit by either the IO or PO bondholder.
That is why many of the trustee agreements have clauses that say the servicer can only renegotiate a small percentage of the loans that make up the mortgage backed security.
Don’t the parts (tranches) themselves specify which ones take the loss first, 2nd …nth and generally the ones that loose out 1st are the ones that paid gave the highest return ?
IIRC, most REIC arrangements use tranches. That is, the conduits that buy large numbers of mortgages and issue bonds usually use a tranche arrangement where the AAA tranche is the first to get principal payments, etc. Michael F is referring to ’stripping’, where the interest stream and principal payments are separated. This is a derivative based on underlying REICs, sort of like CDOs. My guess is that the holders of the derivatives are so many steps removed from the mortgage servicers that they will never be able to force specific terms on the servicers. All of the REIC agreements I have read (filed with the SEC) give the servicer enormous latitude in renegotiating the terms of mortgages, as long as the servicer can argue that the renegotiation (1) is similar to deals that the servicer makes on mortgages they own and/or (2) they are making a reasonable effort to maximize trust (i.e. bond) income. I see little in these agreements that holders of stripped derivatives could use in a lawsuit against the servicer.
I think that reporters who claim that bondholders can sue to prevent servicer/borrower renegotiations ought to read a few service agreements first (I know, I know… they ARE boring as all-get-out…).
this is why some have had their foreclosure suits thrown out, they do not own the note, ( my guess) 20 percent of the mortagges in this country may not have the right to the property. The class action in Ohio, will be quite telling
Someone else here said it first, but I like it so much I’ll repeat it.
A day without a Florida thread on the HBB is like a day without sunshine.
That must be why they call it the Sunshine State.
This state is a fulltime freakshow circus of fun! It is full of lively stuff like crazed amoral speculators and serial killers and strange fatal skin diseases. If you liked _A Handful of Dust_ or _Burmese Days_ or any of the cynically amusing, fatalistic books about dying in the tropics, you’ll love living in Florida. I believe “sunshine” is a euphemism for some very dark and frightening word that cannot be spoken lest we bring the magic kingdom tumbling down.
I recently read Burmese Days. I was the first in about 20 years to check it out of the university library. I like Orwell’s non-fiction and semi-fiction (I recently read Down and Out in Paris and London, also recommended by an HBBer) .
I googled A Handul of Dust and saw it was written by Evelyn Waugh. I like his work (favorite comedic Waugh novel is Scoop). I don’t recall reading A Handful of Dust so I’ll go look for it the next time I’m at the university library. Thanks for the info.
It is. SO. Depressing. But funny. I love Waugh.
“‘These are the people who are going to move in and actually live in the community,’ Spector said. ‘These are the people who are going to take care of the community. It doesn’t matter if they had a $200,000 discount from what I paid.’”
Doesn’t matter? It doesn’t matter to me–I think it’s terrifically funny, even–but it sure ought to matter to you, ya nitwit. 200,000 is a lot of money, and who do you think is ‘going to actually move in’? After spending time whining to the reporter about all the riff-raff that insist on coming over and wandering around?
Plus, your father-in-law hates you. Which is another thing I think is pretty funny.
The banks are actively engaged in a Prisoner’s Dilemma game. As they cut their prices on their REOs, they’re screwing other banks who own the notes on the neighbors’ homes, drawing them closer to foreclosure and more bank losses. And the cycle continues.
It sounds bad, but it’s the only way it can work. It’s the real benefit to a free market capitalist society, sans monopolies. And it keeps things priced fairly in the long run.
The problem is, this is a prisoner’s delima with a dozen participants. Its only begun. Could we have a spring “bear trap?” Yes. But after then, look out below.
Got Popcorn?
Neil
I like to think of some of the Paulson-led marketing ploys as trying to reverse the problem of the Prisoner’s Dilemma. In other words, it’s an attempt to create a trust or price-fixing agreement. If all the lenders/investors work together and cooperate to prevent their asset prices from falling, this is a trust, and it’s illegal IMHO.
It’s really not a Prisoner’s Dilemma, because the prices are going to fall anyway no matter what the banks do. In a real game the final outcome depends on the actions of the participants.
It’s just …drum roll… supply/demand equilibrium in a competitive market.
Supply and demand relationships can get very skewed with monopolies, because the supply can be artificially constrained. Even if prices will fall anyway, they can fall less if the lender participants cooperate. That’s why price-fixing is illegal.
Exactly. If they act as a monopoly, you have the win in the delima, but only in the short term. In the long term, inventory will force prices down. Hence why I see a risk of a “Spring bear trap.”
Got Popcorn?
Neil
As long as we are trying to call bottoms, at what point will long-term T-bond yields hit bottom?
He had to sell his helicopter… That sucks… when you have to let go of your helicopter. Its just unfair, a man without a helicopter.
Lane
I don’t see how he could’ve held onto it. After all, when he comes into a bubble, he makes it snap, crackle, and finally, pop. It’s that last part that loses you your blackhawk.
Blackhawk Down.
I wish Ben Beranke would sell HIS helicopter.
From my little corner of Virginia….chnages from 1/1/07 to 1/1/08….
“CO’s issued for single-family homes decreased by 29% from the previous period. Decreases also occurred in the percent of CO’s issued for: townhouses (100%); condominiums (9%); detached condominiums (43%); duplexes (19%); and new mobile homes (100%). Apartment CO’s were up 19% from the previous period. Demolition of existing residential units decreased by 22% over the previous period, reversing a trend of increasing residential demolitions over the past few years. “
‘Someone told me I couldn’t get a home improvement loan because I was upside down,’ she said over the phone. ‘What does that mean?’”
It means that your one of the sheeple who failed to do their research and ended up getting suckered into buying an overpriced house. It means that you should not be buying anything until you learn the basics of finance. It means you are in deep deep trouble!
I wonder how many people ran up credit card debt thinking that they would just get rid of it with their next refinance of the home. At least this borrower put money down on the property ,(but she can’t free that down payment now ).
–
Desperately seeking bottoms — on financial TV now we have people seeking bottoms in housing as well as the Scam Market. Wait at least until 2010 before any anxiety for missing the bottom.
Jas
An advertising slogan from the 1920’s Florida land boom. “Your future is in Florida, the fair white goddess of states.”
Great article in the New Yorker on irrationality in economic decisions. I read the following passage regarding the “endowment effect” and immediately thought of the frozen real estate market (i.e., existing owners (lottery winners) overvalue their winnings).
http://www.newyorker.com/arts/critics/books/2008/02/25/080225crbo_books_kolbert
“Another challenge to standard economic thinking arises from what has become known as the “endowment effect.” To probe this effect, Ariely, who earned one of his two Ph.D.s at Duke, exploited the school’s passion for basketball. Blue Devils fans who had just won tickets to a big game through a lottery were asked the minimum amount that they would accept in exchange for them. Fans who had failed to win tickets through the same lottery were asked the maximum amount that they would be willing to offer for them.
“From a rational perspective, both the ticket holders and the non-ticket holders should have thought of the game in exactly the same way,” Ariely observes. Thus, one might have expected that there would be opportunities for some of the lucky and some of the unlucky to strike deals. But whether or not a lottery entrant had been “endowed” with a ticket turned out to powerfully affect his or her sense of its value. One of the winners Ariely contacted, identified only as Joseph, said that he wouldn’t sell his ticket for any price. “Everyone has a price,” Ariely claims to have told him. O.K., Joseph responded, how about three grand? On average, the amount that winners were willing to accept for their tickets was twenty-four hundred dollars. On average, the amount that losers were willing to offer was only a hundred and seventy-five dollars. Out of a hundred fans, Ariely reports, not a single ticket holder would sell for a price that a non-ticket holder would pay.”
Well now I understand the reasoning behind the wishing prices of the “well endowed”.
Thanks for the link!
‘It’s when things stop getting worse and basically stay there for some period of time.’
DING, DING, DING, DING, DING!
http://www.usatoday.com/money/economy/2008-03-04-local-differences_N.htm
Great article that breaks down which cities in Fl are facing the recession, and which are headed that way…
From said article:
Stanley Stonier of Boise started as an entry-level worker on an oil rig near Pinedale, Wyo., in January. Before, the 31-year-old was making $15 an hour as a housing construction worker. Now he is making $26 an hour.
“I’m loving it,” says the former Army reservist who served a year in Iraq in 2005.
Beware Stanley as José Ramírez will do what you do for $12 per hour, sun up to sun down and even on weekends.
Beware Stanley as José Ramírez will do what you do for $12 per hour, sun up to sun down and even on weekends.
Stanley may already be doing this (except for the $12/hr part)
‘Those retailers and businesses that have a product that is desired by consumers will survive, and those who do not will not.’”
Uhhh yeeah