The Sunshine Doesn’t Pay The Mortgage
The Daily Business Review reports from Florida. “Another major West Palm Beach project is facing foreclosure. The developer of the Sail Club at Clear Lake, who has abandoned plans for the 10-acre residential project, was hit with a foreclosure lawsuit late last week seeking more than $19 million. Robert Kohn, Wellington-based president of Homes for America, says the foreclosure is an aftershock from the collapse of USA Capital, a Las Vegas company that represented thousands of investors and lent more than $900 million to developers across the country during the peak of the real estate market.”
“The developer was also the victim of timing. At the height of the residential market, it paid $14.5 million for the aging apartment complex that was to be the site of the Sail Club. The seller had purchased the property about 15 months earlier for $8.08 million.”
“‘The Sail Club project was well received and had the lender not breached its obligations, the project would have preceded long before the Florida real estate market entered its own period of contraction,’ Kohn wrote in (an) e-mail.”
“Kohn stated the ‘the developer invested millions of dollars in this project that are now lost.’ He added ‘the developer maintains cross-claims against the lender and its underlying investors for the loss of business advantage and the costs incurred from this failure to fund.’”
The Wall Street Journal. “The condominium market is about to get worse as many cities brace for a flood of new supply this year, the result of construction started at the height of the housing boom.”
“Developers in Miami and Fort Lauderdale, Fla., are readying nearly 10,000 total new units in a market already struggling with canyons of unsold condos.”
“Lenders of all sizes have $42 billion of condominium debt on their books, according to Foresight Analytics. In just three months — between the third and fourth quarters of last year — the delinquency rate rose to 10% from 5.9%, says the research firm.”
“In Miami, only 57 units in the 118-unit Onyx on the Bay have closed since August 2007, leaving the remaining 61 units in the possession of the developer, according to Miami-Dade County records.”
“The deteriorating economy isn’t helping. ‘When the world goes to hell in a handbasket, the last thing anyone wants to buy is a condo,’ says Cathy Schlegel, a mortgage-loan broker in Fort Worth, Texas.”
“Cancellations are rising, meaning developers may not be able to pay back their banks. Peter Zalewski, founder of Condo Vultures Realty LLC in Miami, says condo developers he is working with are expecting 20% to 40% of buyers who put down deposits to walk away from the deal. In some areas, such as inland buildings and new projects along the river in Miami ‘walkaways’ are expected to be even higher.”
The Miami Herald. “First, it was mortgage lenders who began requiring bigger down payments from borrowers in South Florida, ostensibly making it harder to buy and slowing recovery of the housing sector. Now, mortgage insurers are delivering a new blow to a market that is already down.”
“Over the last several weeks, the nation’s mortgage insurers have been unrolling their own distressed market policies in Miami-Dade and Broward counties, eliminating certain loans from coverage and requiring higher credit scores and more upfront money from borrowers.”
“‘Historically, real estate has been a down-payment game. We are going back to what we’ve grown up with,’ said Mike Pappas, CEO of The Keyes Company.”
“‘People are in foreclosure and their houses are not selling because nobody can get loans to buy them,’ said Alphoncia Lafrance, president of Midas Lending in North Miami.”
“To get loan insurance from MGIC Investment Corp., the country’s largest mortgage insurer, South Florida borrowers with a 620 credit score have to put down 10 percent on loans of $650,000 or less.”
“Milwaukee-based MGIC reported a $1.47 billion-dollar loss in the last three months of 2007. On Monday, PMI Group of Walnut Creek, Calif., reported a fourth-quarter loss of $1 million. And the No. 3 insurer, Radian Group, booked losses of $721 million in the same period.”
“Robert DeLoach, a securities attorney with Fort Lauderdale-based Ledbetter & Associates who closely follows the real estate market, said it’s unfair to make qualified borrowers pay for the excesses of the boom years.”
“‘When I was in my 20s, I got a 95 percent loan. I paid it off. The mortgage insurers are picking on qualified borrowers, even when they have good credit scores, good payment histories and good jobs,’ DeLoach said, ‘It will hurt us, and it’s too bad they singled out South Florida.’”
The Herald News. “Dear Mr. Berko: I own a three-bedroom home in Boca Raton, Fla. It’s appraised at $211,000, and my mortgage is $133,000, so I have $78,000 equity. Because my equity is high, a new mortgage would lower my payments and eliminate the $76 a month for private mortgage insurance, saving me $300 a month. But they won’t let me refinance.”
“My problem is that an ex-friend ruined my credit, and I have a low credit score. I don’t owe money to any company or any person. However, I don’t have any reportable earnings and did not file a tax return in 2003 or 2004 or 2005 or 2006.”
“I have an 18-year-old at home who pays $200 a week, and I made $23,000 last year. I tried to tell this to GMAC, but they told me not to call until I got myself a ‘real job.’”
“I must lower my payments by at least $250. My home insurance has nearly tripled, and my property taxes went to $2,496 from $1,540. It’s my fault that I bought a house, but I believed I would always be able to make the payments. When they gave me a mortgage, they knew that I had very low income.”
“Please explain why GMAC won’t make me a new loan at a lower interest rate, but they will continue the current loan with $76 a month PMI that I don’t need now. I could really use the extra $300 per month.”
“Dear L.R.: Suffice it to say that you can’t refinance due to the lupine greed of Merrill, Citigroup, Bear Stearns, UBS, Bank of America and other brokerages warmly embraced by the New York Stock Exchange. Their feral appetite for money, like greed on speed, has contaminated the low-income mortgage markets.”
“No matter how significant your equity or how compelling it would be for GMAC to refinance — they won’t. GMAC is as flexible as a cement block. Today, banks insist on a credit score above 640, a respectable reportable income and at least two years of prior tax returns.”
“During the past five years, home prices have doubled and some tripled, yet personal income for most Americans has declined…if you are offered $184,500 or even $181,000, jump on it like a duck on a June bug, because prices are still going lower.”
“You might consider leaving the state of Florida. The costs to raise a family and maintain a home are so much less in other states and many residents are now leaving the state.”
“Florida wages are much lower than the national average, Florida’s education system is probably the worst in the nation, the legislature is as crooked as a shillelagh, gridlock is unbearable, the health care system is broken and crime (especially violent crime) is epidemic.”
“The sunshine is wonderful, but it doesn’t put bread on table, pay the mortgage or educate your children.”
The Sun Sentinel. “Trying to make something good out of a bad real estate market, city officials want to buy foreclosed properties and turn them into affordable housing.”
“Officials are proposing to directly buy foreclosed homes at bargain prices, fix them up and resell them to qualified buyers, who would get up to $40,000 in down-payment help. Hallandale Beach officials are still trying to determine how the program would work and who would benefit.”
“City Commissioner Keith London said he knows of three investor-bought homes being foreclosed in his affluent Golden Island Safe Neighborhood District. ‘My question is how we’re going to pick the winners and the losers,’ London said.”
“Hollywood spokeswoman Raelin Storey said her city is considering a similar initiative, but has only a ‘few hundred thousand dollars’ to spend. She said city commissioners would have to approve any purchase and homes could not exceed $200,000.”
“According to public records, there are 1,497 homes scheduled for foreclosure sales in Broward this month. Of that number, 201 are in Fort Lauderdale; 148 in Hollywood; 135 in Miramar; 126 in Pembroke Pines; 125 in Coral Springs; 109 in Pompano Beach; 79 in Margate; and 77 in Sunrise. North Lauderdale has 38 Foreclosure sales.”
“Every week, 500 to 700 people call for foreclosure assistance, according to Sue Fejes, assistant director of the Broward County Housing and Community Development Division. She said most are from Miramar, Pembroke Pines and North Lauderdale.”
“She said the Broward County Housing Authority, which helps homeowners in distress, is ’so backed up, they’re making appointments for June right now.’”
“In Hallandale Beach, 30 homes are listed for foreclosure sale this month. The city had 333 foreclosure sales last year, most in the city’s more affluent eastern section, although the problem is citywide.”
“‘I know one guy, right now he has a Foreclosure and he’s now renting his own house [from the investor who bought it] because he doesn’t want people to know about it,’ said Josh Brown, of northwest Hallandale Beach.”
The Herald Tribune. “While today’s dour economy certainly stings everyone, retired seniors reliant on investments and older Americans on fixed incomes are being especially squeezed in the current bout of inflation.”
“As oil has blown past $100 a barrel this year, gas has risen to around $3.35 a gallon. By contrast, in January 2004, gas cost an average of $1.45 a gallon in Southwest Florida, according to AAA Auto Club South.”
“Regional food prices have risen higher. Further increases are expected throughout 2008, experts predict. The same could be true for homeowners insurance, prices for which since 2004 have surged an average of 49 percent in Florida, according to the state’s Office of Insurance Regulation.”
“Martin and Lorraine Henes know the trend well. They have essentially become prisoners of their waterfront Laurel Lakes home. The couple wants to move back to New Jersey to be closer to children and a granddaughter. They have even put down a $25,000 deposit on a new place in a 55-plus condo community.”
“But until their spacious four-bedroom, three-bath home with the pool, Jacuzzi, fireplace, tall ceilings and rich wood cabinets sells, the Heneses are stuck.”
“‘We can’t afford two places at the same time,’ said Martin Henes, 83. ‘We didn’t figure the market would tank like it did.’”
“They are asking $540,000, still hopeful that they will be able to relocate sometime this summer. Their house has been on the market since last year.”
“The Heneses are not alone, of course. Three years ago, the median sales price of a residence in Sarasota and Manatee counties topped $350,000. Today, the same gauge is $100,000 less, a drop that has left bottom-seekers wary of committing.”
“Some analysts believe the Fed will shave short-term interest rates further by year-end. Although that might stimulate a weakened economy, economists say such a move would be bad news for those who count on interest from CDs, money market funds and other accounts.”
“‘It’s a killer for fixed-income people,’ said David Voigt, chairman of the Bank of Venice.”
You’ll have to read the HN article to get all of Mr. Berko’s response to the person in Boca Raton.
Good thing Mr. Berko’s column is in a Chicago newspaper. Presumably he is too. If he were in Florida, the REIC there would be organizing a lynching party.
To call his advice “blunt” would be a serious understatement.
Wow.
Wow… blunt is an understatement:
During the past five years, home prices have doubled and some tripled, yet personal income for most Americans has declined.
-snip-
Florida’s record high taxes, high insurance rates and low-paying job market are three big reasons why Florida’s housing market has collapsed.
Mr. Berko must be tired of receiving these letters! Or is the column normally that tone? He strikes me as a man who is prepared for a depression (as best as one can be). Just first impressions…
Got Popcorn?
Neil
Berko is known for being sarcastic, condescending, and snippy. He also has a penchant for insults and hyperbole.
He does know his stuff, though.
I’m really impressed by the “Worst is Over” PsyOps PR campaign the Fed and the feds are trotting out. Unfortunately smiley faces and upbeat articles don’t replace spendable income. Happy horsesh!t tends to turn into just another awful mess in the constant rain of economic loss. There is no bottom in sight for this economy. Imagine a 100 step granite staircase in front of the County Courthouse. Imagine you have just thrown a rubber ball onto the top step. Jim Cramer is heard saying, “That was the bottom!” Uh huh. As Yogi Berra once said,
“You can observe a lot, by just watching.”
Now watch what happens as property values continue to fall, the dollar continues to fall, municipal revenues continue to fall, spendable income continues to fall, and unemployment continues to rise. About three more steps down the staircase is the level often referred to as Depression Territory. Only 96 more steps down to go after that. The show’s not over, not even intermission yet. You just had a power outage in the first act. It wasn’t in the script. No reason to stand up and applaud. Be more concerned about how you can get out; when you’ve had enough and the kids are getting hungry and nervous. The refreshment stand is closed. The ushers are nowhere to be seen.
This is a different kind of show than you’re used to, or expecting, or being told about in the main stream media.
Or, using a baseball analogy a mortgage broker told me yesterday, “we’re not even out of the dugouts yet.”
It must be syndicated because it did appear in the Northwest Florida Daily News this week (Destin/Fort Walton Beach areas). An area of Florida that got a bubblicious as just about anywhere else.
Berko lives in Boca Raton, or “Boca” as it is known in South Florida.
One of the toniest enclaves in Florida, the name of the place means “rat’s mouth” in Spanish.
“Florida wages are much lower than the national average, Florida’s education system is probably the worst in the nation, the legislature is as crooked as a shillelagh, gridlock is unbearable, the health care system is broken and crime (especially violent crime) is epidemic.
The sunshine is wonderful, but it doesn’t put bread on table, pay the mortgage or educate your children.”
That about sums up the lifestyle in FL for many. It’s very sad, but FL has to be about one of the worst places in the nation (at least urban FL) for a family at the current time. I can’t fathom raising a family here, it’s just not at all geared for it. FL is for retirees first, and for fast money DINKs second (again, all of this IMHO). Raising a family here without a REALLY high income is just nuts; I can’t picture doing it in urban FL without a HH income of 250K+, and even then, it’s not going to be living the “high life”. You will get by, but not in the manner most people would equate to a 1/4 of M dollars a year in income.
If I was ever to have kids, or want to have kids, I would almost certainly leave costal FL. The inner areas of the state still have some “family friendly” areas, and other southern states are also much more geared towards family living.
Now that I am done bashing it; for a DINK or a single person; FL is wonderful. I really do love it here, but that’s because (IMHO) I am in the new target group to enjoy it. Unfortunately, most everyone else I know is NOT in this group, and hates the “new FL” and can’t wait to move out. It’s very sad and unfair; I’m really the one who didn’t belong here 10 years ago… I guess things change, but it’s just never a good thing to see so many people so unhappy about their living circumstances.
However, it is nice to know that evidently in Florida you can make $20k/yr and not have to file income taxes.
I agree for most part of the DINK…however, I stil ithink that it is too overpriced and overrated for what you get as a DINK..so many other places more interesting to live in the USA that doesn’t take a 7 hour drive to get out of the state…cheaper to visit than to live..when it comes to quality of life…
As far as a “retiree” state, well that boat sailed after the 05 hurricane season and can be seen in the decrease of out of state plates and traffic during the winter season..too many other better places to retire..most retirees want the warm climate but are more concerned about living in a economy that allows their retirement dollars to last..that won’t happen in South Florida..pretty much all that will be left in that part of the state will be the 300K plus income earners and the section 8 low income housing..not to pretty a scene…
You are absolutely right about not living the high life with 250K + per year. I make that and more and keep shaking my head wondering where it all goes. The prices for everything are outrageous. I do imagine many of the areas in Northern Palm Beach County will be inhabited by just the very wealthy. And at just 250K per year, I’m not one of them.
You’re forgetting about North Central Florida … like the rest of the South, but the weather and the schools are better. (Esp. Alachua County, which are some of the best in the state…and certainly better than AL, MS, TN, KY, TX except Houston, GA but for parts of ATL…)
Life is fairly inexpensive. Rent for a few years until house prices come back into line (they’re bloated, but not South Florida bloated). Lots of inexpensive recreation, lots of locally grown food (even meats), and a nice mix of Southern culture and civilization.
Although, if I had my druthers, I would leave. But I do not “love” the South.
–
Thanks. It is a good description of a general problem and it says a lot about our debt-infested “home ownership” system.
It is amazing how little people appreciate the role that debt plays in our economic system and how it has been taken to an extreme in terms of ab-use, including what is happening to Wall Street financiers.
It Is the Debt, Stupid!
Jas
PS: For those who may be new here, as a son of a moneylender I learned a lot about debt at a very young age being very curious and an arithmetic wiz kid (I could do compound interest calculations on my father’s client accounts at the age of 8 with paper and pencil). Both my late father and son are known for being exceptional accountants.
As they said in the 1920’s, “Your future is in Florida, the fair white goddess of states.”
$42 Billion worth of condomaximum debt, that is.
“Lenders of all sizes have $42 billion of condominium debt on their books, according to Foresight Analytics. In just three months — between the third and fourth quarters of last year — the delinquency rate rose to 10% from 5.9%, says the research firm.”
I would love to know how much work is being done to keep the smaller banks in Florida from melting down. The problems in smaller banks get much less attention but are very real. They financed the construction of so many of these developments. There will be a lot of ink devoted to this disaster in the next couple years. I don’t think the Fed will rush to save every small bank.
Florida seems to be in the lead with the other 49 way back, if you ranked states using my patented “basketcase” method.
I suspect the 1st bank runs in our country-this century, will happen there.
“…if you ranked states using my patented “basketcase” method.”
Great news, everyone in Florida has been using your method for quite some time!
No small bank will be saved. Shareholders will be wiped out and non-insured depositors and creditors will get nothing. The FDIC will take losses because small banks are heavily dependent on insured deposits.
Large banks, where insured deposits are not significant, will remain in business, even though the FDIC most likely wouldn’t lose a penny in the receivership of a large bank. (For example, the most recent call report of Bank of America shows insured deposits of $400 billion for this $1,313 billion bank. That’s only 30% of total assets, and BoA is a bank with a large, domestic branch network.) The big banks will simply replace their large, private sector borrowings with cheap loans from the Fed. And like in Japan, the US bank supervisory agencies, including the FDIC, will simply ignore any balance sheet insolvency that may appear.
Anyone have an opinion about ALAB? It’s thinly traded so I gave up on shorting it. They own Alarion Bank, which (along with Millennium Bank) made some of the worst investments in Gainesville. I’m waiting for them to go down hard.
the banking regulators are doing their best to forbear on all of the community banks that have massive loans out to the residential homebuilders. they are not requiring new appraisals, or when a new appraisal comes in, they are not forcing any writedowns because they do not think today’s prices are “true values”. yet, they allowed loans to be extended on the appraisals during the bubble. many banks in FL are insolvent today if their loans and reo were marked to current values. the banking regulators are hoping that the housing market will turn around soon. however, it will not and this charade will be exposed.
This thread is all wrong. All of our economic problems are solved. The Fed is going to buy up MBS. Housing has bottomed. Stocks have bottomed. The consumer is in much better shape than the media lets on. How do I know this? The pundits on Fux News have told me.
The one little puke recommended St. Joe (JOE) as his pick of the week. Never mind that JOE is up 70% since its low. He said that this is your way to start buying up land in Florida. He said that the housing problem in Florida has bottomed and is turning around.
I am listening this morning and wondering what planet these people are describing. I know they are biased but Jimminy H. Crickets, how can they be that biased? It shows that this thing will last for decades. The downturn will end at about the same time we get out of Iraq, 100 years from now.
I watch these foolish shows to get a reading on the stupidity out there. The meter is pegged, right now.
Well, for what’s it’s worth, I do think that the huge problems at the big banks are mostly behind us now. They still have some big writedowns to come, but most of that is priced in at this point; and the Fed is doing, and will continue to do, everything in it’s power (and some things not) to prop them up and make sure they recover.
However, homebuilders are a TOTALLY different story. Many of those stocks heading to 0. The fed will bail out Wall St, but will not lift a finger to stop TOL, HOV, or any of the other big boys from going down in flames. It’s not their job, and it really has little/no overall economic impact. The banks will be propped up, the builders will fall into the abyss.
And as far as FL in particular, that little puke needs to look around. Buy all the land you want fool; what most people don’t realize (at least those who don’t live here) is that there is NO land shortage in FL. There are 10’s of thousands of acres of EMPTY lots in most of the SE FL counties; it’s requires an act of absolute denial to even think otherwise. Land is not our problem; buying it up now at anything approaching the market price is a sure way to lose big. If you’re buying it for 100 an acre, that’s one thing. But these idiots (most of them) are buying west of the TPKE (no man’s land) at 50K an acre.. That’s problably 50X the actual value; once someone wakes up and realizes that 95% of S. FL (and 98% of all of FL) is totally undeveloped or woefully underdeveloped.
For banks to recover, although we do not need to be at the bottom for real estate, we do need to be confident at where the bottom is and adjust valuations accordingly and realistically. Also, there needs to be renewed faith in the realistic value of mortgaged backed securities sitting on the banks books and they have to start trading again so the investment banks can get back to business as normal. Why do you think that any of this has occured? I do not see it.
I don’t think that any of that has happened. And believe me, I am as much a bear on RE as perhaps anyone on this blog; I don’t see a recovery in my area (S. FL) for years…
However, the banks (not the 3rd party lenders) have, in recent weeks, been blessed by the Fed. They have shown their hand; and basically, IMHO, we are seeing the bottom in the banks, not because their MTG values are not going to decline further, they certainly are. The thing that has changed my view is that the Fed is willing to do anything to keep the debt game alive; and to bail out these insitutions that have made bad bets. They will take a much larger portion of the paper from them (through the increased loan limits), and allow them to get loans based on the inflated values directly from the Fed.
In short, I think that the govt is doing everything they can to get the MTG debt off the banks books and onto theirs. Your absolutely right; the values have further to decline, and there will be continued pressure on MBS values. But, much like FRE and FNM have the “implicit” promise of the Fed, I feel that a similar thing has been done for the banks. The Fed is going to backstop their bad loans, and socilaize the losses… Many of us thought that this would happen, and IMHO, I think that we just saw it happen in the past few weeks.
Again, all of this is just my opinion, I have nothing but conjecture and my personal views to back this up. Won’t stop me from spweing it into the blogosphere though!
Mike - I concur with what you are saying. The Fed is afterall part of the problem and the solution. It is shamefull that the pigmen can get away with it without any come back. They keep their f’ing bonus.
Unfortunately it is not just Fox that spews out this type of nonsense, listen to some of the garbage that Larry Kudlow passes off as analysis. Culturally we seem to have developed such a bias against pessimism and trying to determine what worst case scenarios could be that anyone who tries to do some introspection into the root of some of our economic problems is labeled as a “gloom and doomer”.
As someone who has worked at a large corporation for most of his adult life I have seen this dynamic at work in the corporate world. Advancement is not possible if you show hints of skepticism. I have seen the same failed ideas tried time and time again because of the bias against pessimism. No one ever says, “You know we lost $500 million dollars the last time we tried this, maybe it’s just a flawed concept”. In the world of mindless optimism there are no flawed concepts. If we just try harder, if we just market better, if we just have more meetings… Some things will not work no matter what, for whatever reason many have a hard time grasping that.
Frank, what a relief to read your post. I get called “pessimistic” all the time just for thinking clearly.
I think the bias against pessimism as well as the compensation structure at the Wall Street firms played a large part in this run up. These firms have risk managers who are suppose to be paid to think up worst case scenarios and how their companies could deal with them. Unfortunately these people had an impossible job because this entire run up in property prices was based on the false assumption that Real Estate always goes up. The worst case scenario that someone should have come up with was what happens if prices go down. However, this type of thinking would have destroyed the entire business model that much of this lending was predicated on.
I recently spoke with a friend who has worked in the securities industry for about 20 years and has significant experience in debt markets. He told me the dirty little secret of his industry was that for years most of the people selling the securitised products didn’t understand them or their possible ramifications. If someone somewhere had shown the slightest bit of skepticism and said maybe selling products we don’t understand is not the greatest idea a lot of this pain could have been avoided.
Great post Frank ,couldn’t agree more .
I get that, too. If you way whoa - let’s explore this a little you’re not a team player. My favorite is people picking software programs that don’t use it and not listening to those of us that do. Now, I just keep quiet and when they want something I just say “sorry, the software can’t do that.”
, they didn’t stay employed at that company very long. Survival of the yes-men.
If someone at these companies had shown the slightest bit of skepticism and said maybe selling products we don’t understand is not a good idea, they didn’t stay employed there very long.
Advancement is not possible if you show hints of skepticism. I have seen the same failed ideas tried time and time again because of the bias against pessimism.
I had painful end with a long standing client because I had the audacity to put it out on the table that what they wanted was simply not possible. There wasn’t enough time, enough people, and the way it was approached involved way too little communication.
I’ve become convinced that part of the bias towards the “no pessimism” coporate culture is that it’s a way to save face and still retain control. I call it “happy facism” - everyone falls into line with what you want and you don’t feel like a dicatoral a-hole because that person or persons were just “negative people” who knew nothing.
“Happy Facism” is good way to put it. Some executive comes up with an idea that 2+2=5. He focus groups it, he has brainstorming sessions, he does budgeting exercises all to support a conclusion he has already come to. Then some poor jerk sitting in a cubicle somewhere gets tasked to work on project that will make 2+2=5. He can either suck it up and pretend or he can point out the obvious and face the consequences.
Thomas Edison tried ~10,000 times before perfecting the light bulb.
Ahh, a Florida thread on a Saturday morning. Gentlemen, start your engines!
With a headline like The Sunshine Doesn’t Pay the Mortgage, you know it’s on.
My thoughts exactly. Nothing puts a smile on my face like a FL thread on a Sat morning. Anyone want to guess on the comments today? 300 on this thread?
“Suffice it to say that you can’t refinance due to the lupine greed of Merrill, Citigroup, Bear Stearns, UBS, Bank of America and other brokerages warmly embraced by the New York Stock Exchange.”
Wow. Just wow. The victim culture just amazes me. F— all you “victims” out there.
It is funny how true victims seldom see themselves as victims because they are too busy trying to make the best out of the awful situation that was handed to them (cancer patients, paralysis victims, the blind, etc.).
“borrowers with a 620 credit score have to put down 10 percent on loans of $650,000 or less.”
Is that all?
I would expect people buying property in that price range to have plenty of disposable income, and plenty of cash on hand. He acts like $65,000 is some huge, insurmountable obstacle for a $650,000 house.
Let’s have a little perspective here.
If they can’t come up with AT LEAST $65k, they have no business “buying” that house. They obviously can’t afford it.
Whiskey Tango Foxtrot? With a FICO of 620 only 10% down? Hello… median FICO is 720. For those people, I can understand 10% down (but its not going to happen in 2009, ex. FHA). If you’re in the half down with the socially promoted baboons, its time to bring a little more meat into the game.
And yes, I understand what this implies economically. Scary? Heck yes. Survivable? Certainly. Now lets get smart and start the infrastructure projects. Rail, Nuke plants, and yes, ROADS!
And maybe when we start building again we’ll send all the builders over to Stuttgart Germany to learn something about sustainable urban planning. (Every suburb is built in a circle around a bus stop or a train stop… it really works great!)
Got Popcorn?
Neil
Neil: That’s why I won’t buy a house. I’m not willing to sink that amount of cash in a place to live. Owning a house just isn’t as important to me as having the options that a pile of cash allows one. Being able to remodel and sink all my time and money into a place to live doesn’t appeal to me. My furniture, art and personal items are enough to make any rental feel like home. I have always picked rentals carefully (no one above or below) and have felt at home in every one of them. The last few years it seems everyone looks as houses as projects - no matter what they buy, they immediately start doing something to it. I would rather travel, enjoy some down time or social activity.
If you’re getting ready to buy a 650K home, you should have had a sable income of 200K+ for the past 2-3 years before the purchase. If you can’t save 65K in 3 years making 200K a year, you have a serious, serious spending problem. Shoot, with 2 income earners, your 401Ks should have more then that in them in 3 years! You can withdrawl 20K from each 401K without penelty for a home purchase; that means you only really need 25K in cash…
And, honestly, borrowers with a 620 should be required to put down 30% in a declining market. Unless you are 750+, no way should anyone even CONSIDER writing a loan for over 80% LTV in a declining market.
Only a fool would take money from his 401K, but other than that your math was OK.
When we bought our house for $300K 17 years ago (now paid off!) we saved $60K for the downpayment, and also had 6 months mortgage in the bank! And we were maxing out on 401Ks. And no, we’re not “super rich”. Just not stupid. It’s really easy not to spend money.
We still save like crazy, and our Government is punishing us dearly for it. They’re doing everything they can to devalue our dollars and make it impossible to keep ahead of inflation with a CD or bank account. They’ve even taken away our right to purchase US Savings Bonds (yearly cap lowered from $60,000/person to $5,000/person!)
They’ve even taken away our right to purchase US Savings Bonds (yearly cap lowered from $60,000/person to $5,000/person!)
Sounds like they did you a favor, actually. Savings bonds are a terrible “investment”.
Back in 2000, when everyone I knew was buying Pets.com, “I Bonds” were paying 6.9%. A guaranteed return of 6.9%, with inflation protection, and some tax advantages is not a terrible investment. Back in 2000, a couple could buy $120,000 worth of I Bonds.
This purchase is now worth $204,000 and change. How much is that pets.com stock worth?
“Robert DeLoach, a securities attorney with Fort Lauderdale-based Ledbetter & Associates who closely follows the real estate market, said it’s unfair to make qualified borrowers pay for the excesses of the boom years.”
“‘When I was in my 20s, I got a 95 percent loan. I paid it off. The mortgage insurers are picking on qualified borrowers, even when they have good credit scores, good payment histories and good jobs,’ DeLoach said, ‘It will hurt us, and it’s too bad they singled out South Florida.’”
Hello..you idiot..when you got a loan in your 20’s a single family home in South Florida was about 50K..10K bought you a mansion..
Not even a close comparision..
The companies are right to single out SFL you idiot..a house that was “appraised” (lied about)…at $1.1 M is now selling (not under contract yet) at $650K…siting there already for 1 year..
Meaning..it is worth ALOT LESS…
OH..Mr Deloach’s FIRST home that he PAID off was a $49K condo!!
http://205.166.161.12/oncoreV2/showdetails.aspx?id=10152146&rn=7&pi=0&ref=search
Great guy to give advice…
Mr DeLoach house purchased in 94 for $260k..assessed at $700+K…gee BIG DIFFERENCE IN 14 YEARS!!!..5% on $260K…5% on 700K…
http://www.bcpa.net/RecInfo.asp?URL_Folio=494212060390
Also forgot to pay his CONDO fees before he bought his home in 94..
http://205.166.161.12/oncoreV2/showdetails.aspx?id=7876112&rn=8&pi=0&ref=search
“…struggling with canyons of unsold condos.”
Whis said FLorida topography is boring? C’mon kids, get in the car, we’re going to see Miami Condo Canyon! It’s the 8th wonder of the world!!
Sorry for the typo, “Who said Florida…”
Perhaps they were built on sinkholes, many of which are just now beginning to reveal themselves as the shortage of rain left some underground canyons a little to dry.
For those in the Gainesville area, visit the Devil’s Millhopper for a look at what a real sinkhole is. Then imagine condos built all around.
Maybe that’s we he meant.
A sinkhole under a house is a selling point: It offers a potential buyer more storage space and/or a built in garbage/trash disposal solution.
Devil’s Millhopper is great if you want to do stairclimbing and hate the machines. *ggg*
Hewre’s one from the Orlando Sentinel: http://www.orlandosentinel.com/news/local/lake/orl-swampland2108mar22,0,4051946.story
Wanna’ buy some Florida swampland???
Selling swampland to suckers. It’s a Florida tradition.
By the way, there’s a bunch of similar tracts in Volusia County near Daytona. The properties are unbuildable, but I found a bunch on e-bay a year or two back when I was looking to see what was being “offered”.
I guess some people never learn.
I’m going to attempt an Aladinsane riff here:
“Robert DeLoach, a securities attorney with Fort Lauderdale-based Ledbetter & Associates who closely follows the real estate market, said it’s unfair to make qualified borrowers pay for the excesses of the boom years.”
Take this hammer, carry it to the captain
Take this hammer, carry it to the captain
Take this hammer, carry it to the captain
Tell him I’m a-gone, just tell him I’m a gone
If he asks you, was I running
If he asks you, was I running
If he asks you, was I running
Tell him I was flying, tell him I was flying
I don’t want your old darn shackles
I don’t want your old darn shackles
I don’t want your old darn shackles
It hurts my leg, hurts my leg
I don’t want no greenback dollar
I don’t want no greenback dollar
I don’t want no greenback dollar
It hurts my pride, hurts my pride
Norwegian Woods:
I once had a loan, or should I say she once had me.
She told me take out a loan and sign anywhere.
I looked around and noticed there wasn’t a stair.
She scammed me ’til dawn and then she said, it’s time to sign.
And when I awoke I was flat broke, living with mom.
“Some analysts believe the Fed will shave short-term interest rates further by year-end. Although that might stimulate a weakened economy, economists say such a move would be bad news for those who count on interest from CDs, money market funds and other accounts.”
On CNN they said the treasury is going to sell 1,000.00 dollars worth notes instead of 100,000.00. What exactly does this mean and with Zirp, how can anybody make any money?
Is it safe to buy pimpco?
It’s $100 notes instead of $1,000. Interesting. I guess they’re trying to steer the little guy away from Savings Bonds. (Last year, a big cut in the annual purchase limit for Savings Bonds was annouced.) I’m sure grandma and grandpa will enjoy ‘bidding’ on treasury bills/notes rather than simply buying savings bonds.
This is a post more appropriate for the “Your Market” thread, but here are my observations for Pinellas County:
I actually contacted a realtor to test the waters and got the, “buy now or you’ll miss out” speech. Since I’m in an awesome rent situation (great landlord, below market rates, no risk, etc.) I’ll continue to wait.
People still have no clue. None. I contacted a buyer directly who believes his property is worth X while an identical house two blocks from the beach rents for .5x. It’s not even worth my time to point this out. As far as I can tell, ‘Short Sale’ listings are complete BS and just trolling.
I did find an REO in one of my target neighborhoods, but the house is completely fugly and in a floodzone despite having no real connection or view of/to water.
It’s great to see the stats that Pinellas lost population YOY. Despite this, banks, owners, and FB’s are still in denial. The realtors, I suspect, now get it, but are still trying the old tricks.
I’m still playing nice, but it’s funny to me that some of these people think they’re “negotiating” with me. It must be odd to be met with indifference in the Tampa Bay Area.
You are correct. Its a market matter. If I had bought a house based on my fixed income, I’d be in a mudd hutt by now.
“I contacted a buyer directly”
Ixnay, I meant, “seller.” Man, I’m fulla typos today.
I’ve found the same thing in my limited hunts.
We’ve recently decided that we are no longer interested in even entertaining the idea of buying from an individual. As a generalization, the sellers don’t have any friggin clue what has happened or what is coming. For that matter, the banks also don’t have any friggin clue what has happened or what is coming. I’ve decided that when we do eventually buy, it’ll be from whatever institution eventually forecloses on the bank, because both the sellers and banks have their heads up their ass right now and it is unlikely they will dislodge them with sufficient time left to save themselves.
I never understood why old people sell everything and move 1000 miles away when they retire, then complain because they never see their family enough. Just for sunshine? It must be like Perpetual Life to them. No winters=no death.
In New England old people move to the Cape and then bitch about the traffic.
Because if you don’t have something to kvetch about, how do you know you’re alive?
My great aunt lives in a flat she owns in Houston, far from family. Her friends died and now she bitches that nobody in the family comes by to help her. Btw, I offered last Christmas to come over for a week and help out with the house, but she turned me down. Whatever.
–
“The Sunshine Doesn’t Pay The Mortgage”
There is a bull in Silly.con Valley who has been telling me for years about the great weather and recreation in the area that will keep the home prices high in Los Altos and other desirable areas. My answer has been: Nice weather doesn’t pay the bills.
Jas
Went Mountain Biking at Ford Ord off of Highway one yesterday, couldn’t ask for a better day. If you’re into outdoor activities year round it’s hard to beat the bay area but a lot of old timers I know are locked out of the housing market entirely. The newcomers generally rent in a nice area and use their incomes to build up sizable 401K’s since buying is out of their reach also. Most of us have the attitude that sooner or later it’ll be time to move out of California with our nest eggs but while we’re at peak earnings we’ll tough it out and just enjoy the recreational possibilities and mild climate while we can. Too bad it’s so damn expensive to live here.
Your comment resembles NYC in all the details except for the weather.
Substitute theatre, music, art, restaurants or whatever for weather, and the same sentiment rings true out here.
Also know a lot of people who swapped NYC for CA and vice-versa. The outdoorsy people hated the East Coast and the culture vultures hated the Bay Area.
But yeah, there will be a time to leave.
There’s a tiny bit of truth to this:
Los Altos Hills homes will sell for SOME price. At some number, there exists a person who will buy it because of the location, weather, etc. This price may be 40% of peak prices. But it will sell.
Compared to huge new developments in “Elk Grove”, Manteca, Gilroy, Pleasanton, which may never sell at any price. Once there are a few too many boarded-up homes on the street, or better housing available closer to where people work, etc. There may not exist any buyers at all for these areas.
So there is a tiny bit of truth, IMHO, that things are *slightly* different in certain areas. But certainly, nobody is exempt from a 50% haircut. Or more!
As this thing moves further along and it becomes more apparent the gov’t is going to take over the paper, I’m thinking there might be a program that sells the gross excess inventory [IE, Arizona, Fla condos, etc] for $50 grand with a Habitat-type covenant that doesn’t allow for flipping within ten years of getting the special program.
At $50K, even the gov’t will be able to sell most of those poorly thought out, overbuilt areas.
The bankers and politicos are feeling their way forward in the dark, and now that we have, I think 2 million empty houses, what happens when it gets to 3 million? Some kind of HUD-on-steroids programs is inevitable at this point.
They need to simply start tearing down houses.
“People are in foreclosure and their houses are not selling because nobody can get loans to buy them,’ said Alphoncia Lafrance, president of Midas Lending in North Miami.”
Correction: Nobody unqualified can get loans to buy them.
no body makes the annual salary to buy these homes
Comment by Frank Hague
2008-03-22 08:57:36
As someone who has worked at a large corporation for most of his adult life I have seen this dynamic at work in the corporate world. Advancement is not possible if you show hints of skepticism. I have seen the same failed ideas tried time and time again because of the bias against pessimism. No one ever says, “You know we lost $500 million dollars the last time we tried this, maybe it’s just a flawed concept”. In the world of mindless optimism there are no flawed concepts. If we just try harder, if we just market better, if we just have more meetings… Some things will not work no matter what, for whatever reason many have a hard time grasping that.
Be quiet.
The surge is working.
I always believed what you said. Let’s say a majority of the senior executives agree to a hare-brained scheme that is likely to bankrupt the firm. Assume one executive points out to the others the foolishness and risk of the proposal. That sceptical and sensible executive gets fired for being a “loose cannon” and not a “team player.” The remaining executives implement the plan, bankrupt the company, and subsequently get new high paying jobs at other companies because they’re “experienced and talented senior executives.”
That pretty much explains Bear Stearns in a nutshell.
This happens in the public sector too, alas. As I can attest to with decades of experience watching highly-ranked bosses f-up, then leave for greener pastures, while we’re left to deal with the wreckage.
The most popular folly for the past several years has been outsourcing public work to private companies. Here’s how it works: the private businessman and the politicos tell the public the private sector always does it better, and cheaper, and they can get let go of lots of those lazy public employees when they outsource the work. In reality, they sign a sweetheart deal with a major campaign contributor’s company (or a personal friend of the chief administrator). Price is no object. Neither is quality or timeliness of the work, because it’s unfair to hold the private companies to any performance standard. After all, the goal is to make them succeed.
Oh, and any private data that you as a citizen entrust to the government to keep private? It’s now being handled by all the minimum-wage grunts working at the private companies. Good luck with that
This dynamic exists throughout all management levels. It is safer to keep your mouth shut and collect your paycheck than to point out the emperor has no clothes.
But it’s got to work - after all, we have a strategic plan, a team-based approach, and excellent outside consultants and research …..
I don’t think I’ve ever worked on anything successful that had a vision, mission, strategic plan. Everything successful I’ve every worked on was accomplished by realistic and motivated people working on the problem at hand, testing different ideas and tactics, and continually trying to improve the process. But the CEO’s and other senior leadership like grand plans …..
I always use this analogy: I hate working for people that pour 2 gallons into a 1 gallon jug just to make sure it’s full.
I see debt fixed-income people…
“‘It’s a killer for fixed-income people,’ said David Voigt, chairman of the Bank of Venice.”
“In Miami, only 57 units in the 118-unit Onyx on the Bay have closed since August 2007, leaving the remaining 61 units in the possession of the developer, according to Miami-Dade County records.”
I know most people aren’t good at math…. BUT!!!!!!
57+61=118
Um, yes….
For those people who are interested in California foreclosure numbers. Riverside county is the champion with %6.3 of housholds in foreclosure.
http://www.market.defaultresearch.com/market/ca.html
Regarding seniors losing their buying power because of the low interest rate Fed policies ,combined with inflation .
The powers tell people to save money for retirement . So the seniors that did save money and relied on fixed interest accounts just got a big decrease in their income flow . Some of those senior will not be able to afford their home anymore because of that . For example ,lets say you got a senior who saved 100k and was making 5k a year off a FDIC account for income . Lets say now that goes down to 2k a years because of the Fed policy .That senior has 3k less a year to live on at a time when prices are rising .
So, the commissioned sales people will call up the seniors and say “Booo Yaaaaa ,I got a great investment that will yield you 5%”,(that isn’t FDIC insured ), or they call up and say ” I can get you into a reverse mortgage and it will only cost you 20k “,or , ” I can get you into some great stocks that will yield xxxxx,” on and on . So now the senior who should be in a safe account gets into the higher risk stuff out of need .
My point is that seniors should not be forced into high risk accounts, or roller coaster ride stock investments ,or crazy refinancing . But anyway ,the ones that remain in a safe account are forced into eating dog food .
(However dog food has really gone up in price these days also ).
Seniors losing income also can put some in risk of foreclosure of homes also because in effect they are getting a decrease in wages at a time where the prices are inflating .
Some people might say , “So what ,who cares about seniors ,let them eat dog food ,or who cares if their fate is in the hands of the commissioned sales people .” I for one do not like to see any class forced into strange choices that are not prudent because of harmful Fed policies that are designed to save the gamblers .
Great post! I was planing on asking what does a saver do at this point when the Fed keeps lowering interest rates and the rates for CDs and MM accounts keep falling. But I didn’t think this was the appropriate place. Or maybe I should take my reality based questions some place else
I always thought the idea was to have finished paying the mortgage before retirement so fixed income didn’t effect housing.
Even a paid-off house has taxes. And with house prices what they are, the taxes could be more than equivalent rent.
Having known seniors who were “duped” into buying extremely expensive annuities that lost nearly all their money, I agree that something needs to be done to help them.
It’s one thing not feeling too sorry for someone who bought into some “get rich quick” scheme. Largely, they get what they deserve–there are no clean hands on either side of the transaction.
But many of these things pitched to seniors are marketed as Safe and Conservative. Like strange annuities that “invest in the stock market” but “your principal is protected from loss”. That’s how they’re pitched. As something rock-solid and safe to seniors.
Reuven, its time to change to the current fed rates on your website.
I wish there was more to read about the war on savers (WOS)
But also the inflation is lowering the purchasing power of every class and group ,not just seniors . Why should yields be so low on FDIC insured accounts ? The lenders get to use that money and get a spread of 4% or more these days . Banks use to be happy with a 2% spread on their money .
Just like risk used be weighed in a proper fashion ,also yields on funds should be in accordance with the real state of the economy . Why would anyone want to save at such low yield? I think this was part of the problem with the Greenspan Game that drove people into investing in bubbles . Now it will take a party twice as long to save for a down payment on a house because of these low yields on safe accounts . Everything the government/feds are doing does not encourage the results the government is seeking .(IMHO)
I bought one of those principal protection funds. Seems like an okay deal to me. Has historically earned a little less than the S&P and is coupled with an insurance policy whereby the principal is returned if you leave your money invested for seven years. It is an American Skandia product. I do realize that the insurance policy is only good so long as the insurance company is solvent. But the product does what I would do if I had the time and skills which is move into fixed income investments as the stock market moves lower.
Anyone on this forum care to comment? I’m frequent lurker but never posted.
Buy one get one free in Cape Coral, FL. Brand new homes for 86k & 2500sf 4 bed 3 bath 3 car garage on a lake for 217k.
http://www.fox4now.com/global/story.asp?s=8049039
“Officials are proposing to directly buy foreclosed homes at bargain prices, fix them up and resell them to qualified buyers, who would get up to $40,000 in down-payment help.
$40K down payment help? Why not just lower the price $40K? Oh, *I see*, then qualified buyers would still need a down payment. I am a believer that letting go of Down Payment was a primary reason for this bubble, and this plan supports that theory.
IMO, if you need down payment help, then you’re NOT a qualified buyer, End of Story. If the city really wants to help the unfortunate, they should buy the place, fix it up a little bit, and RENT it to qualified renters, saving a little bit of the rent in escrow. After a couple years, the renter can start the 30-year mortgage clock, using the escrow as a down payment, AFTER he proves he can keep his up payments and doesn’t trash the place.
Anything else is a free giveaway and a waste of the tax money of responsible folks…like us bitter renters.
We middle class taxpayers get to help out both the working poor with loans we don’t qualify for since we make “too much” while also getting to make sure that bank executives get their bonuses with our forced purchases with taxpayer funds of their bad investments. Is it a great system we have or what ?
oxide and no money ….Boy do I agree with you people about these hand out programs to buy the American Dream . A couple of people that I know of that got those government hand outs to buy a home where upper middle income people who had a way of hiding their income and they just bought the houses for investments at the taxpayers expense . What I’m saying is that there is so much fraud in the government hand out programs that it isn’t funny .
In principal ,who said that home ownership was a government duty,or a wise placement of tax payers dollars .Providing enough rental units for workers should be a concern of government agencies in the planning departments no doubt .
Currently if a lender wants to move a property and provide a “deal” or favorable financing at their expense to unload a foreclosure ,than fine . Why should the taxpayers pay to supplement lenders or builders for the folly . This country is getting is getting more and more nuts .
3. How can I be sure this is a legitimate offering and that Sail Club Clear Lake actually will be built?
The reputation of our company, Homes For America Holdings, Inc., is your assurance that Sail Club Clear Lake will be built and operated as represented. We are a leading developer, with a long and successful track record. A few of our recent successes are Beau Rivage (completed), St. Tropez and Riviera (sold out-under construction) in Ft. Myers, Florida. We also have holdings in Connecticut and New York. For more information on our company, including financial, we invite you to visit our website, http://www.hfaholdings.com.
http://www.vickicopani.com/Sail-club-clear-lake-faqs.shtml
Well I’m a little late to the party but here goes. I can’t believe no one has called this couple out:
Martin and Lorraine Henes know the trend well. They have essentially become prisoners of their waterfront Laurel Lakes home. The couple wants to move back to New Jersey to be closer to children and a granddaughter. They have even put down a $25,000 deposit on a new place in a 55-plus condo community.”
“But until their spacious four-bedroom, three-bath home with the pool, Jacuzzi, fireplace, tall ceilings and rich wood cabinets sells, the Heneses are stuck.”
“‘We can’t afford two places at the same time,’ said Martin Henes, 83. ‘We didn’t figure the market would tank like it did.’”
“They are asking $540,000, still hopeful that they will be able to relocate sometime this summer. Their house has been on the market since last year.”
And the rest of the story - the Henes purchased their house 3/04 for $363,000. They are trapped allright - trapped in their delusion that they can sell their house for that ridiculous price.
Ha! Prisnoners! At 83, if they’re sitting on a pile of money and want to move, simply sell the house for whatever, take a loss if necessary, and get on with enjoying the few years they have left.
I was goofing around and pressed your name renven and found some good stuff that you posted (some writings on the subject on the War On Savers ).Always enjoy your insights .
Anyway ,regarding this older couple . I would like to know who gave them the crummy advice to buy another place until they sold their house first . Maybe they need a certain amount of money to be able to get the new place . The point to me is they put the cart before the horse . Now the couple is trapped with a contract on a new house and not being able to sell the old house . I just don’t know why people are making purchases on other property when they don’t know how much they are really going to get for their house in this kind of market .
Also, there is a trend where some people are buying new property and than walking away from the prior house . My neighbor walked on their house while just a month before that they were making offers on other property .And than the government wants me as a taxpayer to pay for the lenders that are giving people loans who already have a primary residence they refuse to honor the contract on .
The realtor finally took the for sale banner offthese U-area condo conversions and is advertising them as rentals in the paper, at 550 I think. It was a motel originally, so it basically one big room and what looks like a wet bar for a kitchen. He wanted 74,999 and now it’s 69,995 according to the web site. So it’s obvious they don’t pencil out as rentals.
I guess he was thinking that parents would buy for their college kid, or some out of town UM football fans would buy one as a place to flop. I’ll bet he didn’t sell any of them lol. But they can just get a room - we’ve got a big Red Lion, Holiday Inn and others right in the area.
Ok, seriously. When do we start arresting people? Real estate in the US is like a Disney movie: heartbreaking, laughter-inducing, joyful, and full of cartoon characters. But enough with the anecdotes. We know there are millions of idiots out there who can’t comprehend why they can’t afford their $500k house on their $40k incomes. We know the banks are bankrupts. We know the investment bankers made billions upon billions gaming the system.
But why aren’t we rounding up Congressmen, bankers, lenders, hedge fund managers, Presidents, and Fed Chairmen past and present and subjecting them to waterboarding and a little Abu Graib treatment? It’s legal and fun for the whole family.
Everyone is to blame. The idiots who bought McMansions but who could not balance a checkbook. The mortgage companies who spun the garbage. The bankers who sliced, diced, and resold the toxic alphabet soup. The politicians who praised it all while spending the campaign contributions on hookers and coke.
I am hardly a socialist, but out of that list of criminals, the ones who deserve prison or worse are the ones who should have know better: the Mozillos, the Princes, the Greenspans, and the Bushes.
Expat, you are so right.
Bought a condo Clear lakes palm pending the development of the Clear Lake Sail Club. Now the project is scratched and Im holding a white elephant. Don’t know how long to keep holding this condo. Everytime news comes out it’s more and more bleak. I only wish some other developer buys the land and builds something nice, although until things start to turn around I dont see that happening.