The First To Fall And The Last To Rise
The Manteca Bulletin reports from California. “In the go-go days of stratospheric housing price increases some newer neighborhoods - such as Woodward Park, Diamond Oaks, and Villa Ticino - were seeing prices jump as much as $5,000 a month. Now those neighborhoods have returned back to earth as closed deals so far this month signal that banks are now making bigger deals to move standing inventory of homes above median-price by eating as much as $200,000 to $225,000 of what they are owed on mortgages that have gone south.”
“Most homes in the 4,000 square foot range three years ago were selling in excess of $600,000. The median price for all homes sold as of Tuesday in Manteca was $244,317.”
The Sacramento Bee. “Thanks to deep discounts on repossessed homes, the summer season’s existing home sales have been somewhat upbeat. Not so for new homes. Sacramento-area homebuilders are still in a tailspin, having to compete with banks that are slashing prices on thousands of foreclosed properties.”
“Gregory Group President Greg Paquin, said new home sales were strongest in July and August before tailing off in September. That’s when Wall Street’s turmoil grabbed headlines, which likely spooked a number of would-be buyers, he said. ‘I talked to a couple of builders yesterday who said traffic is off 20 (percent) to 40 percent the past couple of weeks,’ he said. ‘A lot of people who were interested have backed away temporarily to let things settle a little more.’”
“For the first nine months of 2008, new-home sales totaled 3,990, Paquin said. That’s a hefty tumble from 6,087 sales the same time last year. And it’s a huge fall from 13,535 sales for the same period in 2004.”
“A ‘cash back‘ mortgage swindle involving in excess of $1 million in stolen funds and more than $11.3 million in fraudulently obtained loans on 16 homes in the Sacramento region was alleged Friday in a federal indictment. ‘Over the course of numerous investigations we have seen how fraud-for-profit mortgage schemes took root in our Sacramento-area housing market, particularly in the 2005 to 2006 time frame of this case,’ said U.S. Attorney McGregor Scott.”
The Pinnacle. “Angie Painter and her husband, Vernon, bought their home on Clearview Drive 37 years ago. In 2006, they refinanced their home through the New Century Title Co. in Campbell. In 2006, Painter received an unexpected call from an FBI agent. ‘Do you know a Wesley Fort?’ he asked and I said, ‘That’s funny you should ask that because we keep getting mail for him and we don’t know who he is,’ Painter said.”
“Painter alleges that Fort was in on a scam with the mortgage broker and escrow officer at New Century Title Co., and that they removed her and her husband’s name from the documents after they left the title office and replaced them with Fort’s name. The case never went to trial, and though the title company returned the deed of the home to the Painters, they still lost the home.”
“The home had been used as collateral for a $407,000 loan that was not in the Painters’ names, and they couldn’t afford the payments. Though they tried to sell their home, with the real estate market tumbling they could not get enough to cover the cost of the loan. They moved out and allowed the home to go into foreclosure. The house remains empty and an agent for Nino Homes has listed the home for $229,900.”
“‘It’s one thing to have to leave your home because you couldn’t pay the mortgage,’ Painter said. ‘But to be forced out because of a scam like this is something you can’t explain.’”
The San Mateo County Times. “The weak housing market has sent homeowners in San Mateo County flocking to the assessor’s office to request lower property valuations that would result in lower taxes. About 4,400 ‘decline in value’ requests have flooded the San Mateo County Assessor’s Office this year — nearly five times as many as the 900 requests last year, officials said.”
“Angelina Hunter, the deputy assessor-county clerk-recorder, said the biggest drops in assessed value have been for homes bought recently in depressed real estate markets such as South San Francisco, Daly City and East Palo Alto. The median home price in San Mateo County dropped to $632,000 in August, down nearly 20 percent from the same time last year, when the median price was $788,000, according to DataQuick”
“Santa Clara County’s assessor also has seen a spike in ‘decline in value’ applications this year of about 55 percent. Median home prices in Santa Clara County were down 20.6 percent in August compared with a year ago that month, from $700,000 to $555,000.”
Inside Bay Area. “The East Bay economy may have to endure two more years of tough conditions before it fully rebounds, a disquieting new report predicts. Even worse, a recovery for California’s housing market will lag even that distant timeline, economists Jon Haveman and Christopher Thornberg, partners with Beacon Economics, told a meeting in downtown Oakland this week.”
“It’s not surprising that the housing market will struggle more than the overall economy of the East Bay, the economists said. ‘Housing is the last to rise’ in a recovery, Thornberg said, ‘and the first to fall’ in a downturn.”
The Marin Independent Journal. “Friday, Marin money managers advised their clients to sit tight, after buckling their seat belts. Meanwhile, Marin car dealers, mortgage brokers and bankers said credit remains available for buyers with good credit histories and healthy bank accounts.”
“‘There is a tremendous amount of fear out there,’ said Neil Hennessy, president and CEO of Hennessy Advisors Inc. in Novato. ‘Never have I seen money disappear like this.’”
The Santa Cruz Sentinel. “Facing a crowd angry over the $700 billion federal bailout of Wall Street at a town hall meeting Wednesday, Rep. Sam Farr said Congress had no choice but to support it, even though it may not work. ‘We have no idea if it will work because nobody has ever done it before,’ he said. ‘All we knew was things were starting to really get bad in Watsonville, Santa Cruz, Salinas. … This was the only train leaving the station, and I reluctantly voted for it.’”
“Farr, answering a question about whether the federal government will be able to help California schools deal with a state fiscal crisis, said he expects spending flat-lined at best for the next few years. ‘We’re in for some really hard times,’ he said.”
“Attendees, who grilled him over the decision…applauded when white-haired Doris Katzen of Aptos complained about executives at insurance giant AIG spending thousands of dollars on a spa vacation after receiving an $85 billion taxpayer rescue. ‘I wasn’t born yesterday,’ Katzen said. ‘I know what happened in the last depression. … What is happening today is we’re rewarding those who have cheated and stolen from the public.’”
The Desert Sun. “Pam Harwell of Palm Desert said she’s seen her IRA rapidly decline with the stock market in recent days. Harwell points the blame directly at the members of Congress responsible for banking oversight and irresponsible home-lending they allowed and many encouraged.”
“‘What happened with Fannie Mae and Freddie Mac was abominable, and I think the people on that finance committee, be they Republicans or Democrats, should all resign,’ she said. ‘I think that’s where it all started.’”
“The banks’ credit crunch is rooted in the housing-finance bust. Santa Margarita resident Liz Pauschek recently wrote a $1,500 check to a contractor for a new patio, but the check was returned unpaid from GMAC. When she inquired, the creditor said her line of credit had been frozen because her home’s value had declined. She had to use a credit card and money from her savings account to pay the bill.”
“‘I explained that I was remodeling because I live there, and they absolutely would not work with me,’ she said. ‘They said the housing market is bad and your house isn’t worth what it was. Essentially, you’re out of luck.’”
The Ventura County Star. “Some sellers slashed an additional 10 percent off their homes’ listing prices Friday as part of 10-day national sale launched by Coldwell Banker Real Estate. There are more than 20,000 properties participating nationwide, including at least 200 in greater Los Angeles and nearly 20 in Ventura County. There’s something for buyers at all price points, such as condominiums and manufactured homes from $200,000 and a property in Carpinteria that was reduced from $9.5 million to $8.55 million, said Betty Graham, president (of) Coldwell Banker’s residential brokerage in greater Los Angeles.”
“Homes that sold for $500,000 or $600,000 in Ventura County in 2005 can now be purchased for $350,000, she said.”
“Charles and Sandi Lake of Ojai, originally listed their 4,000-square-foot home for $1.69 million in May, then dropped it to $1.5 million about two months ago. Charles Lake knows this isn’t the best time to sell, but they are retiring and looking to downsize. The couple was less than enthusiastic to lower their asking price again, this time to $1.35 million, but Lake said Coldwell Banker is making it worthwhile through its aggressive push to reach people.”
“‘I’m impressed that Coldwell Banker wanted to do something,’ Lake said. ‘Most of the other companies are sitting back and lamenting.’”
The Daily Bulletin. “The prospective buyers of the house at 217 E. Annapolis Ave. are taking advantage of the dropping home prices. This will be the couple’s second home. If they get the home, they’ll rent their Pico Rivera house and move to the Claremont neighborhood, said Javier Sanchez, with the Sanchez Group, Re/Max Champions.’
“The current owners bought the Claremont home two years ago for $475,000 - with the help of two mortgages. Sanchez said the two loans were interest-only loans, with the interest locked in for two years. ‘Then their interest went up to about 9 1/4 percent, adding $650 to their mortgage a month, but then the economy went bad, the high interest wasn’t helping, the property value of the home went down, and one of the homeowners lost their job,’ he said. ‘What’s sad is that seven of 10 homes I sell have this story,’ he added.”
“John Vanden Heuvel, real estate agent, said the Claremont area is desirable because of the colleges and because it’s in Los Angeles County. But buyers must be prepared to have a healthy and consistent income to buy and stay in Claremont, Vanden Heuvel said.”
“‘If you’re going to buy this home, you have to have an annual income of $93,000, a monthly income of $7,700 and make a monthly payment to the home of $2,320,’ he said. ‘But first you have to put $9,000 down.’”
The Daily Californian. “For UC Berkeley graduate student Steven Barcelo, what seemed like an exciting new start in his life-moving with his fiancee into a home in a nice neighborhood at a bargain rent-soon turned into a nightmare. After Barcelo and his fiancee settled into the new house two months after pre-paying an entire year’s rent to outbid other prospective tenants, they received an e-mail from their landlord that the property was going to be foreclosed.”
“Barcelo said representatives from the lending bank started pressuring him to leave the property. ‘If we didn’t leave, the sheriff would come by and force us to leave, was what (a bank representative) was telling us,’ Barcelo said.”
“Along with threats of illegal evictions, other ripple effects of foreclosures include declining home prices and increasing demand for renting as a housing option, which is part of the reason rents are going up. ‘Because credit becomes tighter, you are no longer able to afford a condo or single-family home, then renting may be your best other option to stay here,’ said Tim Stroshane, senior planner for the Berkeley Housing Department.”
From WTVD. “Posted on a wall inside the Wake County (North Carolina) courthouse are foreclosure notices, documenting dozens of casualties of the economic situation. In August, nearly 500 Wake County properties were foreclosed. In some cases, the foreclosures are hitting unsuspecting Triangle resident and renters who are doing nothing wrong.”
“‘Unfortunately, it’s hard times right now, and people that invested and thought they were gonna be able to make money, with the situation like it is, they’re not making it,’ Wake County Sheriff Donnie Harrison said.”
“Sheriff Harrison’s deputies end up being the ones who have to bring eviction notices to the door. He said it’s happening about 100 times more a month that is was happening this time last year.”
“And more and more, it’s renters being evicted. Eyewitness News learned of one community in the Brier Creek area where more than 30 units have been foreclosed on in the past year. Many are owned by California investors.”
The Daily Breeze. “During my recent sifting, I came upon an old advertisement that lies at the root of a much larger mess, the worldwide financial meltdown. The glossy postcard from a year ago promotes 133 Promenade Walk, a posh condominium complex in Long Beach. ‘Own a new home in downtown Long Beach for $1,909 per month!’ the advertisement blares. ”
“As further enticement, if I had bought one of the $400,000-plus condos on the last weekend of August 2007, I would have received $20,000 toward the price of the home as well as a 42-inch plasma TV. Wow, sign me up.’
“But wait. An asterisk leads to a block of text with letters so tiny that I needed my daughter’s magnifying glass to read it. The fine print revealed that most of the $1,909 monthly payment would have gone toward an interest-only loan that resets after a decade.”
“By then, depending on the direction real estate prices move, the buyer may have little or no equity in the condo. That and the higher monthly payments can be reason enough to default on the mortgage and simply walk away from the property. In fact, that is what homeowners nationwide are doing.”
“I wonder how many other housing developers have sent out promotions like the offer for 133 Promenade Walk. While some people assume the financial crisis will subside in a year or two, the existence of loans that are interest-only for an entire decade suggests the problem may drag out for much longer than expected.”
“The mortgage meltdown and credit crunch are built on deceptions by greedy bankers, incompetent regulators, naive homebuyers and our own government leaders who had applauded the dramatic rise in homeownership despite the obvious economic warning signs. The most dangerous lies are not the ones whispered in the shadows, but those trumpeted to the world on glossy postcards as fools cheer.”
‘Housing is the last to rise’ in a recovery, Thornberg said, ‘and the first to fall’ in a downturn.’
IMO, Thornberg summed up what we are facing well, and it shows that what we are hearing from these fools in Washington and at the NAR is BS. They keep saying, ‘housing has to recover first.’ That doesn’t make any sense. The economy and jobs situation has to recover first, or how else can people afford to pay for the darn things?
This isn’t hard; what all markets seek is equilibrium. Prices fall and eventually, the economy retools toward non-RE based job creation. Wages will recover and rise a bit until they meet. But to suggest that ’stabilizing’ a housing bubble will accomplish anything is a joke.
Assuming they can stabilize anything which I no longer believe they can.
They have lost control, and the scale at which things are operating is outside their scope short of crashing the global financial system outright.
The maxim stated here often applies yet again: Privatize the gains, socialize the risks.
It’s what the incompetent and unethical seek to do. It’s their stock in trade…both figuratively and literally. Pun very much intended.
We now are in the process of government-forced *stabilization* via losses on a grand, socialized scale. This IS their idea of stabilization. This IS their solution…as governments are wont to repeatedly pro-offer. Spread misery to as many as humanly possible.
And so it goes.
Late post FPSS,
One world economy?
Shuchs, they can’t figure out how to get a one street economy!
(not a flame - just screaming inside).
Leigh
IMO, Thornberg summed up what we are facing well, and it shows that what we are hearing from these fools in Washington and at the NAR is BS. They keep saying, ‘housing has to recover first.’ That doesn’t make any sense.
As I’ve said before, I really respect Thornberg for going against the UCLA team and their financial supporters and pointing out the bubble early. Most of us didn’t risk anything talking about the bubble… Thornberg did.
Housing lags the economy by ~18 months. So… 2 years of bad economics for California. Sadly, I know of too many layoffs coming down the pipeline. Layoffs were the employees can tell a layoff is coming, but they don’t yet know who.
When people are worried about a job… they do *not* commit to a house.
Got Popcorn?
Neil
What’s odd about UCLA, is that Ed Leamer was calling it a housing bubble in 2003 (maybe earlier, IIRC). For some strange reason, he actually backed-off his assertion as the bubble grew larger. One has to wonder if some money wasn’t being exchanged in there somewhere.
UCLA was one of the first to mention a housing bubble, even before Thornberg became a more public “bubble” figure.
Lots of money that was keeping this thing under wraps between 2002 and 2006/7, IMHO.
Here (from 2003):
Bubble Trouble?
Your Home Has a P/E Ratio Too
Edward E. Leamer
UCLA Anderson Forecast Report
http://www.uclaforecast.com/
In June 2002, I issued a definition of a regional housing bubble: home price to rent ratios that elevate without support from the underlying fundamental: the rental value.
http://www.anderson.ucla.edu/documents/areas/ctr/forecast/PE_ratio_update.pdf
And here (from 2002):
Bubble Trouble?
Your Home Has a P/E Ratio Too
Edward E. Leamer
Director, UCLA Anderson Forecast
There is no housing shortage and don’t expect a
phantom shortage to prevent a bubble from
being created.
I remember a realtor telling me some time ago
that I should buy ocean front property because that
was limited in supply and the price could only go up.
The same kind of thinking has led many to conclude
that, since California “needs” more housing, the
current run-up in prices is justified by supply and
demand, and there is no bubble here. For example,
the Los Angeles Times, Monday, May 27, 2002…
http://www.anderson.ucla.edu/documents/areas/ctr/forecast/Bubble.pdf
Comments didnt come overnite… the study must have been observations for several years. Not just a blip… this bubble may have far earlier roots then most would expect.
Fannie Freddie easy lending goes back to mid 90s.
Tried to post a link with references to Leamer’s writings in 2002 & 2003. He was indeed calling it a bubble back then, and discussed the price/rent ratio.
I’d like to see those links. (Time to google it…)
Either way, its odd Leamer reversed course… lack of nerves? Either way, Thornberg went public at a time that was… difficult. Then UCLA went rather pro-housing… hmmmm…
Got Popcorn?
Neil
ps
we have too much spectating ahead… sigh.
“One has to wonder if some money wasn’t being exchanged in there somewhere.”
I would love to hear what Chris Thornberg could bring to light on that possibility. For a while there, Leamer seemed to go all stupid about where things were headed, but now I believe he is back into “we saw it coming all along and told you so” mode.
No, I think it’s just the psychology of bubbles. Prices rise. A few people speculate that it might be a bubble. Prices rise. A few more people speculate that it might be a bubble. Prices rise. Some people say that it’s not a bubble after all. Prices rise. People stop talking about a bubble. Prices fall. The same thing happened with the stock bubble. The time to worry is when hardly anyone thinks it’s a bubble after all.
Excuse me but didn’t the government just make it impossible to save any money for a down payment on anything?
Right now the only way to save it is to steal it or invent it.
Halting the paying of bills is not an option.
And I notice the actual message of the article is, housing in the Bay Area won’t begin appreciating again till 2014. Some of us had had 2012 as an earliest-possible time, because the waves of ARM resets will be finished by then. I imagine in the Thornberg universe 2014 is also an earliest-possible date. Any of us can imagine a Japan-like scenario where house prices fall for another decade.
California and Canada have stopped ordering Maine lobster. Calif because they’re broke, Canada because lots of the lobster moved up there. So tomorrow there’s going to be a “save our fishermen” event on the pier here, where $3.50 per cooked lobster buys you as many as you want. I remember paying $2.50 in 1957. Disinflation, anyone?
Hef has lost his main squeeze and is reported to be down in the dumps. How can you talk about the price of lobster at a time like this?
Luv,
Jen
I’m sure there are plenty of other bleached-blonde floozies ( oops, I mean aspiring actresses ) out there who would be willing to take her place doing things to that wrinkled old — well, I’ll just stop there. I mean, in today’s market, hookers are probably marked-down, too.
Assuming prices began dropping around 2006 in the Bay Area, 2014 as the return date of positive appreciation would match the last cycle, as prices dropped from roughly 1990-1996 (six years) then settled out for a couple of years before climbing steeply.
Since the bubble has so much farther to deflate in order to get back to affordable prices this time, it may take longer before appreciation returns.
During the period of inflating prices (1998-2007) many SF Bay employers (Mainly High Tech) have moved many jobs to other states and overseas. It is unlikely we will see jobs coming back.
Therefor we will continue see gluts in inventory for many years to come. There just wont be the buying power or demand that will allow prices to continue higher. Silicon Valley is pure run on deflationary pressures in its business model. The more expensive an employee become the more likely you will see them be replaced. Saw this first hand back in the prior recession of 1990.
This was, i recall, shortly after the Resolution Trust had liquidated all the bad investments from the Savings and Loan frauds of the 1980’s.
This time is different. We have the Treasury buying up bad loans and writing them off, giving the seller a “premium” over market values.
This will make the adjustment a much longer process, because “market price” will not be found until much later.
Think Japan circa 1990.
that happened in Bahstin Ma in the early 90’s
the lobster index
Did housing really fall first in previous downturns? My impression is that the normal pattern has been labor market weakness spilling over into the housing market. Recession-driven job losses result in many households selling into economic weakness. Fear of job loss among those still employed reduces housing demand among qualified buyers, and those who are unemployed by the recession are clearly out of the game. Prices fall with the resulting drop in home purchase demand.
My recollection of the early 1990s was that price declines followed layoffs, through the channel I describe above. This time is different — big price declines in housing preceded the now-universally-acknowledged recession, and the above scenario still lies in the future.
Please jump in and correct me if I am off base here.
When real estate crashed in the early 90’s in L.A., it came on the heels of weaponry manufacturers closing up shop around town, after we’d won the Cold War.
The point is, a RE crash destroys jobs, regardless of what causes it. This time it was a boom and bust (mania). But remember just about a year ago in CA, we started to hear, ‘the housing crash has spilled over into xxx.’
In Texas, crashing oil prices set off a RE bust. But many more jobs were in RE than oil. RE losses did in the S&Ls and banks, not oil. And rising house prices didn’t get the economy on its feet. People started to find new things to make a living at. That took years. I suggest we get started sooner than later and that these idiots in DC should stop fretting about the housing market.
“And rising house prices didn’t get the economy on its feet.”
I totally agree that the idea the housing market should lead the recovery is political hogwash, with no basis in economic history or reality. In particular, given the virtual disappearance of the subprime lending sector and the investment banking sector that fed the investment end of the mortgage securitization food chain, plus a general credit squeeze that has jeopardized sources of loanable funds to college students, credit card borrowers, municipal and state governments, auto loan borrowers, businesses, and just about every other economic agent or entity who relies on credit to function, sources of loanable funds for real estate lending are toast.
Add increasing unemployment and the effect the fear of job loss has on willingness to make big ticket purchases and it is clear that residential real estate demand is toast. Throw in the fact that home prices are already falling fast, with no bottom in sight, and it becomes obvious that residential real estate demand will remain toast for years. And the worst week of stock market losses in Wall Street history hardly adds encouragement to anyone on the fence about whether to buy a home. Builders have built myriad homes which remain vacant, which are steadily joined by a flood of new foreclosures which also stand vacant. Anyone who believes housing will lead a recovery under these circumstances must be some kind of a fool.
“And rising house prices didn’t get the economy on its feet.”
In my area, silicon valley, rising prices pushed jobs to move to other states and overseas.
I suggest we get started sooner than later and that these idiots in DC should stop fretting about the housing market.
—————–
Agree 100%! Our economy will not recover until the focus is taken off of housing and credit growth. Those are the **problems,** not the solutions.
I was young, but my parents were in the RE business, and I recall housing going down first.
Before the advent of the popular internet, people had limited access to real-time data. Notice how the PTB is already masking the reasons for this recession/depression: falling housing prices. Very few people –none of them in politics except for Ron Paul — mention that the CAUSE of the recession is **too much debt and too-high prices**.
I think I’m going to break my TV over this one day…when Paulson or some CNBC numb-nut says the “cause” of the credit bubble is falling home prices.
correction: …when they say the cause of the “credit crunch” and foreclosure “crisis” is falling home prices. They will blame the depression on falling home prices, instead of the parabolic price rises that are the real problem…
If the government tries to prop up prices ,how are they going to get people to qualify unless they go back to easy money or liar loans ,which would be supporting fraud or toxic loans . The values have to fall to the demand of qualified buyers . In addition ,if you have to many homes and not enough qualified buyers, than prices fall because of good old over
supply also . Does the government think they can buy up all the houses to create a shortage ? Also, you just can’t let houses sit adding up insurance and property taxes ,possible homeowners fees, etc. For Paulson to suggest that you can hold this non-performing paper for future gain when that loan has monthly costs is absurd. Why do you think banks always use to get rid of foreclosures quickly in the past .Evey month the paper is a liability .
Also ,I think the public needs to know that the MBS’s have a problem in that trenches are in conflict of interest as to the the altering of the loan contract . Don’t hear much talk about how defective these securities are when it comes to foreclosures .
Did I miss it here. Rays just went up 7 to 6, runner on third. Oh, sorry, read this aft on Marketwatch that government is telling Freddie and Fannie to buy 20 bil each per month of sub prime, Alt A and stated. Rays just got another one now 8 to 6. I think I’ll go get a drink. This is where we came in didn’t we? We’re screwed again!
I believe Paulson identified falling home prices as a “root cause” of the financial crisis. Never mind that homes became hopelessly overvalued and would remain so if price declines were arrested at the current level of prices.
Actually, CA renter, if you think the problem is too much debt, you don’t get it either. The problem is too much income disparity.
Over the past quarter century, middle class incomes have stagnated while corporate earnings have doubled. Most of the increased income has gone to a small group of rich folks. Had it gone to the middle class, they would have been able to afford their homes, cars etc without the debt.
Yes, but if you look at historical trends, you’ll see that income disparity and credit bubbles go hand-in-hand. From what I’ve read, most financially-fueled depressions are caused by credit bubbles and the related wealth disparity.
Think about it…who is the creditor and who is the debtor? The creditor (rich person) gets “x+interest” on his/her money. The borrower (poor person) pays “x+interest.”
Multiply this many times over many years and consider what happens as the credit market expands.
IOW, the rich person’s wealth grows over time, while the poor person’s wealth diminishes over time and eventually is replaced by debt which can never be serviced. At this point, the markets stop because there are no more solvent borrowers.
It’s not lack of credit that causes markets to freeze, it’s lack of solvent borrowers, IMHO; and that is what we are witnessing right now. Pushing on a string…
Some of us are not servicing the debt -
(not aimed at current company) -
Lack of credit is lack of trust (or so (s)one say).
A not so popular poster here on HBB frequently says:
“It’s the debt stupid”
Individual or governments - dang-
That just rings true!
Leigh
“‘If you’re going to buy this home, you have to have an annual income of $93,000, a monthly income of $7,700 and make a monthly payment to the home of $2,320,’ he said. ‘But first you have to put $9,000 down.’”
—
solvent borrowers, hahaha.
This RE is desparately searching for someone to take on a $475k loan with 2% down, at 5 times loan to income.
Strangely, they aren’t beating on his door this year.
Well, geez, guys, when the majority of your “incomes” are based on rising prices and “cash-out refi’s” from HELOC’s, then i would say that falling housing prices is the reason for all of our problems.
What amazes me is that we had a govt/media complex that considered serial refinancing and price inflation a model of economic success.
Buy a house, refinance, buy new furniture, refinance, buy an SUV, refinance, payments about to ‘re-set’, just ………….refinance. See.
You really can have everything for nothing.
“My recollection of the early 1990s was that price declines followed layoffs,”
Earthquakes and riots too if I remember correctly and a big fire scaring voters into making the temporary half cent sales tax increase permante for the firemen
2 dinky earthquakes, one meaningless riot over a crack addict being mishandled, and the 1/4 cent sales tax was not made perm. It was terminated by 1995 or so.
last time we did that was 1921
since then it’s a managed economy
Old Sacramento sitcom: 8 is enough
New Sacramento sitcon: 16 is enough
======================================================
“A ‘cash back‘ mortgage swindle involving in excess of $1 million in stolen funds and more than $11.3 million in fraudulently obtained loans on 16 homes in the Sacramento region was alleged Friday in a federal indictment. ‘Over the course of numerous investigations we have seen how fraud-for-profit mortgage schemes took root in our Sacramento-area housing market, particularly in the 2005 to 2006 time frame of this case,’ said U.S. Attorney McGregor Scott.”
“And more and more, it’s renters being evicted. Eyewitness News learned of one community in the Brier Creek area where more than 30 units have been foreclosed on in the past year. Many are owned by California investors.”
======================================================
Reason # 943 for Californians to stay put within the confines of the Golden State.
They really didn’t like us all that much as we were busy inflating the values of their homes, imagine how they feel about us now?
CNN reporting the public is hoarding au, silver, cash, whatever in personal safes…does this mean we’ve hit a top in metals (and in tinfoil hat blogging), if so, how disappointing, au never even really got above $1000. Or is this just the beginning.
Buyers make great sellers when they are desperate for cash.
66% of Gold demand is for jewelry and other uses….China’s and India’s middle class were pushing up demand as they did oil Prob see price headed down in this down turn the next couple of months. As a safe haven, it will need more inflation to pick up the slack from decrease in demand. With all this printing of dollars…that time may not be far off. I can’t guess a date though.
How dumb to keep precious metals or cash in a personal safe. That’s just advertising to criminals where the loot is. There is a reason banks were invented.
When it’s at home in your personal safe, then it is not a known commodity and YOU control where it goes. Suppose, just suppose that the government makes holding of Gold illegal, and closes the banks and goes into your Safe deposit boxes to confiscate your gold. Can you stop them?
Think Roosevelt. Think Depression. Right now, the morons in Washington are just covering the bad bets of their buddies on Wallstreet with Tax Dollars.
When that fails to make the economy turn around, what other desperate measures will this team and then next team up try?
Do you think they are motivated to protect your rights and your property? I think not.
I think we’re in a deflationary event, and that means the price of assets in dollar terms will fall as the market deleverages. Including commodities, such as gold and silver.
Oh I think those people wont be coming near their former
investment properties.. infact i doubt they will ever go into
RE investment ever… more likely will do bonds or CDs next time.
RE: Most homes in the 4,000 square foot range
As the levels of state aid to communities crash, watch for property tax assessment systems to adopt a levy based on
square footage and energy usage similar to the luxury and gas guzzler tax placed on autos.
McMansions, ho!
Well, maybe not for certain carbon-rich politicians who are aswim with offsets. Something tells me that particular privledged class will soldier on unscathed.
Going on record - a big part of the solution to this crisis is to vigorously prosecute all those dirtbags that screwed people over, from Wall street to the mortgage fraudsters. That doesnt happen and Rome continues to burn and we will end up in a civil war which will start out screwed vs. the screwers (pols, bankers, RE related people) and could quickly devolve into a free for all, e.g., rich vs. poor, liberal vs. conservative, black vs. white, young vs. old - you get the picture. I put the odds at 30-70 but we’re inching towards 50-50 every day.
That would involved prosecuting Barney Frank, Chris Dodd, Greenspan, Paulson, Mozilo, the heads of all the investment banks, short of a revolution, what odds do you foresee that happening?
We could maybe form a “Committee of Public Safety”.
The odds are 0 - now. If the PTB doesn’t get a handle on this chaos (and I don’t personally consider it chaos, just markets heading to fair value and useless jobs/parts of the economy being deep sixed, but its sold as chaos to the masses) then the odds will climb big time.
We’ll see if we get there, but I recommend the book Collapse and the part about Rwanda that fueled the idea I was already starting to kick around. We have a culture of entitlement, and when all those promises/illusions get broken, how are people going to take it?
And my main point is that of all the solutions being put forth - buy this, loan that, prop up industries, etc. - none of them address punishment. Without that the economy will just morph into the next bubble.
In my book Dodd and Frank are already guilty peddling to the NAR and the Fannie Mae’s Frank Raines…
I really got a kick watching Dodd looking as if he was he was in pain as Paulson was giving his speach to the Senate.
Yep! lets remind Dodd and Franks how they supported easy loans programs for lower income people. Brilliant going !
–
It would be like prosecuting kings and lords for the crises in the realm. Can’t be done as long as they are in power.
Jas
Here is what i am so scared of the corrupt loan officers brokers agents will get a job a lot faster then me because they had a “JOB” and i didn’t
Most hiring people are so clueless to the amount of fraud….
Absolutely, amoney. A very distinct probability.
How about the realtors ? They created fake multiple bidders to get higher prices out of naive buyers which were in turn to created comps for future sales listings and then repeating the vicious cycle thus gaining higher commissions month over month as prices inflated for a decade.
There was no confirmation (verification), no transparency, no honesty, no way to enforce better business practice, no internal controls..
Imagine for a minute a realtors 6% commission on sale in the SF Bay Area as prices inflated from 200K to over 700K ? thats nearly 15% raise in pay year over year for 10 years! Talk about greed!
How do we make the “little guy” who refinanced his way to supposed prosperity pay?
I would propose the govt should reset RE values to 2000 levels. People who are underwater on their mortgages will have two options
1) Pay off the original debt and take a loss
2) Take a taxpayer bailout that pays the bank the difference between their mortgage and the 2000 value.
Option 2 would come with a price to pay. Anyone opting for this would be required to perform some sort of civil service, the amount dependent on the size of their bailout. Personally, I think work camps in the desert to build massive solar energy farms would be a good use of this “volunteer” work force…
And while they’re out there in the desert heat, they should play the song at 4:46 of this video: http://www.youtube.com/watch?v=8cNN5zwEcXM
I hereby dedicate it to all of you good HBBers out there as your anthem and mine, and to a Clockwork Orange-like indoctrination of the failures of society.
Bailout people who bought homes while screwing those who saved and were priced out? How about savers just kill the current occupiers and take over their homes without paying any money at all?
Here is what the CEO of Booz Allen recently said:
“This downturn originated almost entirely in the U.S. financial markets. Essentially, cheap credit from the U.S. Federal Reserve fuelled an extraordinary leveraging of the U.S. economy over the past six years. Its locus is in consumer debt, especially mortgage debt. The original sin was not in (the lack of) regulation, but in the expansion of credit with outrageous terms to un-credit-worthy people—for example, 105% “Loan to Value” loans with no credit checks. The willingness and ability of regional and local lending institutions to then package and re-sell this debt (as “collateralized debt obligations”), first to the big U.S. banks (who in turn used debt to buy it), and then ultimately to parts of the global system, freed up those banks’ balance sheets so they could go at it again. The overall cycle was predicated on the notion that the purchase of the debt would produce a perpetual stream of repayment income against secure collateral—for example, that the real estate market would always rise…
As many have noted, the larger system fell apart when (inevitably) the U.S. real estate market began to decline. For the primary originators or the resold obligation owners, the assets’ values were below the loan values. More importantly, if a major function of packaging is to create lower risk pools because of aggregation, this only works if they are not collinear. In other words, if all the bets are based on one super-bet—a bet on the U.S. housing market (or not so long ago, the Taiwanese, Korean, or Japanese commercial real estate market), the risks will be related as well.”
I”m calling BS on this one
It’s all due to poor regulation. The expansion of credit was a symptom not the cause.
1. Securitization - Companies should have been required to keep skin in the game to make sure they didn’t approve crap loans
2. Rating agencies - The conflicts of interest were never addressed.
3. Accounting - Gov should have reviewed accounting of financial firms and banks and set better standards. The whole idea of a SIV is offensive.
4. Credit Default Swaps - How about requiring margins and letting people know when hedge funds take out large negative positions on stocks.
and long before 1-4 we had realtors spewing out
“Buy now or be priced out forever”… public believed it.
“There are multiple bids, (unverified ?) … public believed it.
“RE prices never go down” … public believed it.
“They dont make land anymoe”… public believed it.
All the NAR hogwash being dished out in the media.
The mania of people buying spec homes across states.
FWIW, Wall Street as we knew it is dead! A victim of believing the BS from NAR and their marketing cronies… count up all the Commissions from millions of realtors and compare that to the so called bonus payments from a handfull of Wall Street/Bank CEOs. NAR and their cronies arent even mentioned today in the media connected in all the fraud they instigated. It seems they are free to continue to spread fraus unfeathered by the law.
Where is the outrage over the NAR in all of this?
Just remember what they kept saying…
“There are multiple bids, can you go higher?” w
Where is the transparency and confirmation in all of this ?
Most are fake bids anyway designed to make people overpay anyway.
Gail Swainson
Real Estate Reporter
tony wong
staff Reporters
The incoming head of the Toronto Real Estate Board has come out swinging against phantom bidding tactics after denying they even existed when she ran for the job three months ago.
“It’s dirty realty, it really is,” Maureen O’Neill said of agents who fabricate offers during bidding wars. She is now calling on the Real Estate Council of Ontario (RECO) to yank the licences of agents convicted of using phony bids.
“Boot them out, we don’t need them in the business,” O’Neill said. “I don’t think these people should be allowed to sell real estate.”
Phantom bids can be used by selling agents to spark extra rounds of bidding or to spook potential buyers into rushing or raising offers. The practice is considered a breach of ethics under the Real Estate and Business Brokers’ Act of Ontario – administered by the Ontario council – and realtors who are caught can face hefty fines.
There are more than 52,000 real estate agents in Ontario (26,000 in Toronto) and last year they sold 194,793 existing homes in Ontario (84,872 in the Toronto market).
An informal poll of 30 Toronto-area agents taken yesterday by the Star suggests that virtually all believe that some form of phantom bidding exists in the market. More than two-thirds said some kind of structural reform in the way bids were handled was needed to address the problem.
Not my words, but ones to think about:
“In May 2008 the market capitalization of our stock markets was $57.5 trillion. It has dropped to about $35 trillion today because of the problems caused by over zealous lending practices emanating from the 1977 Community Reinvestment Act and continuing competitive edges given to Fannie Mae and Freddie Mac in originating sub-prime mortgages for political reasons. Those who refused to regulate imprudent growth are well known. And for God’s sake, don’t kid yourself. This was was NOT a Bush “economic policy”! To even imply it was is a lie!
It repudiates the Democrats’ historical charge that the Republicans have never cared about the little guy!
http://en.wikipedia.org/wiki/Market_capitalization
It is a true shame that a “D” or an “R” has to be associated with these names! If those who failed us had no party affiliation they would be in jail already! Unfortunately, the party in power determines who gets investigated.
The loss of $27 trillion in market capitalization has realistically “cost” the government a minimum of $5.4 trillion in lost capital gains taxes. The contraction of credit has easily “cost” the government an additional $15 trillion in lost income tax revenues as businesses lose profitability. Add on whatever you want for rising unemployment “costs” - but if you don’t apply these ancillary costs to the root cause of the unemployment you are a dull tack in the box! In other words, doing stupid things that create lost revenue “post” policy is basically no different than raising taxes prior to establishing new expensive policy. Those who ask the question. “How are we going to pay for a program?” need to consider the economic effect. Is it smart to tax oil companies $10 billion and then watch more than $10 billion disappear in potential capital gains revenue? How stupid can anti-business politicians be to only see the front end of an issue? Look at your own 401k’s and try thinking effect! Eloquence does not open eyes!
The point is: The initiators of the “war on poverty”, regardless of party or intent, who pushed high risk housing commitments, regardless of “bleeding heart” compassion, have indebted the taxpayers of this country an amount far-exceeding the entire four year cost of the Iraq war! Make no doubt about it! Let me repeat: The judgment of the likes of Chris Dodd, Barney Frank, Nancy Pelosi, and Barack Obama (in his function as community organizer and eloquent ACORN philosopher of income redistribution) has cost taxpayers an amount exceeding the entire cost of the Iraq war!!!! And half this country actually wants to not only keep these bozos in their offices but give one of them a huge promotion!! They actually want to trust one of them with the top spot and the right to have his finger on the red button! That, my friends, pretty clearly proves the emotional dumbing down of this great country!
Those who deny the clear, video-tape proven complicity of those bozos in the vote-pandering “sales pitches” they made to help everybody own a house are liars!!”
Very Late Post
In reference to the previous post, I have one word for it. Bull! In the bay area, the run-up in housing costs had nothing to do with efforts to make housing affordable. Examples easily make the point. For example, prices of faculty homes in Palo Alto went through the roof (no pun intended). For exasmple, formerly 1 million dollar homes became 5 million dollar homes. I could give lots of other examples. Do you really think the price run-up on such houses, and the chicanery couples went through to arrange financing, is all the fault of Congressional efforts to prohibit race, sexual preference, and gender discrimination in real estate transactions?
Blaming the current price correction on Wall Street and in home prices on pressure to make loans to poor people is a standard, discredited practice of blaming the little guy when the pyramid scheme crafted by the big guys collapses.
I mean, do you really think some poor person in the ‘hood (or their Congressional representative, a representative that rarely listens to their constituents) made Bank of America buy and sell MBS’s and CDO’s while having ZERO in place to back up the investment should it go south? Do you really believe it was pressure to make loans to poor people that made NAR tell rich people that there were multiple bids on every house and they should buy now or be priced out forever?
The very idea is . . . appropriately subject to ridicule, i.e., ridiculous.
IAT
No… but we had a RE bubble early in 1998 due to stock option cash outs. Do you recall how RE prices skyrocketed when some employees cashed out their stock options ? Yahoo at $350/share. Some actually used their unregistered stock certificates (illegal per NASD) as deposits. We saw doubling of prices from 1998-2000.
But now we dont see hugely valued stocks or hundreds of IPOs hitting the stock market. Fact is we are back to 2002 on the S&P…
Hanging head in shame -
Booz Alley? (huh).
Sounds right.
O.K.
…In other words, if all the bets are based on one super-bet—a bet on the U.S. housing market…the risks will be related as well.
Hmmm…
So, if housing falls, faster, harder, than what quants foresee, we are in a world of hurt.
Yeah.
Freaks of nature.
Leigh
P.S. One may have insight the quants are unable to forcast.
@Leighsong. Since you seem to be unfamiliar……
http://www.boozallen.com
Could this happen? Like who saw last week coming?
Government raises FDIC insurance to unlimited. Ben, myself and others who have over 500,000 put our money into our favorite local bank.
Three weeks later Nancy Pelosi, Harry Reid, Hank P and Barrack put a freeze on all FDIC accounts including those of Ben and myself and using some magic percentage on those funds is claimed by US Government as a patriotic payback for living under a Constitution and Bill or rights.
Is this a possible?
This comes from 90274. That hill between LAX and LA Harbor along coast
Ben Bernake proposed taxing idle savings as a way to get money spending or flowing through the economy. Now I think I read this on MSN Bill Flectenstein who can get a little hysterical about the FED , rightly so it seems
This was maybe 2003 ?
In 2006, Painter received an unexpected call from an FBI agent. ‘Do you know a Wesley Fort?’ he asked and I said, ‘That’s funny you should ask that because we keep getting mail for him and we don’t know who he is,’ Painter said.”
Huh? Me no speaka english?
Recent events suggest that we ‘negative thinkers’ and ‘bitter renters’ weren’t nearly negative nor bitter enough, because this thing is cascading out of control faster and broader than most of us imagined.
True.
As one of the gloomiest, depression-expecting, guns-n-ammo uber-bears; the depth and breadth of this is a bit breathtaking. Now that it’s **finally** happening, after years and years of head-fakes, it’s come on stronger than even I expected.
Sitting on pins and needles as we watch this tranwreck happen.
CA -
Ya (oh my, some of the years I lived in FL are articulating in z english - my mom will cuff me)!
Oh:
ammo - check
food - check
family - check
friends - check
All systems go!
Leigh
http://news.yahoo.com/s/ap/20081011/ap_on_bi_ge/where_s_the_money;_ylt=AlJhFakEuDtmfrbFV6rzVWqs0NUE
Mandatory reading for Joe 6pk
It’s very nice to see Neil and Jen Bones today. Two very different personalities, but both great.
“After Barcelo and his fiancee settled into the new house two months after pre-paying an entire year’s rent to outbid other prospective tenants, they received an e-mail from their landlord that the property was going to be foreclosed.”
I would go to the landlord’s house and really kick his ass. I’l make sure I get my money’s worth.
“….but then the economy went bad, the high interest wasn’t helping, the property value of the home went down, and one of the homeowners lost their job,….”
They should just cut-n-paste this text into every article from now on. It is always the same story.
Right now, the fastest declining metro (tracked by Radar Logic) is San Fran at 45% Annual Rate for all the sales that have originated since June 2008 and have completed. L.A. is next with 34% and San Jose at 33%. Yes, all three are still the most expensive of the 25 metros and falling at a faster rate than all others (Ooops… New York just took over L.A. in last week’s data by a fraction of 1%). Coincidence?
CA is sinking fast into depression.
Jas
What parts of L.A., over in west LA/SM/Venice, it seems to me (not based on any research, just listings I see) that prices haven’t fallen much at all?