May 27, 2008

What Something’s Worth And What Someone Will Pay

Some housing bubble news from Wall Street and Washington. Reuters, “Prices of single-family homes plunged a record 14.1 percent in the first quarter from a year earlier, marking a pace five times faster than the last housing recession, the Standard & Poor’s/Case Shiller composite index of 20 metropolitan areas (showed). Housing markets that grew the most during the housing boom, such as Las Vegas, Nevada and Miami, Florida, are leading the decline, S&P said.”

“S&P said its composite index of 10 metropolitan areas declined 2.4 percent in March, for a record 15.3 percent year-over-year drop.”

“U.S. sales of newly constructed single-family homes rose 3.3 percent in April to a 526,000 annual rate but they were down 42 percent from a year ago, which was the largest year-over-year drop in nearly 27 years, Commerce Department data on Tuesday showed.”

The Boston Globe. “The median price of a single-family home in Massachusetts was $305,000 last month, down 12 percent from $346,750 in April 2007, said the Warren Group. That drop was the steepest decline since the Warren Group began recording prices in 1987, the firm said.”

“The number of single-family homes sold in the state during April declined 12 percent to 3,215, from 3,654 a year ago, the Warren Group said.”

“‘In the early 1990s - during the last big housing slump - prices fell in 42 of 48 months,’ CEO Timothy Warren Jr. said in a statement. ‘Since March 2006, when prices first started to fall in this current slump, there have been price declines in 20 of the 26 months. But the early ’90s price declines weren’t as dramatic as the drops we’re seeing now.’”

The Associated Press. “Federally regulated savings and loans set aside a record $7.6 billion to cover losses on problem loans in the first quarter as they felt the brunt of the housing market’s downturn…the Office of Thrift Supervision said Tuesday.”

“Thrifts set aside $5.5 billion for loan losses in the previous quarter and $1.2 billion in the first quarter of 2007.”

“The agency regulates major lenders, including Washington Mutual Inc., Sovereign Bancorp Inc. and Countrywide Bank, owned by Countrywide Financial Corp.”

“The amount set aside for problem loans soared in the first quarter to more than 2 percent of average assets, about six times from 0.33 percent a year earlier. Charge-offs, or loans written off as not being repaid, rose to 0.93 percent of average assets from 0.28 percent a year earlier.”

“Troubled assets, loans that are 90 or more days past due, continued to soar, rising to $31.1 billion in the first quarter, up from $11.9 billion in the same quarter last year. As a percentage of total assets, troubled assets rose to the highest level since the early 1990s.”

The Buffalo News. “M&T Bank Corp. said it expects to lose more money on its investment in a Florida-based commercial mortgage lender, and is closely monitoring the value of its securities portfolio to see if paper losses of more than $100 million turn real.”

“In its quarterly filing with the Securities and Exchange Commission, the Buffalo-based banking company said it ‘anticipates operating losses’ at Bayview Lending Group LLC in the second quarter, as the Miami-based lender terminates leases and pays severance.”

“Also in the filing, M&T disclosed that it had recorded $194 million in ‘net unrealized losses’ in the first quarter on its investment securities.”

“In the fourth quarter, M&T recorded a $127 million hit to earnings after reducing the value of three mortgage-backed investments by 96 percent, down to just $4.4 million. At that time, the bank had concluded that the damage to those investments’ value was likely to be permanent, prompting it to take the charge.”

“In contrast, as of March 31, executives still believed M&T would receive all the principal and interest payments from the other mortgage investments, and were not ready to declare the losses permament.”

“‘The ability to reasonably determine the fair value of certain assets in times like these is, at best, severely limited, because those that previously made markets in these assets are nowhere to be found,’ said spokesman Chet Bridger.”

From USA Today. “A modest housing tract, set amid pecan trees here in suburban Phoenix, faces big problems: About 40% of its homeowners aren’t paying their association fees. It’s a scenario being repeated across the country.”

“‘We’re looking at a very deep hole,’ says Kent Miller, president of the Los Arbolitos Homeowners Association in Avondale, Arizona. ‘I don’t know how we’re going to get out of it. We’ve put liens on all the (delinquent) properties, but it doesn’t do any good.’”

“‘It’s happening all over,’ says Frank Rathbun, a spokesman for the Virginia-based Community Associations Institute. ‘It’s a national problem.’”

“In Phoenix, Shawn Stone, a lawyer for homeowner associations and property managers, says the problem is most acute at new developments. Some homeowner boards, Stone says, have been able to collect assessments from only half their members. ‘It’s not going to be too long before we’ll see situations where associations are going bankrupt.’”

“In Florida, homeowner groups surveyed by the Community Association Leadership Lobby complained that even some banks are failing to pay association fees after foreclosing on homes.”

“‘The whole issue of foreclosures is dire and getting worse,’ says David Muller, a Sarasota lawyer who co-directed the survey. ‘It’s causing the rest of the owners, who aren’t delinquent, to pay even more money.’”

“The ’snowball effect’ began, Muller says, as buyers, many of them speculative investors, started snapping up homes using subprime loans. As housing values plunged and mortgage bills ballooned, some buyers owed more on their mortgages than the homes were worth. So they stopped paying community association fees, then walked away.”

“‘At one place in Florida we had seven (foreclosed) homes on one street,’ says Steven Brumfield, VP of operations at Wentworth Property Management, which serves 950 community associations in more than a dozen states. ‘The association could not even afford to cut the grass, there were so many of them. They ended up with a street full of homes that looked horrible and wouldn’t sell.’”

“Eric Glazer, a property management lawyer in Florida, says he’s had to deal with some banks that failed to pay association dues after taking over properties through foreclosure. ‘Just this morning, we found ourselves in court, and we got a default judgment against a bank,’ he said last week. ‘Words can’t describe how bad the problem is here.’”

“Karen Conlon, president of the California Association of Community Managers, estimates that her state’s delinquency rate soared 1,000% over the past year. Fees at her condo association were raised 18.5% to account for a shortfall.

“‘We’re seeing cutbacks,’ she says. ‘Instead of having flowers planted six times a year, it may be just two or three times.’”

The Washington Post. “For a while, the two-story house with the burgundy shutters in Manassas appeared to be growing wheat in the yard. In one especially thick stand of the suburban savannah was visible a hollowed-out den, where a large mammal was apparently bedding down for the night.”

“Carl Berry lives two doors down from the house, which he said was abandoned about six weeks ago by a family that used to keep the property tidy. Now there’s a real estate agent’s lockbox on the door, rain-sopped newspapers in the driveway and, until repeated complaints brought it down, uncut grass so unruly it was attracting other occupants.”

“‘I’d never seen a rat in this neighborhood until now, and I’ve lived here since 1988,’ he said. He and his wife have seen snakes in the reedy thicket, too.”

“No county in the region has been hit harder by the foreclosure wave than Prince William, where there are nearly 7,000 empty houses, said neighborhood services coordinator Michelle Casciato. Given recent census estimates, that means about one in 20 houses in the county are unoccupied.”

“And new residents aren’t filling up the empty houses fast enough. Although home sales in the county increased 14 percent from January through April compared with the same period last year, foreclosures in the county have gone up 211 percent in that time.”

“There were 645 foreclosures last month in Prince William, Manassas and Manassas Park, court records show.”

“‘We’re hopeful that the real estate community and banking community will do what they can with the property entrusted in their care,’ Casciato said. ‘For the ones where that is not the case, we’re calling on the community to help us locate those.’”

“These days, Manassas resident Jennifer Hansbrough sees the overgrown lawns in her neighborhood as a depressing economic barometer. It’s bad enough that she is seeing more ticks and mosquitoes this year, but the long grass also signifies the $100,000 drop she has seen in her home’s value.”

“‘It reminds me the economy is crappy,’ she said.”

National Mortgage News. “INNOCENT VICTIMS OF A BAD MARKET: (Edited, in part, by me) ‘What am I to do? Last week I had a contract on my house for $316,500 with a qualified buyer. The appraisal came in $36,500 less than the agreed upon sales price. So the sale fell through. I live in Lake County, Ill., just north of Chicago.’”

“‘There are a few homes in my neighborhood for sale but no foreclosures that I know of. Because of all the hype of doom and gloom buyers are sometimes making low offers and some sellers are grabbing on like it’s a lifesaver. A little over six months ago my neighbor took $287K for their home. It was the first offer after only three months on the market.’”

“‘I have the same floor plan but theirs required painting of the interior and new carpet and it didn’t have the upgrades that mine has. That was the main comp that was used even though they also showed others in the same neighborhood over $300K. Is my only alternative to come down to the $280K appraised value, hope for a cash buyer, or not sell?’”

“‘My buyer didn’t have cash to pay the difference. They were getting a 97% FHA loan. The value of something is the price an educated willing buyer is willing to pay. The lenders are going to drive the prices down even further because of a few scared or desperate sellers. I can only imagine what foreclosures do to a neighborhood when the lenders agree to fire sales to investors.’ — Debbie.”

“In last week’s column I mentioned what some former mortgage executives are doing to make a living. Jack Martin, a former wholesale official, writes, ‘I have a very large database of past and present broker clients. About 80% to 90% of my past customers have closed shop. That is, the majority of offices I have called on in Orange County are no longer in business.’”

“‘What I think has happened is they haven’t really gone out of business, but are now working out of their houses (low overhead)…I know of one LO who is selling Toyotas and making a living again. I tried selling Infiniti’s but got really bored due to little or no customer traffic. The recession has affected car purchases.’”

The Morning Call. “There is no doubt that the rules have changed for buying and selling a house in this market. Most importantly, sellers need to price their houses aggressively to compete with comparable homes. And buyers need to make sure their financial ‘house’ is in order.”

“For almost 30 years, Realtor Joyce Carlos has been hanging up signs, holding open houses and selling real estate. The hard truth for sellers is that what they think their house is worth has no meaning to buyers. ‘The buyer looks at it from a different perspective – its current market value,’ Carlos warned.”

“‘You have to look at [the house] as someone else is looking at it,’ agreed Joyce Epstein of Joyce Epstein Realty in Manchester. ‘It’s not the place where you brought up your children. It’s a home for someone else. It’s a commodity.’”

“A sore spot for longtime homeowners is dealing with what they may consider insulting low-ball offers. Epstein recalled one prospective buyer who offered $98,000 below the listing price. ‘That’s the worst one I’ve got,’ she said.”

“But even low-ball offers can be a starting point in this market.”

“‘I had people come in at $70,000 below and we were able to negotiate it up and have a meeting of the minds at $29,000 below,’ she said.”

“To avoid excessively low offers, Epstein advises her clients to price their houses realistically. ‘There’s a big difference between what something’s worth and what someone will pay,’ she said. ‘The truth of the matter is the buyer is not going to pay you what you were going to get in 2004.’”

“News reports about the tough shape of the California and Florida real estate markets don’t apply to Connecticut, said Realtor Elizabeth Banco, in Simsbury. ‘But homebuyers can’t help but be affected by what they hear on the news or read all time. It starts to sink in subconsciously.’”

“Yet it’s true that today’s market is slower, with many buyers taking their time, Realtors said.”

“‘People are thinking prices will drop so they will get better deals,’ Banco said. ‘But if that happens, maybe interest rates go up and it will be a wash. Who knows what will happen? Most of us try to discourage that way of thinking.’”




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131 Comments »

Comment by milkcrate
2008-05-27 11:31:41

National Mortgage News. “INNOCENT VICTIMS OF A BAD MARKET: (Edited, in part, by me) ‘What am I to do? Last week I had a contract on my house for $316,500 with a qualified buyer. The appraisal came in $36,500 less than the agreed upon sales price. So the sale fell through. I live in Lake County, Ill., just north of Chicago.’”

Greater damage was caused when appraisals during the go-go (yo-yo?) years came in like clockwork at steroidal purchase prices. Appraisals are like “broker opinions” today, only they cost more. It wasn’t this appraiser’s fault the would-be buyer had been led astray. “Best time to buy!” “We’re going to get multiple offers!” Ad nauseum…

Crummy airport there, anyway.

Milkcrate

Comment by aNYCdj
2008-05-27 11:53:42

well to the Doofus in Lake county:

Have you considered lowing your price , or loaning him the $36K as a second mortgage, to get the sale done?

Comment by NoSingleOne
2008-05-27 14:21:44

Shhhh! Don’t blow his cover… he’s trying to be a victim here!

 
 
 
Comment by Kim
2008-05-27 11:46:44

“‘We’re seeing cutbacks,’ she says. ‘Instead of having flowers planted six times a year, it may be just two or three times.’”

She’s kidding, right?

Comment by caveat_emptor
2008-05-27 12:00:35

This can be a big financial hit for some folks (those with big tulip investments, for instance).

 
Comment by Richard Mason
2008-05-27 12:51:44

Flowers planted six times a year…

I’m not much of a gardener but I think a plant should live for longer than two months before you dig it up and put in a new one.

Comment by laughing boy
2008-05-27 13:28:05

Yeah, but, but…. they might get all icky and dirty… Ewwww… so they have to replace them to keep them pristine and perfect.

Actually, I did work at a company once that had nice fall leaves PLACED in the grass around the trees to give it a more autumny look….. so nothing surprises me anymore.

Comment by mikey
2008-05-27 13:57:17

Would somebody with large patato sacks, some boulders and deep coastal waters rid me of these fools ?

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Comment by Hazard
2008-05-27 13:59:24

Bad move to keep digging up and replanting.

They should have done the sensible thing and painted them.

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Comment by iftheshoefits
2008-05-27 14:33:51

Painting them is so 20th century. They should put big flat screens or jumbotrons out there showing virtual flowers, so they could be changed hourly.

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Comment by are they crazy
2008-05-27 15:10:02

Out here in Coachella Valley they plant 2 kinds of grass/year - winter and summer grasses and new flowers at least twice a year if not 4 times. Flowers that thrive in winter can’t make it in summer. Personally, the more people go to “desert” type plantings needing much less water and get rid of all the stupid lawns, the better.

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Comment by bicoastal
2008-05-27 13:07:13

“‘We’re seeing cutbacks,’ she says. ‘Instead of having flowers planted six times a year, it may be just two or three times.’”

Why not try xeriscaping?

Comment by hip in zilker
2008-05-27 13:34:25

it would make too much sense?

 
Comment by sfbayqt
2008-05-27 13:53:57

Yep. xeriscaping, and possibly perennials that are native to the area. There is still maintenance involved but at least you won’t have to planting stuff 2 or 3 times a yr.

They really have to get with the program.

BayQT~

Comment by MadBoy
2008-05-27 14:55:44

I recommended this to my former HOA and was told “we know what we are doing….”

After they got quotes for planting and maintenance, they suddenly changed their mind and decided to go with native plants.

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Comment by Ben Jones
2008-05-27 11:46:51

‘The Justice Department and the National Association of Realtors are likely to settle an antitrust lawsuit over the posting of online real estate listings, The Wall Street Journal reported Tuesday, citing lawyers close to the case. The suit against the realtor association charged that its bylaws undercut Internet-based realtors when association members withheld online listings.’

‘The [Case-Shiller 20-city index] fell 2.18% month-over-month, continuing its now 5-month streak of greater than 2% monthly home price declines. Bought a house last October with 10% down? Congratulations — you’re now underwater. California (not just southern) and Florida continue to live up to their reputations as the biggest post-boom bust locales… The sizeable March revision (-17,000) [to new-home sales data] was the bigger story, as it may suggest a higher level of abandonment by buyers who walked away from contracts. In light of the ~2% monthly decline in home prices nationwide, it’s not surprising to see a tick up in abandonments.’

‘Sales of new single family homes rose 3.3% but this initial estimate of the April sales totals matched the previous estimate for March, which had been the lowest level since late 1991. Indeed, the latest report included downward revisions to sales figures for each of the past six months. The median sales price was surprisingly higher than a year ago but, as with the big drop in the median price in March, probably reflected a shift in the regional sales mix.’

‘New home sales extended their 33 months decline, which has now totaled 62.1%. Moreover, despite this month’s increase, there is little indication that home sales are approaching a bottom. Inventories of unsold homes remain very high despite slipping for the thirteenth consecutive month.’

Comment by polly
2008-05-27 11:54:39

Done.

http://www.nytimes.com/2008/05/28/business/28realty.html

….In a court settlement, government lawyers said the National Association of Realtors could no longer discriminate against Internet-based agents by blocking them from the group’s multiple listing service, a database of for-sale properties….

Comment by DinOR
2008-05-27 12:12:12

Thanks for pointing this out. It’s a real step in the right direction. RE Bulls love to point us doomsayers out as if it was -only- high prices ( we were unwilling to pay ) as the sole basis of our protests?

Cooked appraisals, conflicts of interest as well as the black-balling of the discounters and other thug-like behavior is more the problem. Keeping the discounters from getting a toe hold was a big part of keeping the “6%” intact. Watch for NAR to fight this tooth and nail.

Comment by polly
2008-05-27 12:22:10

It’s a settlement not a judgement. There is little they can do to fight it since they already agreed to it.

They can just ignore what they promised to do, but judges tend to get very pissed off when that happens.

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Comment by DinOR
2008-05-27 12:53:11

polly,

Understood. I think my point was that NAR doesn’t agree to any compromises unless there is no other alternative. They’ve seen what happened when discounters got traction in everything from travel to on-line stock trading and decided they want no part of it. I think there’s a tendency to view the MLS as “public domain” and it isn’t. Not if NAR has anything to say about it.

I think typically they are the sole and private property of that local NAR membership. If you talk to realtors off to the side they will confide in you that this really is “their secret weapon”. I also noticed over the weekend that Zillow no longer shows the ’sale history’ on a home. Has anyone else noticed that?

 
Comment by NoSingleOne
2008-05-27 14:27:43

The NAR has a monopoly they have to enforce. The so-called “value” of having a buyer’s real estate agent was shown to be a fraud once the bubble burst. RE agents do not protect the buyer, and clearly put their own interests over that of the buyer…although they might be of use to a seller who has no idea how to market his property and doesn’t mind paying a 6% premium to learn.

 
Comment by AppleEye
2008-05-28 09:23:42

Zillow still has the sales history, it’s now under “Zestimate & Charts.”

 
 
 
Comment by svguy
2008-05-27 16:32:27

This, my friends, is the Rosetta Stone.

This was the firewall that separated the realtors from the free
market.

The Smithsonian will have, in 10 years, an exhibit of overly paid
realtors right next to T-Rex.

Beautiful!

Mike

 
 
 
Comment by aladinsane
2008-05-27 11:47:53

Don’t worry~

They’ll make up for the losses, by giving out free checking…

“Federally regulated savings and loans set aside a record $7.6 billion to cover losses on problem loans in the first quarter as they felt the brunt of the housing market’s downturn…the Office of Thrift Supervision said Tuesday.”

Comment by taxmeupthebooty
2008-05-27 12:19:07

and some folks want more regulations, regulators,subsidies and transfer payments

Comment by holgs
2008-05-27 18:13:04

In this case, the whole point is that the regulators weren’t doing their jobs. Less regulation was the problem. Starting to regulate now doesn’t help.

 
 
 
Comment by wjk
2008-05-27 11:48:23

Apparently, everybody is cheered that the new official, government-determined and government-sanctioned inflation is 3.9%, which makes me laugh to think that anybody in their right mind would believe that, and then which makes me howl in anger because the Federal Reserve and a willing co-conspirator Congress (except Ron Paul) allowed this to happen by allowing the banks to create so much excess money and credit, so astonishingly much excess money and credit, so stupidly and criminally irresponsibly much excess money and credit, for so many months, so many years and so many decades, which doesn’t even mention the fact that throughout all the rest of human history, 3% inflation was considered to be the cut-off between “High” and “Emergency! Emergency!”, but which is actually ignored today!

But even 3% sounds good right now, as even food and energy, and everything else we have to buy, are increasing at rates of inflation that are multiples of the “official rate”, which means that the horrifying 3.9% inflation is, unbelievably, the residual inflation after the government ignores the things that went up a lot in price, and then lies about the rest! Hahahaha!

My laugh is nervous and dry, and for a little comic relief we go to this week’s Barron’s and look in their “Indexes’ P/Es & Yields” table to see that the price-to-earnings ratio for the Dow Jones Industrial Average is now up to 87.07! This is, incredibly, up from last week’s P/E ratio of 85.97! Hahahaha!

And while that is funny enough, get a load of this; the dividends paid by the DJIA companies to their stockholders was $317.88, while earnings were only $149.16! Hahahaha!

Comment by joe momma
2008-05-27 11:44:43

Inflation is 3.9%? What is more shocking is the government already stripped out all the stuff that was going up, and IT STILL went up 3.9%!

The actual inflation rate is probably 15%. And that could be low.

But after seeing how badly this government lied to us about Iraq, and a thousand other things, why should we expect anything different on the economic stats?

Seriously?

Comment by FP
2008-05-27 12:32:36

I was going to fill-up at my usual Shell Station then I saw the prices. $4.50 for 89 Grade. I’ll fill up later. I’m still half “empty”. LOL! I’m glad I work at home. Housing communities that have no Industry nearby are going to suffer huge. How far do they people have to drive to go to work!

Comment by Va Beyatch from Virginia Beach
2008-05-27 12:59:07

They could get together all the McMansion owners and buy a piece of property near the city work center. Then they could fence it in and put their cars there. Then buy an old used school bus from feeBay, and all the McMansion owners pool together to drive the old school bus full of neighbors to the parking area near the work center.

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Comment by FP
2008-05-27 13:30:02

I thought that was our local transit system. The japanese has this down pat. http://glumbert.com/media/rushhour

 
Comment by Rintoul
2008-05-27 15:22:49

*That* is insane. I would be absolutely freaking out.

 
Comment by grumpy realist
2008-05-27 17:12:38

Eh, you definitely get squished, but on the other hand the train *does* make it there rapidly so you’re not stuck in traffic for an hour.

(Lived in Tokyo 10 years so yeah, have had the experience. Discovered that if I left the house 15 minutes earlier the packing percentage went down from 250% to, oh, 99%.)

 
 
Comment by Ria Rhodes
2008-05-27 14:58:25

When I see a Walmart truck on the road I think about diesel prices affecting consumer costs, and when I see the Walmart parking lot full of vehicles, I think about the fuel used to try to save a buck on the Swifter Duster’s and the case of Milwaukee’s Best. Dust off your big screen and pop the top on another cold one. Ignorance is bliss.

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Comment by Hazard
2008-05-27 14:07:21

They had to strike a point somewhere though and this is probably as low as they could get it. The fed gov’t has raises announced around Oct based on COLA. In total these are massive as they include military, social security and civil service. IMO thats what they are looking at more than anything else.

Comment by Vermontergal
2008-05-27 14:59:05

The fed gov’t has raises announced around Oct based on COLA. In total these are massive as they include military, social security and civil service. IMO thats what they are looking at more than anything else.

I agree. I often wonder why people get so upset that the government severely understates inflation. The Feds have a direct economic incentive to keep inflation low because most of their budget is tied to the COLA. The wonder is not that it’s understated, rather, is they couldn’t massage the number enough to get below 3%.

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Comment by NoSingleOne
2008-05-27 14:38:09

Don’t forget “hedonic adjustments”…ie people who would rather eat steak instead of hamburger, or hamburger instead of spam. The gov’t thinks that core inflation should only include items that people would have normally bought in 1980, therefore inflation in the price of steak shouldn’t be counted..

 
 
Comment by Anthony
2008-05-27 12:12:02

“My laugh is nervous and dry, and for a little comic relief we go to this week’s Barron’s and look in their “Indexes’ P/Es & Yields” table to see that the price-to-earnings ratio for the Dow Jones Industrial Average is now up to 87.07! This is, incredibly, up from last week’s P/E ratio of 85.97! Hahahaha!”

Wow, wjk! I knew the market was overpriced, but didn’t realize by that tremendous degree. Earnings have gone down by such a degree, yet the market barely flinches. Amazing.

Comment by In Colorado
2008-05-27 12:44:18

Interesting

HPQ is only 14.94

Comment by wjk
2008-05-27 15:42:40

Dow Industrial trailing P/E 85

It’s a good time to buy the stock market!

http://online.wsj.com/mdc/public/page/2_3021-peyield.html?mod=mdc_h_usshl

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Comment by JP
2008-05-27 12:23:49

Somebody is channeling the Mogambo Guru.

 
 
Comment by Anthony
2008-05-27 11:50:37

“As housing values plunged and mortgage bills ballooned, some buyers owed more on their mortgages than the homes were worth. So they stopped paying community association fees, then walked away.”

But, but, these are victims! And Congress must help them! They didn’t know any better…the prudent and responsible must pay for these victims so they can keep their homes!

/sarcasm off/

 
Comment by Mo Money
2008-05-27 11:52:56

“The ’snowball effect’ began, Muller says, as buyers, many of them speculative investors, started snapping up homes using subprime loans”

And the liars at the sales office told real homebuyers they were only selling to a few investors per development. Richmond American Home is notorious for this, that and setting up the initial HOA fees so low in the beginning to lure buyers that the HOA’s have no choice but to boost fees substantially once the development is complete. Richmonds legacy is going to be a long list of failed developments.

Comment by climber
2008-05-27 11:57:27

HOA’s do have a choice. They can vote to disband. There is NO NEED for HOAs.

Comment by Ben Jones
2008-05-27 11:59:18

I hope you are right. But doesn’t the HOA have a deal with the local govs on streets, etc?

Comment by Mo Money
2008-05-27 12:08:43

The HOA has to take care of the streets typically since they are not built to the same standard as city streets (heavy traffic). In addition all these communities have commons areas that must be taken care of not unlike a small park. The city will not take care of these as they are not “public” parks. Anyone saying HOA’s are not needed does not live in a modern neighborhood.

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Comment by JP
2008-05-27 12:22:16

The HOA has to take care of the streets typically since they are not built to the same standard as city streets (heavy traffic).

So what happens when the HOA sticks its collective middle finger at the municipality and declares bankruptcy? The roads just deteriorate?

 
Comment by aladinsane
2008-05-27 12:25:47

Mexico becomes U.S.

 
Comment by scdave
2008-05-27 12:35:31

collective middle finger at the municipality and declares bankruptcy ??

Not positive about the “fine print” in a PUD muni approval but my bet is there are provisions for “Eminent Domain” proceeding in the event the HOA declared bankruptcy…I also think there are likely provisions in any loan that would accelerate the loan in the event of a HOA filing…

Besides, if the HOA did declare bankruptcy you have just effectively rendered each unit almost worthless since it is no longer financeable…

 
Comment by az_owner
2008-05-27 12:49:24

Mo - I live in a neighborhood with wide, solid streets, a nice community park, streetlights, garbage/recycling collection, bulk trash pickup when needed, and many other things that my taxes pay for.

And NO HOA.

There are no “common areas” except for the streets, sidewalk, and city park, and they are not missed. All other land is owned privately and kept up by that owner, 99% of the time very well.

The HOA mindset is another symptom of “big government will take care of everything” that has been fed to people for 70+ years now - except now it’s very small neighborhood government giving you a ticket for parking an RV in front of your house overnight or painting your front door the wrong color.

The HOA scam in Arizona will be exposed as part of this downturn - why pay taxes once to the city then again to the HOA, for inferior service from both?

But good luck trying to get the city to take responsibility now for the narrow, eggshell-thin roads, or to come out and trim the trees in the “community spaces”.

The only way some of these HOA ‘hoods will work now is as rental communities, like giant apartment complexes where there is a dedicated property manager and maintenance crew, and a phone number the renters can call when a light bulb goes out over the bathroom vanity.

 
Comment by Deflationary Jane
2008-05-27 13:26:19

Testify! HOA = hell on earth

 
Comment by oxide
2008-05-27 13:50:00

On top of the flimsy OSB/Tyvek, “Mexican national” labor, a treeless yard that makes the community into a heat island, and other assorted shortcuts, the HOA’s are yet another reason to buy a house that’s 20 years old or more…
so what if it needs a new roof? that’s cheap compared to years of cash-in-the-trash HOA fees…

 
Comment by Mo Money
2008-05-27 13:53:09

I used to live in a community like that also, it was really great when my neighbors thought it was a swell idea to park their camper on their front lawn for a few years.

 
Comment by iftheshoefits
2008-05-27 14:40:27

I’m so out of the loop after having moved to the sticks five years ago. I thought HOAs were for condos, and that was it. I lived in a condo a few years back for a short time, because we were in transition in life and I didn’t want to deal with all the homeowner crap. $58/mo and they mowed the lawns, pruned the bushes, shovelled the snow - no worries. I thought it was great.

Now I keep reading about HOA’s in SFR neighborhoods. This makes no sense to me - that’s what my property taxes are for!

 
Comment by NoSingleOne
2008-05-27 14:51:15

HOAs just insure that cookie-cutter houses are owned by cookie-cutter people wanting to create the illusion of exclusivity and therefore prop up their home values.

A good CC&R, as well as enforcement of existing city ordinances with teeth will do just fine.

 
Comment by iftheshoefits
2008-05-27 15:21:41

“A good CC&R, as well as enforcement of existing city ordinances with teeth will do just fine.”

Yeah, that’s what I always thought.

 
Comment by jim A
2008-05-28 04:46:50

So what happens when the HOA sticks its collective middle finger at the municipality and declares bankruptcy? The roads just deteriorate?

Short answer: Yes. Of course the local government CAN take over the road and sometimes will, if there are enough complaints from others who wish to use it. But it is under no obligation to take over maintenance of a substandard right of way. Those roads are all private driveways.

 
 
Comment by scdave
2008-05-27 12:27:46

vote to disband. There is NO NEED for HOAs.

Cannot disband in Cali….Governed by both local PUD approval and DRE with the state….As far as No Need for a HOA, again, in Cali, a PUD with more than 4 units and a “Common Maintenance” element such as a “Roof”, will require a HOA both from the local and state level……

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Comment by not a gator
2008-05-27 16:05:47

That stinks. In VA HOAs could and did disband or at least remove the gates and turn over road maintenance to VDOT. As I recall, if they made the road public, then they could dump the sweeping/fixing/plowing chores on the state. If they fenced it off, it was all on them.

 
Comment by aNYCdj
2008-05-27 18:14:50

That’s really a FAIR deal, and make sure there is another exit on the back side. Must have 2 means of egress.
————————————
If they fenced it off, it was all on them.

 
 
 
Comment by NotInMontana
2008-05-27 12:37:19

Why can’t they develop without HOA’s? The two places I’ve bought weren’t in HOAs but in areas that just built one lot at a time, different owners, different builders & styles. The difference is no common areas to maintain, or the developer started a park turned over to the city. Around here people take better care of their own yards than the HOA’s take of their (boring) common areas.

The stickler is the roads & community sewers. Do HOAs cover these because they’re building out where the govt doesn’t really want them?

Comment by scdave
2008-05-27 13:03:07

Why can’t they develop without HOA’s ??

You can…It just depends on the design of the project…The city’s do not want “ownership” of any roadways OR the infrastructure that its beneth it so they typically require a HOA or at a minimum, a maintenance agreement with all lot owners…If the “common” responsibilty extends beyond lets say “a driveway”, it is likely to require a HOA…At least thats the way it works in Cali…

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Comment by Darrell_in_PHX
2008-05-27 13:28:12

That is my understanding too. You can develop without an HOA, but it requires larger impact fees for the city to build and “own” the parks and roads.

Developers don’t want to pay the impact fees, so they make it a PUD and dump the costs on the future owners.

No HOA in my ‘hood, and I’m VERY happy for it.

Could you imgaine being in an area where it snows and the HOA is responsible for plowing the roads. Now imagine only half the people are paying their HOA dues.

 
Comment by Homoaner
2008-05-27 15:52:01

“Could you imgaine being in an area where it snows and the HOA is responsible for plowing the roads.”

A friend of mine who bought into a HOA development here in Minnesota got to endure that. He lasted through the first winter, then sold and got out. The streets were almost half the width of a standard municipal street, and the HOA wouldn’t plow unless/until there was a snowfall of at least 4 inches. Result: chaos. Slipping, sliding, crashing, no room on the road to dodge a sliding car, no place to park. And the board was really snotty about folks complaining about the 4-inch rule.

My buddy didn’t buy into a brand-new development just so he’d have to put a plow blade on his truck and plow out his own street, so he found a GF to sell to and moved back into the nice, quiet, clean, well-serviced working-class neighborhood in Minneapolis he’d lived in for decades. More room, better maintenance, and a much better-built 1950s-era house. He appreciates all that now, after having lived a year in a new development HOA hellhole.

 
Comment by aNYCdj
2008-05-27 19:09:30

Well Darrell:

Maybe the nazi HOA board will grow some brains and allow those low class people with big Dual McTrucks to put on a snow plow in exchange for not ticketing them on the street anymore.

ya think????
=====================================================
Could you imgaine being in an area where it snows and the HOA is responsible for plowing the roads. Now imagine only half the people are paying their HOA dues.

 
 
Comment by lavi d
2008-05-27 13:43:50

Why can’t they develop without HOA’s?

I can tell you that here in Las Vegas where the lot sizes are microscopic and only one car can fit in front of one house, that HOAs are probably necessary in order to prevent the blight and violence caused by squeezing the rat’s cages so close together.

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Comment by NotInMontana
2008-05-27 14:32:27

I’m glad I managed to avoid ‘em. It was just dumb luck, though I was seriously looking at houses in the development behind the place I eventually bought. The whole subdivision feel turned me off.

Nice place, though, and only 2-3 foreclosures out of about 80 properties so far.

Looks like it was a developer-driven thing.

 
 
 
Comment by Theroachman
2008-05-27 14:02:17

Members of a HOA can vote to disband but, and it is a big but, the mortgage holders must also approve a disbanding of a HOA. Since most mortgage companies feel HOA groups help prices stay high they are not going to just let a neighborhood drop their HOA with out assurances. Lets not leave off the lawyers that really run the HOAs either. They are certainly not going to just let go with out a fight.

 
Comment by SaladSD
2008-05-27 23:18:08

Most HOAs oversee maintenance of privately owned streets, and perimeter fences, especially true for caged communities.

 
 
 
Comment by Groundhogday
2008-05-27 11:56:41

“There’s a big difference between what something’s worth and what someone will pay…”

Thus said Epstein, not Einstein

Comment by SDGreg
2008-05-27 12:09:21

““There’s a big difference between what something’s worth and what someone will pay…”

I always thought what someone would pay is what it’s worth. But then again I’m not Einstein nor (thank God) Epstein.

Comment by packman
2008-05-27 12:15:55

There’s one exception to that - the worth of things of sentimental value, to those with the sentiment. I’d pay probably 10’s of thousands of $$ for all the photos I have of my family - my neighbor though would maybe pay 50 cents.

This principle doesn’t apply to housing however, which has no sentimental value.

(except maybe in rare cases - e.g. a billionaire who wants to buy their childhood home may pay a lot).

 
 
Comment by Mr. Drysdale
2008-05-27 12:17:44

This one caught my attention too . . . in ‘04-05, it was worth X and someone (FBs) paid X+Y - there may have been a big difference then.

But now, it IS worth what someone will pay for it . . . too many fools are holding on to the notion that prices never come down and anything below peak prices is a screaming bargain.

Just because someone paid peak price doesn’t mean that’s what it is “worth” and not everything below peak price is yet a bargain.

 
Comment by joeyinCalif
2008-05-27 12:42:39

What “someone” will pay is what it’s worth.. but this assumes a well informed market, where all the details are known and a fair assessment can be reached. It’s called market value.

it ain’t necessarily worth what some particular ignorant individual will pay..

Comment by teufelhunden
2008-05-27 13:43:33

Exactly.

 
 
Comment by teufelhunden
2008-05-27 13:41:56

Whenever I buy something I always go through the value vs. price comparison in my head. There IS an intrinsic value to something irrigardless of teh price, based on materials and labor. Admittidly, labor can be a multiplier both ways - high quality labor can make prices skyrocket (stradivarious violins for example), while low quality labor can make something worth LESS than the cost of the underlaying matterials (as people are now finding out about their POS McMansions built by wetbacks who didn’t know what they were doing).

But my point is this - there is an actual value attached to everything of what it is actually worth, you just need a little information to know what that number is. Then usually a 5-15% (depending on the industry)markup for proffit will get you to the selling price. What has been most appalling to me has been how idiots all across the country borrowed hundreds of thousands of dollars each, when they had no clue as to what the underlaying product (housing) was actually worth. Because I’ve been in the housing and construction industries for a while I refused to jump in, which actually brought on a lot of ridicule. But instead of ridicule, people would have been better served to pay attention and educate themselves.

And it’s not just housing - if I don’t know about a product I educate myself before I make a purchase. I try never to pay more than the underlaying value, although sometimes overpaying is part of the education process. But thankfully I can say I’ve never overpayed by hundreds of thousands of dollars or orders or magnitide.

Idiots and their money…

Comment by NoSingleOne
2008-05-27 15:20:04

“…low quality labor can make something worth LESS than the cost of the underlaying matterials (as people are now finding out about their POS McMansions built by wetbacks who didn’t know what they were doing).”

Excellent argument for more oversight and gov’t regulation. If city inspectors, appraisers, and the Border Patrol did their jobs, then your argument holds.

Unfortunately, it also holds for POS American cars that can’t compete with Japanese and European imports. Our bloated management/CEO structure, cost of health care, liability insurance and heavily unionized workforce can’t compete with a better educated and less greedy labor pool.

 
Comment by Groundhogday
2008-05-27 17:33:44

As we are learning, the value of a house is NOT what it costs to build it. Actually, the relationship between cost and value is reversed. The cost to build a house will decline as the market value of houses declines. Drywallers, plumbers, etc… will make less for their labor. The market value of products directly linked to residential construction (e.g. 2×4’s, OSB, drywall) has also declined dramatically.

So no, I don’t think you can compute the instrinsic value of a house by adding up the labor and materials used in construction.

 
 
 
Comment by joe momma
2008-05-27 11:58:18

Isn’t it funny watching the PTB act almost hysterically about falling prices? This is the biggest purchase in your life and they are pissed you might get a good deal on it.

Imagine of this were Wal-Mart.

Wal-Mart today reported that they had to lower prices on the Chinese crap they sell. This was the 18th straight month of falling prices at Wal-Mart. Experts were dismayed that the chain had to drop prices again, but they are hopeful that the worst of the price cuts are behind us. There is optimism in the retain sector that the bottom has been reached and prices can once again continue to climb.

Only in an industry this screwed up could lower prices be spun to be a bad thing.

Comment by lavi d
2008-05-27 13:51:30

There is optimism in the retain sector that the bottom has been reached and prices can once again continue to climb.

Only in an industry this screwed up could lower prices be spun to be a bad thing.

Awesome!

 
Comment by Incredulous
2008-05-27 14:51:52

Chinese crap is everywhere. I just got back from Publix, Florida’s #1 (and supposedly best) supermarket at the site of the original Publix (in South Tampa). On every aisle there were thingies for sale–pots, pans, cups, utensils, toys, etc. as well as food and the usual supermarket items. I started picking things up and turning them over to see where they were made. China. China. and More China. This was especially alarming with little children’s toys such as tiny cars(lead paint potential) and electrical appliances (disaster protential). I did find some children’s bowls that were made in the U.S.A., but nothing else.

Since our government will do nothing to prevent the importation of toxic crap (recalls are voluntary), I think Americans should simply refuse to buy anything from China till the situation has been rectified. But, I might as well wait for the Man in the Moon to show up with a box of Godiva chocolate.

Comment by Rintoul
2008-05-27 15:28:14

The fact that everything these days is made in China is news to you? Where’ve you been?!

 
 
Comment by combotechie
2008-05-27 14:59:15

I love your anaology. But I’d substitute Exxon for Walmart.

 
 
Comment by Gulfstream-sitter
2008-05-27 11:59:11

“Is my only alternative to come down to the $280K appraised value……..or not sell?

2005 was when mostly stupid people were buying houses. Welcome to 2008, the “Year of the Low-baller”

If I were you, I’d chose Option A (come down to the appraised value, take the money and run like hell/move on with your life). The fact that you are even asking the question leads me to believe, however, that you will take Option B.

And another thing……..I don’t give a rat’s ass how much painting and carpet replacing that you’ve done. Same as buying a used car; I don’t give extra points for all the worn out stuff you’ve had to replace to keep driving it.

Comment by DinOR
2008-05-27 12:21:11

Gulfstream-Sitter,

Oh… excellent point! Nor do I consider spring clean-up, cutting the lawn and taking out the trash “home improvement”! Things like dishwashers and hot tubs are “user items” like windshield wipers and bald tires. Don’t look for brownie points from me.

Now if we can just imagine further that 2005 was the Year of the Low-Baller we’d all have been a lot better off? It was encouraging over the Mem. Weekend though as we spoke with many of our daughters’ young friends, finally… feeling like affordable housing is ’somewhere’ in their future. They’re not jubilant but no longer utterly despondent.

 
Comment by crisrose
2008-05-27 12:36:44

Don’t you remember? Buy $50 worth of paint, slap it on the walls, and you have an instant $5000 in extra equity - the house, excuse me HOME, is simply worth more. Ditto carpets, drapes, faucets, light fixtures… Ask anyone, they’ll tell you.

I

Comment by Lost In Utah
2008-05-27 12:51:46

I just talked to a woman who said she’d put 80k into her kitchen remodel. I drove by her house, the whole property looks to me like it’s worth not much more than that.

 
Comment by DinOR
2008-05-27 13:00:05

crisrose,

That’s “my” take on it. My wife has had me replace drapes just for the changes in the season! Re-painting kids rooms as they grow through different “phases” is a user item as well.

With the new garbage they peddle at Home Depot many times it’s easier and quicker to simply replace a $12.99 faucet in the guest bath as it is to find gaskets and washers. Ceiling fans? Same deal. It shouldn’t take more than an hour or so to replace a damn fan. Yet to look at the multitude of shows on TV and the attitudes of sellers for the last decade and you’d think these were major accomplishments!?

Comment by Arizona Slim
2008-05-27 14:52:26

I was in Home Depot yesterday. Was looking for faucet caps to replace the busted “C” cap in my shower. Did they carry such a mundane item? Nope. But I could have gotten a whole new faucet handle set.

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Comment by aqius
2008-05-27 16:02:15

C’Mon now Az Slim

it’s people like you that expect things like ONE battery for sale, ONE light bulb, or ONE slice of bread.

our overlords have a capitalistic obligation to gouge us for uneeded/unwanted items. we are just the great unwashed consumers. fleecing the masses is considered a patriotic duty & right of passage by our Ivy League Wall Street Banker Boyz. unbridled capitalism at it’s finest. and now China, the great imitator, is doing it better than us!?

we fought for global democracy against the heathen commies. ok, we “won”. so, now what?

The average US citizen thought that America would drive the godless hordes back into their asian huts or soviet concrete ghettos, leaving them only the options of harvesting rice or distilling vodka to trade for our far superior finished goods.

Too bad someone forgot to mention that the Manhatten Island situation is a permanent deal, not an “Indian Giver” arrangement like Hong Kong. The NERVE of them; actually taking back what has been improved. next thing you know Mexico will want all the paved parts of Texas, AZ, & CA back. oh wait, they already do. fast learners.

 
Comment by grumpy realist
2008-05-27 17:27:20

And how. I became extremely grumpy the other day when it turned out to be absolutely impossible to buy one (1) single solitary Pyrex baking pan. Just a nice, simple 8″ x 8″ pan, pleeese?

Impossible. Best I could do was a dual 8″ x 10″ / 10″ x 12″ set. Yargh.

 
 
 
 
 
Comment by aladinsane
2008-05-27 12:08:20

“In the fourth quarter, M&T recorded a $127 million hit to earnings after reducing the value of three mortgage-backed investments by 96 percent, down to just $4.4 million. At that time, the bank had concluded that the damage to those investments’ value was likely to be permanent, prompting it to take the charge.”

“In contrast, as of March 31, executives still believed M&T would receive all the principal and interest payments from the other mortgage investments, and were not ready to declare the losses permament.”

March 31: Alice in Wonderland

Today: Jabberwocky

“Beware the Jabberwock, my son!
The jaws that bite, the claws that catch!
Beware the Jubjub bird, and shun
The frumious Bandersnatch!”

Comment by hoz
2008-05-27 12:33:41

Convincing the bank to sell the Mortgage Backed investments could return a 100 to 200% profit. Also this would be beneficial to the bank freeing up a little badly needed cash.

Comment by spike66
2008-05-27 13:33:27

I like watching M&T Bank…Buffett is a major shareholder.

 
 
 
Comment by exeter
2008-05-27 12:08:41

“News reports about the tough shape of the California and Florida real estate markets don’t apply to Connecticut, said Realtor Elizabeth Banco, in Simsbury.

Oh really. I have bulletin for you RealTard Binco. The same exploding supply in CA and FL is ratcheting up in CT. So do tell us how the fundamental relationship between price and supply is an exception in CT….

Some of the crap realturds say is mind numbing.

Comment by Anthony
2008-05-27 12:15:10

That’s because Chris Dodd is from CT. He will personally ensure that no FB sells at a lower price than purchasing price. And if a FB does, he will bail them out at your expense.

Comment by exeter
2008-05-27 14:02:40

Senator Dodd makes for a great boogeyman doesn’t he?

Comment by not a gator
2008-05-27 16:10:29

you’re defending DODD???

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Comment by exeter
2008-05-27 17:57:15

No. I’m calling out BS fear mongering for what it is.

 
 
 
Comment by combotechie
2008-05-27 15:07:04

I am so happy that Christopher Dodd expertly utilized his position as “Chairman of the Senate Committee on Banking, Housing, and Urban Affairs” to prevent the current mess we are in.

 
 
 
Comment by ChrisO
2008-05-27 12:10:43

“No county in the region has been hit harder by the foreclosure wave than Prince William, where there are nearly 7,000 empty houses, said neighborhood services coordinator Michelle Casciato. Given recent census estimates, that means about one in 20 houses in the county are unoccupied.”

That’s pretty astounding.

Gee, I guess middle-income people really don’t want to pay $500,000 to live two hours away from their job.

All of this creative price destruction is headed toward the inside-the-beltway part of the DC area, it’s just taking its sweet time.

Comment by taxmeupthebooty
2008-05-27 12:20:55

have the feds laid anyone off ?
office of soviet supervision
all hiring and handing out raises for jobs well done

 
Comment by Kevin Road
2008-05-27 12:38:13

let us pray it does!!!

 
 
Comment by packman
2008-05-27 12:32:42

Am I the only one that’s shocked at how fast the price declines are now?

As most on here, I expected prices to go back to historical norms, and perhaps overshoot some. However I expected it to come about with a slower curve, together with some long stagnation (price reduction in real terms). Something on the order of 5-10% declines per year initially for say 4-5 years, followed by 5-10 years of flat prices. 15% in one year though nationwide is just amazing. Keep in mind this is averaging in a some areas that have yet to see any declines (though their numbers are dwindling).

We’re beyond “hard landing” at this point. This is a full-bore crash, plain and simple.

Comment by Kevin Road
2008-05-27 12:52:25

thats is relative. I mean I feel like it is happening to slow - the sooner the better

Comment by CorpsmanUSN
2008-05-27 18:42:35

I agree…Here is southern NH it’s taking forever, people still think their house is worth what they bought it for or more, usually more.

 
 
Comment by Darrell_in_PHX
2008-05-27 13:45:51

I agree Pacman,
I really was expecting 5 year to hit bottom with the biggest drops in year 4. We are coming up on the 2nd anniversary of the peak. Only 9 months after creative mortgage origination ended in August…. And the bottom is dropping out.

I not thing the upcoming foreclosure auctions are real… lenders are REALLY dumping as quickly as they can.

We have 1 auction coming up in a week and a half that will auction off over 500 bank-owned properties in 2 days. That matches the TOTAL daily MLS closings, from one auction.

I think May/June is going to show big transaction increases and HUGE price drop. 2% a month, 15% a year on a national average is amazing. Here in PHX we’re off 20% in a year and 3-4% per month now. I would not be surprised to see 5%+ drop in case-shiller when the numbers come out 3 months or so from now.

 
Comment by diogenes (Tampa)
2008-05-27 14:21:49

I was expecting a crash and here is why:

What supported the ridiculous prices was ridiculous financial arrangements. Mortgages that required no down payment and easy-low-monthly-payments for the first 2 years. People who took these loans could NEVER afford the “real payment”.
The scheduled re-sets started in 2005, thus requiring unsold inventory to GO NEGATIVE, even if it was rented.
Speculators will eat up their savings for 6 months to a year to “keep” their “equity”. Then it starts to get to them. They drop the price to get out from under the debt. This causes a flood of other properties on the market as everyone else that is “over-leveraged” needs to get out of their agreements to pay.
These people can’t WAIT 4 or 5 years to unload these alligators. They are being slowly eaten alive. They need to sell the first year of the re-set or get “re-financed”. No Chance there. Bailout Maybe??

We are now in the peak decline year. It will trail off some more over the next 2 as unabsorbed inventory builds and more price reductions bring more buyers into the market. I will start shopping in the Fall.
I am seeing some really good discounts, but I’m in NO Hurry. There’s plenty of stuff for sale.

-D.

 
 
Comment by WT Economist
2008-05-27 13:01:27

Understand what the idea of private developments with homeowners’s associations is. If you have public streets, public parks, public pools, public policy, then everyone pays in taxes and everyone gets equal services. The poor neighborhoods pay in less and get equal, the rich neighborhoods pay in more and get equal.

The HOA is a way around this. More services for those in the HOA, paid for by those in the HOA, without being open to those outside in less well heeled areas.

So do I weep for them when they knuckle under financially? No.

In condo, of course, there are common parts of the building that have to be maintained, and a common property tax that has to be paid.

Comment by scdave
2008-05-27 13:14:14

there are common parts of the building that have to be maintained, and a common property tax that has to be paid ?

Reserves are set aside for the “replacement” componets of the HOA…Roof, paint, fences etc…A properly run HOA has budget review every three years to assure that the past estimates of “replacement costs” are still accurate and if not, the HOA dues may need to be adjusted…Human nature is to resist increases but HOA’s that due this do it at their own peril…I have seen HOA’s that were under funded when they needed lets say a new roof…It has a tremendoes adverse effect on the value of each unit if the HOA is underfunded….

Comment by aqius
2008-05-27 14:19:19

“‘At one place in Florida we had seven (foreclosed) homes on one street,’ says Steven Brumfield, VP of operations at Wentworth Property Management, which serves 950 community associations in more than a dozen states. ‘The association could not even afford to cut the grass, there were so many of them . . . ”

but you just know that this HOA Prop Mgnt Company still keeps collecting their FULL CONTRACTUAL FEES during any/all revenue downturns from distressed HOA’s. bloodsucking leeches.

hell NO this company wont lower their sacred salaries in fairness to an HOA that has fallen on hard times. nooo sirreeee . . . first-in-line, payment-in-full-off-the top for them. let the grass grow tall & any maint. go to hell; as long as they get theirs first!

(However, I’ll just BET if said Prop Mgnt Co. income dropped low enough to endanger salaries from an HOA, they damn skippy would find a way to get off their lazy azzes & execute foreclosure liens against delinquent props, not just let ‘em sit idle with a clouded title. however, no action in the interim because it would cost a lot of money to have an attorney pursue a lien sale.)

and just for comparison, the HOA (Sunrise Homeowners Assn) which came with my prop spends over 50-60% on a PART TIME contracted Prop. Mgnt Company. Christ, all they do is handle the books; what a ripoff! not to mention the no-bid inside sweetheart deals given out for endless repairs to the common pool area.
but just try getting a straight answer from any board mbr about justifying expenses. HA! and they also want this company to take over operations full time. LORDY - there goes the entire budget.

We are so “blessed” with bored AIr Force retirees inthis area (N. Sacramento) who run this HOA like the NCO club; its all about “who you know” that determines what happens.

legacy of 2 recent base closures, Mather & McClellan.

lovely.

juuuuuuust lovely.

 
 
Comment by bicoastal
2008-05-27 13:25:42

“Understand what the idea of private developments with homeowners’s associations is. If you have public streets, public parks, public pools, public policy, then everyone pays in taxes and everyone gets equal services. The poor neighborhoods pay in less and get equal, the rich neighborhoods pay in more and get equal.”

Good analysis. BTW if an HOA runs out of money and wants to go bankrupt, wouldn’t they have to sell off some of the community assets? Perhaps they could sell their country clubs, golf courses, and swimming pools to the cities, which could turn them into public pools, golf courses, and youth centers! (Remember when Auntie Mame buys the house in the “restricted” community in CT and donates it for a camp for Jewish refugee children? Something like that.)

 
 
Comment by Mr_Dave_O
2008-05-27 13:34:43

“‘People are thinking prices will drop so they will get better deals,’ Banco said. ‘But if that happens, maybe interest rates go up and it will be a wash. Who knows what will happen? Most of us try to discourage that way of thinking.’”

If interest rates go up to say 15% (like they did in 1980-1982), and house prices have to fall greatly to compensate resulting in the same monthly payment as the high price / low interest rate scenario, then how is that hurting the buyer? At least the buyer can refinance in the future when rates eventually go down. But with rates already very low as they are now, when interest rates do rise (and I’m sure they will rise a lot within the next few years), a buyer who buys at the higher price will not be able to refinance and will be stuck with a higher mortgage balance than those who waited for interest rates to rise first before buying a house (remember, when rates go up, house prices have no choice but to decline to compensate).

Comment by Darrell_in_PHX
2008-05-27 13:50:27

Eaxctly right! Buy when prices are low and rates are high. When the rates go down, you refi. You still owe a small amount, and have dropped your payment.

If you buy when prices are high and rates are low, all you do is lock yourself in. If rates go up, you won’t be able to sell for waht you owe because no one in your target market will be able to pay the interst on the amount you owe at the higher rate.

 
Comment by joe momma
2008-05-27 14:09:44

I like his definition of wash. Saving thousands of dollars means the possibility to pay cash. Let prices fall. Period.

 
Comment by climber
2008-05-27 14:30:28

Low prices, high rates is good for buyers because their downpayment goes farther, and while they’re saving the savings grows faster. That means less borrowed money for the same asset.

Higher interest rates encourage less debt. That’s the point. Houses will still sell.

 
 
Comment by Lost In Utah
2008-05-27 13:47:19

OT, and I just posted this in the Bits Bucket, but have to ask over here, too…

Just found out Home 123 (the mortgage holder of the house I’m squatting in) is a branch of New Century (bankrupt).

Now what? Who actually owns the mortgage? Who do I call???

Unbelieveable. Just brings home in a very personal way what a big mess this housing bubble really is. Sometimes you just get lucky… :)

Comment by aqius
2008-05-27 14:29:26

Lost In Utah

Geez, what red tape mess yer in over there! guess the only way to see it through is to wait for the game of musical chairs to end long enough for some fianancial entity to finally knock on yer door or send a letter notifying you of where to send mortg payments ?

good luck

(I’d be tempted to pull a prank on the financial boyz that finally get their act together, such as when someone comes out to inspect yer home, hang some “BIOHAZARD” signs on the front door, or maybe a “HAZARDOUS DWELLING; LEAD PAINT/ASBESTOS” to generate some fear & have em happily accept a lowball buyout offer from you to remain in the place. . . heh heh !!)

Comment by Lost In Utah
2008-05-27 15:25:22

Hey aquis, this story is even better, as I don’t own the house. I was renting and the LL went bankrupt, giving it back to the bank, whoever the heck that is! That’s what I’m trying to figure out, so I can keep renting, …er squatting for now. No deposit, no last month’s rent, and so far I haven’t paid any rent, just trying to unravel who owns it! The LLs furniture is still here.

And I like your biohazard idea… :)

 
 
 
Comment by Nozferatu
2008-05-27 13:48:32

All these drops are still not enough. We need significantly more reductions in price before it makes any sense at all. 2-3 bedroom condos in the LA area STILL go for well above $350K….does that make sense to anyone?

Or how about $600K+ homes in Glendale/Pasadena/Burbank where every other idiot is seen in a Beemer or Benz?

 
Comment by sm_landlord
2008-05-27 13:48:57

It looks like the justice dept has a deal with the realtors to open up some MLS data…

http://biz.yahoo.com/ap/080527/realtors_settlement.html

 
Comment by joe momma
2008-05-27 14:03:47

This is the crap we have to put up with in this country. Pure propaganda.

Why Consumers Are Underconfident
By Rick Newman

It doesn’t add up. American consumers see gloom all around, with new consumer confidence numbers that are the worst since 1992. In other words, the economy is ailing worse than it was after 9/11, or after the tech bubble and stock market run-up that came crashing down early in 2001.

This, even though it’s not clear we’re even in a recession. Sure, quibbling over whether economic growth is positive or negative doesn’t help anybody fill the tank or put food on the table, but overall, the economy isn’t nearly as sick as consumers seem to think. Unemployment is a relatively low 5 percent, and some important indicators have recently turned from negative to positive.

http://biz.yahoo.com/usnews/080527/27_why_consumers_are_underconfident.html

 
Comment by blofeld42
2008-05-27 14:14:45

There have been some really dramatic price drops locally in the Central California Coast over the last few months. Stuff that was $650K is down to the mid-$300’s. The drop is as steep or steeper than the run-ups in 2004.

It’s getting so that the rent/buy calculation isn’t completely out of whack. And there’s still a ton of foreclosures and walk-aways coming down the pike over at least the next six months.

 
Comment by texas rules
2008-05-27 14:21:37

“Karl Case, co-founder of a home-price index that bears his name, said more auctions of foreclosed properties will hasten the reduction of inventories from record levels and may lead to a faster housing recovery. Case said housing starts, which fell to a 954,000 annual pace in March, might also be signaling a turnaround in the market. He said starts ‘go below a million every single time, and then they come back.’”

Karl, there’s only one slight problem. New home sales are hovering around 500,000 per year, so housing starts need to only fall another 50% to fall in line with sales.

You might want to consider giving up on the forecasting thing…

 
Comment by Ken Best
2008-05-27 14:42:23

“‘People are thinking prices will drop so they will get better deals,’ Banco said. ‘But if that happens, maybe interest rates go up and it will be a wash. Who knows what will happen? Most of us try to discourage that way of thinking.’”

Banco needs education: low price is good deal.
You want to buy at lowest price and highest interest rate, since
you can refinance when interest comes down.

Comment by Incredulous
2008-05-27 15:18:21

Also property taxes and home owner’s insurance bills are based on selling price or appraised value, so a lower selling price and/or appraisal means lower property taxes and insurance bills year after year. Locking a house in at an inflated price in Florida is beyond stupid, since this inflated price may represent the LOWEST value the tax-appraiser will ever except, no matter what happens. These real estate hucksters really don’t care who they hurt do they, as long as they get theirs?

Comment by reuven
2008-05-27 15:27:05

A related point: False appraisals and people lying on mortgage applications to pay inflated house prices in your neighborhood raises the amount for which the county will appraise your house.

Which means many innocent people–who had NOTHING to do with the bubble–had to may more property tax than they should have! It would be nice if it were possible to get a judgment from your neighbors for causing your property to be over-assessed, but I doubt you’ll ever be able to. Nobody cares about the true victims of the housing bubble.

 
 
 
Comment by Carlos Cisco
2008-05-27 14:57:48

…… where there are rats, there are lots of snakes in the grass…..

 
Comment by Thomas
2008-05-27 15:09:26

“He and his wife have seen snakes in the reedy thicket, too.”

OK, now that’s just begging for a dirty joke or three.

 
Comment by Darrell_in_PHX
2008-05-27 15:13:44

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKzbMH2M1azY&refer=home

Home sales in CA up 2.5% month over month.

Ugh… I’ve come to expect better from Bloomberg. Where are the year over year numbers? Where is the info on sales ALWAYS increasing this time of year? Where is the comparison to pre-bubble transaction rates?

AND, how is lenders auctioning off homes “removing inventory”? Aren’t these houses going to be occupied by people that are leaving other places, increasing the odds those places they are leaving will be the next round of foreclosures?

 
Comment by Captain Credit Crunch
2008-05-27 15:16:20

“Prices of single-family homes plunged a record 14.1 percent in the first quarter from a year earlier, marking a pace five times faster than the last housing recession, the Standard & Poor’s/Case Shiller composite index of 20 metropolitan areas (showed).

How does the Case-Schiller measure month-over-month and year-over-year price changes? I thought the whole point was that the index used same-house sales for accuracy at the expense of timely data. How many houses are sold twice within a year–or a month?!

 
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