Establishing A New New Affordability
Some housing bubble news from Wall Street and Washington. MarketWatch, “Home prices across 20 major U.S. cities have dropped a record 15.3% in the past year and are now back to where they were in the summer of 2004, according to the Case-Shiller home price index released Tuesday by Standard & Poor’s. Prices in the 20 cities are now down 17.8% from the peak two years ago.”
“Prices were lower in April than they were a year earlier in all 20 of the major metropolitan areas as tracked by the Case-Shiller index. Home prices surged in 2003 through 2006, climbing by a cumulative 52%, according to Case-Shiller. Since then, homeowners have given up half of their gains from earlier in the decade.”
From Consumer Reports. “The April index showed thirteen record low annual declines, and 10 of the declines were in double digits. Las Vegas and Miami continue to share the dubious distinction of being the weakest markets over the past 12 months returning -26.8% and -26.7%, respectively.”
“These two markets witnessed some of the fasted appreciation of the 2004-2005 period, rising 53 percent and 32 percent respectively.”
“The National Association of Realtors said than that the housing recovery was being hindered, in part, by what it called restrictive lending practices. It said it saw evidence of growing interest by prospective home buyers, but some are still having difficulty finding financing.”
From Bloomberg. “Three months after Fannie Mae and Freddie Mac won the freedom to step up home-loan purchases, the government-chartered mortgage-finance companies are doing what critics in the Federal Reserve and Congress had predicted.”
“Instead of using powers granted by Congress to buy jumbo loans for the first time, Freddie Mac and Fannie Mae are purchasing their own mortgage-backed securities, helping reduce losses, company filings show.”
“Since the rule change took effect in March, Fannie Mae has packaged $24 million of jumbo loans into securities, while Freddie Mac added $220 million, according to the Inside Mortgage Finance newsletter. In April, the companies spent more than $32.4 billion to buy their own instruments, regulatory filings show.”
“The slowness of Fannie Mae and Freddie Mac in injecting cash for new jumbo loans may have exacerbated the housing slump in markets including California and Florida, where prices have already fallen more than the national average, said Jerry Howard, president of the National Association of Home Builders.”
“‘Had they been quicker into the marketplace, they could have helped slow the downward spiral in housing prices,’ Howard said.”
“‘Fannie and Freddie are catering to low-risk homeowners with high credit scores and a lot of equity in their homes,’ said Dan Green, a loan broker in Cincinnati and Chicago. ‘I’m sure there will be some high-cost areas in the country that will benefit. They just don’t happen to be Florida, Michigan, California, Nevada.’”
From C-Ville.com. “Just a few months ago, Micah Davis, a broker for Mahone Mortgage, thought he had a deal done. He had run the customer’s numbers through Fannie Mae’s automated underwriting system, and the system had blessed the customer with an approval for a mortgage. Then came June.”
“That was the month when Fannie Mae updated its system, making mortgages harder to come by. Davis ran the same customer’s numbers through this month-the very same numbers-and the system spat out a ‘refer,’ meaning that Davis couldn’t do the loan.”
“‘Nothing had changed,’ says Davis. ‘I’m going to be able to do it because, until October, they’re honoring anything that was run before June. But all things being equal, it went from an approval to a refer.’”
“Two things are certain. The days of 100-percent financing-no down payment-are gone. And the baseline credit score you need for approval has risen sharply.”
“‘It is more difficult to qualify borrowers for loans these days,’ says Peggy Deane, VP of mortgage services for Member Options, which provides mortgages for the UVA Credit Union. Dean says the secondary markets, institutions like Fannie Mae and Freddie Mac who buy loans from originators, have tightened up their guidelines around the county.”
“‘Even a year ago, for credit scores in the 500s, I won’t say those loans were easy to come by, but they were certainly possible,’ Deane says. ‘That’s not the case today. We’re seeing a migration to a minimum of a 620 on more programs.’”
“Borrowers in Charlottesville do have an advantage over homebuyers in larger cities like Boston, Washington, D.C., and Phoenix, says Doug Adamson of Bank of America. Because of the slump in housing prices, many larger cities are considered declining markets. That label limits some loan options.”
“Deane says that generally people are going to have to have some money saved to buy a house now that 100-percent financing has disappeared.”
“‘And there’s going to be a whole lot more focus on how they manage their credit,’ she says. ‘For those who have the income and credit history to qualify, I’d say it’s just as easy as it always was.’”
“Societe Generale, the French bank buffeted by subprime losses and a rogue-trading scandal, said it will wind up a $4.3 billion structured investment vehicle in a move that will repay senior debt, but leave holders of the lowest-ranked debt with nothing.”
“SocGen moved the fund’s assets on its balance sheet last December and provided it with a liquidity facility to prevent a forced sale of its assets.”
“The bank said in a statement Tuesday that the liquidity facility is set to expire June 26 and that it’s decided not to renew it ‘in view of the current market situation.’”
The Post Crescent. “The latest data shows that there is no slowing in mortgage foreclosures across the nation. Wisconsin is not shielded from the problem, though it isn’t as dramatic as it is nationally, according to RealtyTrac.”
“‘The Federal Reserve has projections of a two-year window when things should start to level off,’ said Laurie Anne Lee, a credit counselor…banking industry veteran and former mortgage broker. ‘But there’s so many factors that go into foreclosures that I think 2010 is a conservative estimate.’”
“Lee believes consumers are facing higher debt loads because of increasing daily living costs driven by record gasoline prices, coupled with a weak economy and soft job market.”
“‘There’s more of a chance, people may begin to miss mortgage payments because they just can’t keep up,’ she said.”
“John Waite, owner of Full Spectrum Mortgage in Appleton, believes the financial community and Wall Street investors are the main culprits. He said mortgage-backed securities were popular investments because of their quick returns.”
“‘When this all started five or six years ago, someone needed a credit score of about 640 to get a loan, but by the time the hammer fell, lenders were offering 100 percent (loans) to someone with a 570 credit score,’ Waite said.”
From Las Vegas Now. “People in the valley are losing their homes to foreclosure at alarming rate. Now they are lashing out — destroying those homes before the bank takes over.”
“For more than a week, neighbors in a Spring Valley subdivision watched their neighbor go on a rampage. ‘This man was able to go berserk — throwing things around throwing furniture,’ said a neighbor.”
“On Friday, the man was seen throwing junk into his backyard. His neighbors say it’s nothing compared to what has happened over the past few nights, ‘Throwing things around — throwing furniture all over.’”
“It went from dumping boxes of junk into the backyard, to ripping cabinets off the walls. On Saturday, neighbors say a flood of water came gushing from the garage.”
“Tom Calabesea sells foreclosure properties. He says vandalism is happening more and more. He showed one home with everything taken, ‘Before they left, they took the oven, stove, dishwasher, microwave and sink.’”
“They also slashed the carpet, threw motor oil it and took the water heater. ‘They want to get even with the bank because they didn’t make there payments, if that makes any sense,’ said Calabesea.”
“Neighbors called the police on the man in Spring Valley, but because he still owns the home, they couldn’t to stop him. Real estate broker Tom Blanchard says disgruntled foreclosure victims are getting away with vandalism because there are so many foreclosures the banks can’t keep up with.”
From Fortune. “Builders constructed far more homes from 2002 until 2006 - the peak bubble years - than could possibly be absorbed by the normal growth in households.”
“As a result, the market is now swamped with one million new and existing homes for sale that aren’t occupied, and hence need to sell quickly. That’s a multiple of the figure in most downturns, and it testifies to the duration and girth of the bubble.”
“The key player in any recovery scenario is the first time buyer. When the first-timers are absent, the entire buying chain gets frozen.”
“Today, newbies are coming back. Why? For the first time in years, entry-level homes are affordable. Builders have slashed prices, and what they’re building tends to be far smaller than the McMansions of the boom, selling for far lower prices.”
“KB Home’s average selling price dropped to $248,0000 in its February quarter, versus $267,000 a year earlier. In 2006, KB’s basic model in Victorville, Cal., a former boomtown east of Los Angeles, took up as much as 3,800 square feet and sold for $328,000.”
“Today, its stripped down offering goes for $220,000, at less than half the size.”
“So the first time in a decade renters can carry the mortgage payments and taxes on a new house for what they’re paying a landlord. Call it the New Affordability.”
“One event has the potential to slow or even derail the recovery: A sharp rise in interest rates. If they rise to 8% or higher because inflation rebounds, it would take a far bigger drop in prices to make new and existing homes affordable.”
“The New Affordability is now in place. But if rates rise, we’ll have to establish a New New Affordability - at even lower prices.”
From Wave TV 3. “The slumping housing market is affecting how southern Indiana home builders are marketing their homes. The annual Southern Indiana Home Expo which highlighted homes $500,000 and up is now a thing of the past. Now, homebuilders are simply trying to get more homes seen — many less expensive homes.”
“When you talk to people in the new homes business, the conversation doesn’t get too far these days before you hear something like this: ‘I don’t think in the next 10 or 20 years you’re going to see houses at better prices than they are right now,’ says Mike Campbell, the chairman of the 2008 Southern Indiana Parade of Homes.”
“And some prospective home buyers are buying that. In the first three days of Southern Indiana’s first ever Parade of Homes, 6 of the 33 on display have already sold.”
“‘We’ve built homes in the $600,000 range, but our company has adapted to what the market has told us the need is for $130,000 and $135,000,’ says Bill Burns, owner of Aristocrat Homes (and) also a realtor.”
“Instead of picking one fancy subdivision to host a home expo and charge $10 a person like they used to, this year southern Indiana homebuilders are showcasing more modest homes from Jeffersonville to Georgetown and admission is free.”
“The struggle for realtors trying to sell existing homes continues. Compared to this time last year, home sales are down 22-percent in southern Indiana and down 21-percent in Louisville.”
From Fox 28. “The nation’s housing crisis is definitely being felt here in Michiana. Home sales in the area are down about 18-percent.”
“When Anne Farthing was searching for her new home the wide selection came in handy. ‘We were pretty particular about what we wanted and there were a lot of options out there for what we wanted, so it didn’t take us long,’ explained Anne.”
“Many buyers are getting a deal by taking advantage of foreclosed properties. Real estate agent Mary Dunfee says ‘Banks they want to move their inventory, so they’re pricing these homes to sell or these properties to sell within 30 to 60 days.’”
“On top of that, sellers desperate to get their home sold in the saturated market are offering special incentives.”
“In this market realtors say make sure your home is priced correctly and looking great. That’s advice Anne is taking now that she needs to sell her old home, but she also realizes it doesn’t hurt to have a back up plan.”
“‘We plan to rent it out if it doesn’t sell within the next couple of months.’ she shares. ‘I’m just hoping it sells that’s all I can ask for.’”
‘KB’s basic model in Victorville, Cal., a former boomtown east of Los Angeles, took up as much as 3,800 square feet and sold for $328,000. Today, its stripped down offering goes for $220,000, at less than half the size.’
Question: how many people in Victorville can afford a $220,000 house? And where do these media people get the ‘you can buy for the cost of renting’ line when they show no figures?
I was thinking of buying a house up here in the PNW a few weeks ago because prices seemed to be getting more reasonable, and then it occurred to me that they’re still WAY out of line. 220K seems reasonable compared to 328K, but it’s still completely unaffordable to most people based on traditional lending standards - and the fact that I could afford it doesn’t matter.
Luckily I got my mind right in time not to pursue the house and get in over my desiring head.
Thank you this is the same conclusion I reached. Until affordibility
returns you simply have to sit on the sidelines regardless of if you can afford a house. The only people that should be buying homes now are the ones that can pay cash and afford to lose the money in exchange for eliminating the cost of renting/mortgage.
If another sucker cannot borrow money to buy your house your a fool to borrow money and do it.
I think you will find that the concept that buyers are setting on the sidelines is a myth. Very very few people in the US have their finances in shape to purchase a house using traditional metrics. The vast majority of these already own a home or have substantial equity. House swapping amongst this group will likely continue all the way down but this is not a viable housing market.
You know, one of the thngs I’ve rarely seen discussed here in detail are pre-fab dwellings…not so much in regards to their affordability or design, but rather to the notion of portability and the feasability of moving pre-fab houses around the country to suit the owner’s changing lifestyle.
And no, I’m not taking about homes on wheels or mobile trailers. I’m talking pre-fab only.
I wouldn’t mind owning 3-4 pieces of improved or unimproved property around the country, to which I could easily move my home by semi as conditions (age, employment, health, proximity to family and attractions). And who knows…maybe I’d like to own land in Central or South America someday in case the good old USA becomes to socialistic to warrant living here.
Anyone have any ideas or thoughts about this approach? The legalities/zoming/regulations, etc. I want YOUR thoughts, please, not websites of developers, retailers, advertisers, etc. Those I can find on my own.
Thanks in advance.
It would cost way too much to move houses very far. Most people do not even find it cost-effective to move moble homes, much less anything more complicated like manufactured homes or log cabins. Still, the notion of sawing some of these McMansions up into highway sized blocks has some appeal. Just be sure they only travel at night.
This is a rip-off!
Prior KB home: $328,000 / 3,800 sqft = $86.32/ft
Current KB home: $220,000 / 1,900 sqft = $115.79/ft
The cost per square foot to build them is at least the same (probably less). KB Homes just increased their prices in Victorville by 34% and this is a deal?!?
Nice catch. It’s even worse than this because this assumes parity of the innards. Notice they say “less than half the size” and “stripped down”. Wow!
Good going John, I didn’t notice that. Fortune sure didn’t!
Methinks you are giving Fortune too much credit…
I emailed the author of the Forbes article with my comments - so far no response…..big surprise….
And it’s worst than that. I have little doubt that KB is putting these ‘affordable’ homes on lots developed during the boom - with base land costs at 60-80k. The land cost for the 3800 square footer would be $21/ft. The 1900? Try $36.4/ft. And that folks is a 73% increase for the same dirt.
KB’s homes are pretty stripped down to begin with. They typically have a low spec level as “standard” and then really give the hard sale on the options. It is probably only a matter of time for KB or DR Horton to start offering homes where the dishwater is an option. Hey maybe make a garage an option!
Oh yeah. My daughter bought an already “upgraded” KB house in San Antonio. A couple had put down a deposit then divorced before the house was finished. The “upgrades” are not impressive to say the least.
If I were buying a house in a development like that, I’d get the absolute most stripped down version. I’d even be trying to get them to not install their cruddy cabinets/counters/appliances, either. It’ll just take me time and effort to rip their shoddy junk out and put in something useful.
Of course, I wouldn’t trust any of the national builders to put together a toolshed, let alone a house right now.
manufacturing stuff isn’t like that.. cutting the size in half doesn’t necessarily cut all your costs in half.
Add a second story to a home and double square footage, but most of the costs came in building the first story.
Your point is well taken, but I would bet that the “new” KB model is also a 2-story. About 90% of new construction (non-custom) homes in California are 2-stories.
I would also bet that they are building on already developed lots so their land costs are the same. You are correct that the 34% increase could be overstated since they have to amortize that lot cost with a lower priced home.
But I will predict that this behavior will be the norm for builders in the next few years in California - smaller homes with higher per-square-foot prices. It’s the only way they can stay in business, they need to make a certain percentage of the per square foot price as a profit.
it’s not only true of 2 story homes..
A 25′x50′ home’s footprint is 1,250 sq feet.
Increase length and width to 33×75 and square footage is doubled to 2,500.
The 1250 sq ft home has 150 linear feet of wall. (25+25+50+50= 150)
The 2,500 sq ft was attained by adding only 66 linear feet
(33+33+75+75= 216)
Square footage was doubled by adding only around 42% more wall.
I agree with the rest of your points.. I do not dispute the idea that builders will try absolutely any trick in the book to pull their butts out of the fire..
Foiled again by geometry. DAMN YOU PYTHAGORAS!!
I remember seeing on TVwhere that the costs of permits, environmental impacts studies, etc for a new house ran around $80k. Does anyone know the correct costs and if that varies by the price of the house?
(I think it was some show on HGTV explaining how they leave 1 wall remaining when doing a tear down to avoid having to pay those fees).
Actually, they leave one wall remaining to get around maximum square footage limits for a given lot. Where I used to live, lots were 3000 SF, and people wanted to build as much SF as possible. The limit was 50% of the lot size for a new dwelling. Rather than a new house, it’s considered a “remodel,” thus they can add a second story and get a larger house exempt from the limit.
Also, the developers are quick to say that they cannot believe that new house prices will never be lower than they are today?
I bet what the developers mean is the profits that the builders make today will never be lower. They do not consider that the land, labor, and material costs can and probably will go lower. In the next 30 years, the construction will migrate into factories, the factories will make more pre-fabbed, pre-finished pieces of the house in the future.
I sure hope so. Really I do. Here in OR however we’re finding the opposite. Short-term we’re seeing mfr. housing plants shut down and all throughout the bubble no self-respecting flipper would be caught dead looking at a mobile home.
The problem was with all the cheap labor of questionable origins all around us to enable site built homes what should have been a sea change moment for mfr. housing turned into a bust. At one point in 2005 you could buy repo’d units for $15 a sq. ft.
“I bet what the developers mean is the profits that the builders make today will never be lower.”
I thought exactly the same thing!
Question: how many people in Victorville can afford a $220,000 house?
Anybody with an income of $58K or higher with no debt and excellent credit along with 20% down payment. However, the criteria I mentioned would eliminate almost everyone in this area.
1. no debt
2. excellent credit
3. 20% down
Regarding item #3…In Victorville… is that cash or meth?
Just work at 3 fast food jobs and you are in!
Most of the fast food outlets in Victorville/Hesperia area are staffed by Caucasians.
They generally suck at fast food, lazy, slow,
and a side order of attitude.
Except for In ‘N’ Out Burger, where they have standards.
In general white people suck at fast food service.
Despite the language difficulties, almost all hispanic fast food workers are expedient, efficient, cheerful, hard working with no and without the entitlement attitude.
Yes I am white, but not optimistic about our future with the current generation of slacker, MTV, hand me stacks of $100 bills on a silver plate on bended knee, while I play video games all day.
Sorry, I just notice trends…
MOGAMBO
“The latest inflation figures from the Bureau of Labor Statistics, from which we learn the ugly news that the un-adjusted Producer Price Index for Finished Goods increased in price by 7.2% in May! At this rate, prices will double in 10 months! This is inflation in spades!
Producers of Intermediate Goods raised prices by 2.9% in May, which seemed a relief after that 7.2% Finished Goods report, but which didn’t last but a second before we read that the Crude Goods index increased 6.7%! Gaahh!
And, lest we be misled by the facts that inflation is eating us alive, the new “official” rate of annual inflation from the government’s wonks is 4.2%, which makes me laugh at the incongruity of the new BLS figures in relation to this. But this is horrendous news!
Hell, John Mauldin of FrontLineThoughts.com reminds us that 3% inflation was once considered so bad (and it is so bad) that “President Nixon instated price controls on the 15th of August, 1971. Inflation was a little over 4% at the time.”
The latest report is that the combined net worth of all U.S. households is $56 trillion, which is (as Bill Bonner here at The Daily Reckoning notes with, I assume, controlled horror) less than the $57 trillion accrued federal government’s liabilities, meaning that we are technically bankrupt.
Wages are stagnant, prices rising dangerously, government spending out of control, Federal Reserve creation of money and credit out of control, debts of every kind at record levels!”
http://www.dailyreckoning.com/Writers/Mogambo/DREssays/MG062308.html
There is no market for these home period. I drive the Victor Valley area for work and the tract KB is selling is about 50% occupied with half of those investor rentals. Before we had people moving up here from San Bernardino City, Fontana, Railto.. etc now with gas price those buyers are frozen out. Most of the buyers seem to be investor and I think they are missing the point because they are looking at price property has drop to. The rental market is tight and home are setting empty. Price for rental homes are going lower and the inventory is growing. Here is just one example 13164 Solar Bay Ln, Victorville, CA Beds: 3 Baths: 2 Sq Ft: 1480 Lot Sz: 5524sqft Yr: 2006 Rent $995. http://vvmls.rapmls.com/scripts/mgrqispi.dll?APPNAME=Victorvalley&PRGNAME=MLSPictureDescriptions&ARGUMENTS=-N290538340,-N354271,-APB,-N0,-N,-ARR,-LFalse,-N,-AVIC
So for KB to compete in Victorville they need to drop prices closer to 100k to get buyers otherwise you can rent the same homefor less money. One more thing I don’t see where the numbers of buyers with the credit and income to purchase all the available inventory is coming from.
They cut the house in half and reduced the price by about a third. That is supposed to attract more buyers?
Question: how many people in Victorville can afford a $220,000 house?
Maybe the dummies are thinking that there’s going to be knuckleheads that are still willing to do the long commute thing. With over $4/gal for gas in CA, that doesn’t look very appealing, or likely.
“The National Association of Realtors said than that the housing recovery was being hindered, in part, by what it called restrictive lending practices. It said it saw evidence of growing interest by prospective home buyers, but some are still having difficulty finding financing.”
The fools at the National Association of Realtors are stooping to new lows. Let’s see, you can get an FHA loan with only 3% down–0% down if you get help from a non-profit “assistance” program–and 30-year mortgage rates are 6.5%, and the National Association of Realtors is complaining about difficulties in financing? Give me a break.
Keep the popcorn popping,
Red Baron
The real reason people are not buying houses is because even if they still have jobs, they cannot afford them even at current prices. In California, the median house price TODAY is 6.2 times the median household income.
Keep the popcorn popping,
Red Baron
“…they cannot afford them even at current prices.”
I am willing to give some would-be buyers the benefit of the doubt that they are trying to avoid catching themselves falling knives.
My company has told us us layoffs, and cutbacks, but won’t tell us the details for a month, maybe longer.
So, I would venture to say that many are not going to do a darn thing,saving money if possible for the possible hammer.
I have “growing interest” in buying a home with 0% down, a 1% interest-only payment, and a due date of infinity…….but I am having difficulty in finding this financing.
Can anyone here help me?
Let me know when you find this great deal JohnF.
Try Prosper.com
If these jackasses think lenders are being too strict, why don’t they start lending out their own money?
Why bother lending their own money? They’re going to be lending YOUR taxpayer dollars so why bother assuming risk when they can just amortize the risk among people who work for a friggin’ living.
Fantastic comment! Thanks, yogurt. Why don’t you call the quoted rube and ask him exactly what you said here? Might be rather entertaining.
‘That’s not the case today. We’re seeing a migration to a minimum of a 620 on more programs.’”,
Boo-hoo, people with credit scores below 620 having trouble purchasing houses, when will we get beyond the crazy belief that everyone should be able to borrow hundreds of thousands of dollars to buy a house? A credit score this low implies serious deliquent payments, collections, bankruptcy, massive debt, etc.
“‘Fannie and Freddie are catering to low-risk homeowners with high credit scores and a lot of equity in their homes,’ said Dan Green, a loan broker in Cincinnati and Chicago. ‘I’m sure there will be some high-cost areas in the country that will benefit. They just don’t happen to be Florida, Michigan, California, Nevada.’”
No act of financial prudence shall go unpunished.
With regards to the imagined punishments -
What do you suppose that the PTB might attempt to do in order to influence this situation, which apparently is so unacceptable to certain privileged interests?
They’ll try to raid our private Joshua Tree ranch. But the HBB sharpshooters will be there to meet ‘em.
Uh-oh, they’ve caught on to the sharpshooters at the ranch. Now they’re heading over to the 20-pound trout pound…
The F-word GSEs were never intended to cater to people with equity. They were intended to cater to credit-worthy first-time buyers, regardless of the borrower’s state of residence.
Mumbo Jumbo, defined.
“Instead of using powers granted by Congress to buy jumbo loans for the first time, Freddie Mac and Fannie Mae are purchasing their own mortgage-backed securities, helping reduce losses, company filings show.”
“Since the rule change took effect in March, Fannie Mae has packaged $24 million of jumbo loans into securities, while Freddie Mac added $220 million, according to the Inside Mortgage Finance newsletter. In April, the companies spent more than $32.4 billion to buy their own instruments, regulatory filings show.”
“helping reduce losses”….
Helping reduce “whose” losses is the real question.
This same self-preservation of inplace interests in the banker world will be the outcome for the use of powers granted by Congress in the current housing bill that is close to passage. Taxpayers (meaning future debts of our grandchildren) will eventually be used for this bailout of lenders and their toxic loans.
Just watch the system work to that end once the bill is passed!
Only the Fed backed entities are still offering 0% down loans, and we all know how how good those are in a falling market.
I don’t really get how this reduces losses. Buying crap from yourself. How does this change the situation? Freddie Mac loans are not guaranteed, right?
Someone correct me if needed but from what I understand they sold investment grade paper to hedge funds and banks. That paper went to shirt. Now they are buying back the crap paper at inflated prices in an effort to either….
1. Artificially boost the price of the paper hoping that the housing market will turn a quick corner and they will make money on the original mortgages.
2. Rescue their “investors” since they are illiquid already and are want to maximize taxpayer bailout….thank you government backing.
I know which one I am betting on.
But they’re not really government backed.
Or maybe they are buying it back so they can push it back to the banks due to contract contingencies. That way they make a small profit buying it back and the bank eats the loss. The more I think about it the less I know.
I thought the same thing, makes no sense….though maybe this way they can cover up the terminal malignancy for awhile longer…reeks of desperation
“Builders constructed far more homes from 2002 until 2006 - the peak bubble years - than could possibly be absorbed by the normal growth in households.”
“As a result, the market is now swamped with one million new and existing homes for sale that aren’t occupied, and hence need to sell quickly. That’s a multiple of the figure in most downturns, and it testifies to the duration and girth of the bubble.”
Sounds like the U.S. has quite a dire housing shortage…
Maybe what they mean is that the houses are too short. Works for me.
Housing is on the short bus.
“As a result, the market is now swamped with one million new and existing homes for sale that aren’t occupied, and hence need to sell quickly. That’s a multiple of the figure in most downturns, and it testifies to the duration and girth of the bubble.”
I think it’d also be interesting to look at the size (square footage, number of bedrooms, etc.) of the surplus housing, not just the number of excess units compared to previous downturns. I suspect the surplus of rentable rooms is even greater than the numbers of unoccupied houses would suggest.
According to the Case/Shiller report we’re back to 2005 prices.
I haven’t seen a big fall in prices here in Astoria, Queens. POS-SFHs still are more than 600K and two family are usually over 800K (meaning the tenant barely pays for the higher mortgage payments)
Example:
http://century21triboro.com/Details.CFM?MLNum=2084582
Pretty unbelievable. At 4x income, you would have to make at least 150K to buy this crapper. Anyone know anybody with that kind of income who would live in this dump?
The realtors still think NY prices don’t go down. Even though I’ve seen houses on the market for over a year.
Sure, they’ll eventually retreat, I just don’t want to wait until retirement to buy a home.
Posted in the bits bucket, but we’re actually back at July/August 2004 prices.
Case Shiller Data
Location - Current - 12-Months Ago - Last Seen
Phoenix - AZ - 161.33 - 213.94 - February-05
Los Angeles - 202.52 - 263.19 - May-04
San Diego - 180.57 - 231.8 - October-03
San Francisco - 164.63 - 210.89 - March-04
Denver - 128.49 - 136.32 - April-04
Washington - 201.21 - 235.37 - October-04
Miami - 200.42 - 269.52 - November-04
Tampa - FL - 178.5 - 222.06 - January-05
Atlanta - GA - 124.19 - 135.04 - January-05
Chicago - 150.44 - 165.68 - January-05
Boston - 158.68 - 170.95 - January-04
Detroit - MI - 93.79 - 111.89 - April-99
Minneapolis - MN - 139.19 - 164.41 - March-03
Charlotte - NC - 131.82 - 133.42 - April-07
Las Vegas - 165.89 - 224.79 - March-04
New York - 193.93 - 210.49 - March-05
Cleveland - OH - 109.55 - 118.42 - June-02
Portland - OR - 174.87 - 185.21 - April-06
Dallas - TX - 120.41 - 125.47 - July-05
Seattle - WA - 179.57 - 190.68 - June-06
Composite - 183.15 - 218.33 - July-04
Composite-20 - 169.85 - 200.1 - August-04
Anyone think we’ll get to 1998?
I will run naked through the city of Portland if that happens, screaming like a little girl with glee.
Then again, if I did that in Portland, no one would even blink.
Anyone think we’ll get to 1998?
Yes.
And please provide 24 hour notice before the gleeful screaming naked run so we can bring our HBB cameras for posting.
Sh!t. I said that out loud, didn’t I?
Even worse: You put it down in print. Just like a contract.
We are definitely going to get to 2001 prices in Marin county, California by 2012.
Keep the popcorn popping,
Red Baron
I’m going to the hinterlands in Eastern Utah, …I’ve swam naked down the muddy colorado long ago in the past…but these days I’m afraid if I get “discovered” by the man who wears the star..I’ll have to register as a sex offender.
However they accumulate their stats, I can tell you from first-hand, eye-witness observation that here in Queens we are definitely NOT back to 2004 prices. I was looking at houses in 2004. In some places prices are down 5%, maybe 10%. That’s after a run up of over 200%.
A look at the MLS will show this.
Do you really think the house I linked is down in price?
Try this one.
http://www.century21triboro.com/Details.CFM?MLNum=2013244
This is priced higher if anything.
This house should be under 200K, not over 600K!
Ed:
Asking prices are irrelevant. The statistics provided by Case and Shiller are based on actual selling (closing?) prices.
Okay ed,
Now you have really done it. That 2nd house you posted is worth 15K tops. I have seen roach motels in South Central eLay that are better than that.
Is that my old toolshed, for crying out loud? Is that really an outhouse? My Lawd! Does that even have indoor plumbing, let alone an AC for those wonderful balmy August nights in NY?
Forget 2015, that I said above. We might get to the bottom by 2018!
Psst. It’s got Granite! Where you been?
hey ed i have to been astoria lately and it is grossly overcrowded more than ever actually
but you are right on the stagnant prices and listings as stale as 3 year old bread all over any desirable area of queens -same thing in middle village which i cannot wait to leave as it feels like a cemetary devoid of culture and intelligent life
they are wishing prices that is all
Well, we have a less-crowded Astoria out our way. Its prices boomed too, but have now retreated. You would need to be able to deal with 120″ of rain every year, though. Lewis and Clark had a horrible time doing that.
ed,
I don’t care if that was in Beverly Hills, there is no way I am offering more than 25K for that and the lot.
WOW!
600K, we still have a long way to go before this whole thing unwinds.
Every time I think we pick upsteam, I see stuff like this garbage and realize this buuble may not completely die until about 2015!
“‘We plan to rent it out if it doesn’t sell within the next couple of months.’ she shares. ‘I’m just hoping it sells that’s all I can ask for.’”
Not that long ago people wouldn’t dream of buying a new home until the old one was sold, they didn’t want to take a gamble on having to pay two mortgages or becoming accidental landlords.
Not only that, but “back in the day” as you mention, houses were also much easier to sell! Really makes you wonder what people are thinking.
No they weren’t. People were just more realistic about their asking prices.
The only reason why a house won’t sell is that you’re asking too much for it.
And it will be SO much more attractive after it’s been rented out for a while.
I’ve especially wondered about the rationale of renting out a new house except for only a few narrowly defined economic circumstances. You can only sell it as new once. Once it has been rented, it is not new.
Contingent contracts were much more common.
yog,
You know what I mean. Would you rather sell into this market, than the one of a few years back? I wouldn’t. It was easier to sell then, particularly if you wanted to sell quickly because you’ve relocated for a new job. But it was harder to buy.
“The New Affordability is now in place. But if rates rise, we’ll have to establish a New New Affordability - at even lower prices.”
Or if employment drops. Everything that has happened so far is the result of prices simply being too high. Now will come real economic problems on top of that.
“Or if employment drops.”
Or if fraud gets drummed out of the lending system.
Or if word gets out that you can lose lots of money by purchasing a home when prices are falling.
Or if a record number of foreclosures and never-lived-in new homes come back on the market as REO sales.
Or if downpayment and income requirements revert to historic norms.
I am sure there are a few other ‘ors’ that I am forgetting here…
Meanwhile, on the other side of the pond…
Two-year fixed-rate deals hit 7%
For Sale signs
Money to buy a home is becoming harder to find
Page last updated at 15:27 GMT, Tuesday, 24 June 2008 16:27 UK
The interest rate on the average two-year fixed-rate mortgage has risen above 7%, according to the financial information service Moneyfacts.
It means these loans are at their most expensive since February 1997.
“Two-year fixed rate mortgage”
Classic!
WOW!
2 years fixed! Man, what are the payments on a 600K home? 24 months @ 30,000/month? Where do I sign up?
Sarcasm off!
I’m not all too familar with the UK system, but I’m pretty sure that just means that the rate is fixed for 2 years. Terminology is different on the other side of the pond. I think the monthly rates are based on a 25 year repayment plan?
A brit would know better, but in no way does this mean that the average dude pays off the house in 2 years.
OCDan was joking, as was I.
What’s the point of a two-year “fixed” rate, really? I could see if you were an investor who, for some reason, wanted a fixed rate for 2 years to give you time to unload.
The only other people using them would be speculator homeowners and “howmuchamonth” homeowners.
Sorry, long day, coffee ran out, should have known better
We would call it a 2/1 ARM here in the U.S.
Oh bugger…
London house prices set to drop by 25%
Hugo Duncan, Evening Standard
24 June 2008
One of London’s biggest estate agencies today warned house prices in the capital could drop by as much as a quarter. Savills said the continuation of the credit crunch would trigger a 25% fall in prices before the end of next year. It also warned of a sharp reduction in the number of homes being built.
I’m still scratching my head about London prices. When I was there in 2001-2002 there was a real estate peak and downturn. Financial collapse in the City, much wringing of hands and wailing. So there was a boom after that? Or are we still on the down side of the 2002 downturn?
Me confused…..
Correction: When rates rise, and then when loans start re-setting at the higher rates, we’ll need Better-than-New-New, whiter than white, cleaner than clean affordability.
Which means that prices need to get Lower than Low. I have previously predicted inflation-adjusted 1997 prices, but now I’m thinking we could overshoot that.
I’m thinking we’ll have *1984* prices soon, which is doubleplusgood.
I prefer 1973 prices.
“…a New New Affordability…”
“This doesn’t happen man… not in the real real world”: the movie: “The Crow”
I think I have the comic books that came out before that movie. Is it the one where there’s a guy who dies and comes back to life to avenge the crime against his girlfriend?
All real estate ain’t local anymore.
Home-Price Gains Are Erased, Now Stand at 2004-2005 Levels
Consumer Confidence Tumbles
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
June 24, 2008 1:41 p.m.
Home-price declines continued to get steeper in April, according to the S&P/Case-Shiller indexes and the Ofheo home price index, which showed at least three years of gains erased.
…
The S&P/Case-Shiller home-price indexes, a closely watched gauge of U.S. home prices, show price declines continued to get steeper in April, with prices in every region surveyed now showing year-over-year drops.
Has anyone actually uttered the words, “Real estate prices have fallen nationally”? To my knowledge, no one has admitted that national median has fallen.
I have. They’ve been saying that since 2006. Since then, they’ve come out and said that “this is the first time that national house prices have fallen” like 4 times. It keeps being the first time over and over again.
NOT that I would ever, but if I were that disgruntled of a homeowner losing my home ( I never would have thought of it till now) but I wouldn’t trash the place, if I were so inclined, I would delicately dismantle and save for building another place somewhere else. Take down all cabinets, carpeting, granite, water heaters, a/cs etc and build something just like this out in the country.
Well, okay, at least I wouldn’t trash the stuff that was good. Hey, you could donate it to Habitat for humanity or ? and well, it is their house for the time being. Just ramblin in my mind.
I just don’t see or understand the vandalism aspect.
Kind of validates HBB’ers accusations of the greed and entitlement motivations that got this ball rolling in the first place, doesn’t it?
Vilence has become all too common in our country.
Also invalidates the “ownership society” rationale that turning people into homeowners makes them more responsible.
The reason why homeowners were more responsible than renters in the past is that you had to be responsible to be a homeowner in the first place.
“Also invalidates the “ownership society” rationale that turning people into homeowners makes them more responsible.”
So true. I had a rental property and my friend got all pissy with me about how neighborhood values are negatively affected when people rent out their houses because renters are irresponsible. I always had great renters that I screened to the nth harmonic.
With every new tenant I would pass out my card to the neighbors and told them to call me with ANY disturbance. I also told my new tenants that I was doing so.
Never got a call except from a neighbor whose cat had somehow gotten into my house while the tenant was on vacay.
What these people fail to realize is it is the OWNERS responsibilty to maintain their property. If the house has peeling paint, rotted window sills, damaged stucco and termite eaten eaves, it is the owners who are at fault. Carpet and tile need replacing after, say, 20 or 30 years.
Ugh, 30 year old carpet? So not going to be renting that house!
Yeah, carpet is cheap and should be figured into the “maintenance” cost that is paid for by the rent. Carpet should be replaced when it needs to be replaced not based on a measure of time. That’s also what cleaning deposits are for.
20 to 30 year old carpet remark was total sarcasm. Unfortunately though I see many rentals in that condition. My carpet in the old house was easily 30 years old. I’ll bet the carpet removed from this house before I moved in was 20 years old.
Like I said though if the house looks terrible from the curb, who’s fault is that?
A very nice line, yogurt. Indeed. It never fails to amaze that desired results are so often divorced from prior actions - like giving a Personal Finance Manager of the Year award to the company embezzeler.
I just don’t see or understand the vandalism aspect.
It makes perfect sense once you realize that most of the people flipping houses during the bubble were NARCISSISTIC ASSHOLES and SOCIOPATHS. That type of person would never consider “donating” anything to anyone of lesser means, because that type of person does not have a charitable bone in their body.
Thank you, HARM. You’ve nailed these characters harder than a nailgun would have.
HARM,
Absolutely. Ever wonder whatever happened to the kids that trashed somebody else’s science project because it was cooler? I think we’ve found them.
Great comment! So true!!
“They want to get even with the bank because they didn’t make there payments, if that makes any sense,’ said Calabesea.”
Even assuming sociopathy will never help me understand this mentality.
“Take down all cabinents, carpeting, granite, water heaters, a/cs, etc and build something just like this out in the country.”
Why not just move the whole house out into the country, leaving nothing but a vacant lot?
Right. I mean after all, they ARE the “loanowner” correct?
LOL
well if they still had a heloc, they coulda had a mover load up the house and move on down the road.
Also noted, when those house shows show ppl doing total demo on thoroughly usable cabinets etc, made me irritable to think, just a little time and poof, someone else could use the free or cheap usable product.
Urgggggggh.
Harm nailed it.
grin.
A few law enforcement personnel in a few high visibility areas need to throw some of these people’s asses in jail for a few months, to make a point. Bet a lot of the crime would subside pretty quick, being that most of it is quite readily traceable to the perps.
Clearly the lenders are in way over their heads if their only responses to this are to pay ransoms as we’ve all been hearing.
We let Iraqis loot their own country, why shouldn’t we let our own citizens do the same thing?
Human behavior is what it is. When I read about this pinhead destroying his wannabe property, I was reminded of a scene in Bonnie & Clyde when Beatty hands a rifle over to the foreclosed old man Okie, who then proceeds to shoot out the windows of what was his house.
What’s the old saying - times change but people don’t?
OT… A quick question for you California folks… My wife just flew out to Temecula for a soft ware course. I know that’s in the area called the Inland Empire, is it a bad area? Or just commercial? Just wondering.
Temecula is the Mayan word for hell.
Temecula along with the nearby communities of Fallbrook and Murietta are among locations that households who could not afford to buy within SD circa 2005 chose as affordable alternatives, in exchange for longer commutes to work in SD. Oops…
It used to be a gorgeous/beautiful rolling giant ranchero in the late 60s but has now become one giant sprawling land developement community, crammed in together.
Weather is nice,balmy, gets ocean breeze cool off in evenings, and aside from the overcrowding, it is okay.
5 yrs ago or a tad more, I was always surprised to see developements signs advertise 8 bedroom/ or 10 bedroom houses with Zero Lot lines and I would wonder, who is having all those kids these days, or why in the world would you want a 10 bedrm home?
It was pretty, and hilly countryside.
Where are you possibly moving from?
was always surprised to see developements signs advertise 8 bedroom/ or 10 bedroom houses with Zero Lot lines and I would wonder, …
Mormons? Catholics? Illegals? Group homes (LOL)?
Oops is right! Communities like that would have been much better suited for retirement but I can’t blame anyone for not wanting to pay SD prices. Especially in 2005?
I had a friend that was semi-retire in Perris ( nearby ) and since he went Vegas more than he worked it was actually better for him. Thankfully he sold in Feb. of ‘06 and plans to rent for some time to come.
I wouldn’t mind owning a nice mobile home in PS though? As long as the space rent was dirt cheap.
I remember when Temecula was getting started as a bedroom community (Rancho California) in the late 80’s. We lived in Oceanside at the time (renting) and we heard that it was a bargain compared to North SD County.
It was cheaper, but it felt oh so far away. I couldn’t imagine ANYONE doing that commute (and there was no traffic all the way into Escondido back then). When the early 90’s bust hit Temecula was even cheaper.
Just knowing that people with good salaries now commute from there to jobs in Rancho Bernardo and further into San Diego just boggles my mind. I’ll bet that $5 gas and bumper to bumper traffic all the way down really makes living in SoCal “worth it”.
Nobody answered your question so I will. It is not a bad area. It is fairly nice and safe.
Thanks!
I did a brief look at Yahoo maps for So. Indiana, wondering what might be the attraction for $500-600K homes there. I noticed there’s a town down there called Santa Claus. Maybe this is where they were building them? That would seem appropriate.
Back in my long-distance bicycle touring days, I pedaled through southern Indiana. Sorry to say that I missed Santa Claus, but I did go through a lot of other nice little hamlets.
Which leads to my next point: The people of southern Indiana are as sweet as the day is long, but, as a general rule, they aren’t affluent. So, the mystery of who will buy those half-a-million-dollar houses will have to remain so. It sure won’t be the locals.
I’m a bit ashamed to know that Jay Cutler, QB of the Denver Broncos, is from Santa Claus, IN.
Did you guys hear? I posted it on the other thread. People are starting to talk about the crash. My admin keeps talking about it. She says that she doesn’t trust unrealtoRs or mortgage brokers, that banks are a bunch of idiots, and that the FB were foolish and shouldn’t get any help. This is a great sign.
You’re in SV, right? If so, that’s especially great news.
If this keeps up, pretty soon people will be heard to say, “Real estate is the worst investment.”
i havent seen it yet. A bank called me yesterday and said i should move some money (2% interest on savings) to some CDs (2.5% interest) .. hmm.. a whole half a percent.. wow.
Anyway, i says no. I want to buy a freakin house and dump the money there. I lost all respect for him when he replied “Now is a great time to buy”
btw.. How is Paraquat the duck doing?
Pester is fine. He’s growing by the day.
“Neighbors called the police on the man in Spring Valley, but because he still owns the home, they couldn’t stop him.”
If he is “disturbing the peace”, enough so that the neighbors called, couldn’t they have gotten him for that?
Just saying…
Here in Tucson, you can say that it’s “suspicious activity.” That tends to make the cops come-a-running.
Or, if you want to be a tad more coy, you could say that you’re hearing quite a ruckus coming from this property, and could the police come by to check on the welfare of the residents?
Could you describe the ruckus?
Why not tell the police that the neighbor is an intruder/renter and not the homeowner. Make the neighbor prove to the cops that he is the homeowner. Theres a real good chance hes too disorganized to produce writen proof.
Ha haha hahahah
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/23/AR2008062301797_pf.html
“There is no allegation of wrongdoing,” Bernards said. “Mr. Hoyer feels comfortable supporting Representative Richardson as a fellow House Democrat.”
How do I provide my formal allegation?
but some are still having difficulty finding financing.”
Those having difficulty with financing are the lucky ones as they now have time to back out and not catch the falling knife!
NAR, It looks like this smakes you in the face as your members propective customers can’t get financed on the overpriced properties you are trying to dump on the unsuspecting public. Looks like your media blitz has failed NAR, good luck on finding more knife catchers with questionable credit!
June 24, 2008, 1:00 pm
Housing Prices Rally?
I am a contrarian by nature. These days that requires me to look for good economic news. And there is some of that in the Standard & Poor’s/Case-Shiller house price indexes released today.
…
Those 20 percent-plus declines now mean that there are homeowners who put 20 percent down who may owe more than their home is now worth. Those who got 100 percent loan-to-value loans, or who had negative amortization loans, may reasonably conclude they will never be even, and follow the advice of that noted sage, Paul Simon:
Just drop off the keys, Lee
and set yourself free.
Meanwhile, the consumer confidence survey finds that the proportion of people planning to buy a home in the next six months was 2.2 percent in June. That is the lowest since September 1982, when recession and high interest rates had destroyed the home market.
If it is any consolation to the home builders, they don’t have the only businesses that don’t look good. Plans to buy cars are also close to historic lows, and plans to take a driving vacation are also lower than ever.
Looking out six months, more people are pessimistic about the outlook for jobs and business conditions than at any time since 1980. And more people think their own income will fall than at any time since the Conference Board started asking that question in 1967.
Refer Madness
“That was the month when Fannie Mae updated its system, making mortgages harder to come by. Davis ran the same customer’s numbers through this month-the very same numbers-and the system spat out a ‘refer,’ meaning that Davis couldn’t do the loan.”
Don’t Bogart that loan my friend !
I guess that’s the smoke part, now all we’re missing are the mirrors.
Speaking of smoke, San Jose looks like it took a giant bong hit in a small room. Can’t see the hills for the smoke.
Don’t forget you can smell the smoke also.
“‘When this all started five or six years ago, someone needed a credit score of about 640 to get a loan, but by the time the hammer fell, lenders were offering 100 percent (loans) to someone with a 570 credit score,’ Waite said.”
——————-
This fact alone does not bother me so much. The AMOUNT of the loan they were willing to give DOES bother me much.
Lots of inaccuracies in that man’s statements. Of course they always feel compelled to throw in the customary:
“If you have great income and a decent FICO score getting financing is as easy as it ever was”
You can tell this guy is a boot camp b/c he’s either too young or too stupid to realize there WAS a time when everyone… applying for a mortgage got a rectal exam! The only reason I think they try to keep that urban myth alive is b/c they don’t want to discourage the few folks out there that actually ‘might’ qualify?
“‘Even a year ago, for credit scores in the 500s, I won’t say those loans were easy to come by, but they were certainly possible,’ Deane says. ‘That’s not the case today. We’re seeing a migration to a minimum of a 620 on more programs.’”
So… now, instead of simply having to fog a mirror, they must now show proof of having at least one arm and one leg?
Don’t forget at least one opposable thumb on the mortgagor. No more grunting your approval of loan terms.
And to think that I’ve just been pre-approved for up to a million dollars for my small business. Or so the recording said when I answered the phone.
I didn’t stay on to hear the whole pitch, but it just goes to show you that credit is indeed still available. All I had to do was pick up my ringing phone.
“The slowness of Fannie Mae and Freddie Mac in injecting cash for new jumbo loans may have exacerbated the housing slump in markets including California and Florida, where prices have already fallen more than the national average, said Jerry Howard, president of the National Association of Home Builders.”
“‘Had they been quicker into the marketplace, they could have helped slow the downward spiral in housing prices,’ Howard said.”
________________________________________________________________
mission acCOMPlished
“The days of 100-percent financing-no down payment-are gone.”
Nope. Just get a FHA loan with “down payment assistance”. Voilà, a 0% down loan…’move in for just $500′!
Thank you Uncle Sam, we knew we could count on you to do the right thing.
We should start a ‘dead pool’ on when the FHA blows up and takes American taxpayers down with it, due to the increased frequency of these types of loans. Thank you US Congress!