The Wait Continues
The Eagle Tribune reports from Massachusetts. “The number of new homes being built in Salem has hit a 30-year low. In Rockingham County, building permits dropped from 2,071 in 2003 to 749 in 2007, a 64 percent decline, according to statistics recently released by the state. Derry has issued just four permits for new homes in the past four months, Building Inspector Bob Mackey said. Mackey said developers are sitting on dozens of empty lots ready for new houses, waiting for the housing market to improve. ‘They’re waiting until the demand for new houses picks up,’ Mackey said.”
“The bad economy has put plans on hold for 288 upscale condominiums next to Atkinson Resort & Country Club in Atkinson, said Harold Morse, general manager of Lewis Builders. ‘Everybody is having trouble selling,’ Morse said. ‘Even though we’re outperforming a lot of other builders, there’s very little traffic right now. We need some consumer confidence back.’”
“Ed Humunick of Salem, a real estate professional for 30 years, said he believes the housing market will continue to plummet, especially in New Hampshire and the rest of New England. ‘It’s clear that the market was overbuilt,’ he said. ‘Easy credit has been available everywhere, whether people could qualify for a mortgage or not. Builders should have seen it coming, but they continued building every year, and the bubble has burst.’”
The New York Times. “Even though the average price for a Manhattan apartment, at $1.5 million, is higher than it was a year ago, some New York neighborhoods have already started to feel the downward tug that has wrenched the housing market elsewhere in the nation. Median prices in Harlem and East Harlem were down nearly 20 percent, to $440,000 at the end of this year’s third quarter, from $549,000 at the same time last year, according to Miller Samuel Inc., a real estate appraisal and consulting firm.”
“Similarly, condominiums in Midtown East and Turtle Bay dropped 18.6 percent, to $1.197 million from $1.47 million; and condos in Midtown West and Hell’s Kitchen dropped 8 percent, to $1.01 million from $1.099 million.”
“The credit crisis and the volatility on Wall Street will probably spur a continuation of these trends and lead to a universal drop in housing prices, said Michael Signet, the executive director of sales at Bond New York, a real estate agency. ‘From everything we’re seeing out on the street, the fourth quarter report will slow prices down across the board in every neighborhood,’ Mr. Signet said. ‘There’s a lot of nervousness out there.’”
The Philly Metro from Pennsylvania. “For many African Americans in Philadelphia, Barack Obamas election as the nation’s first black president is a symbol of hope. But will his presidency translate to better conditions for blacks in Philadelphia – and across the country? Local political consultant Maurice Floyd weighed in.”
“Floyd: ‘I think one of the other things he was talking about is affordable housing for people to not only dream the ‘American Dream,’ but live it in providing them with equal opportunities for first-time homebuyers to buy those homes. I think those homes before this drop were unreachable – even unthinkable – to people in our community…I think where he will come in to help with the housing is to get these banks and lending institutions to open credit so that people can buy some of these houses at affordable prices.’”
The Star Ledger from New Jersey. “It’s not impossible to get a mortgage — even if you don’t have a 20 percent down payment lying around and an 800 credit score. Surprised? So was 23-year-old Kerri Kushner who along with her boyfriend, 27-year-old Erik Richardson, bought a two-bedroom home in Old Bridge a few months ago.”
“‘I was quite frank with the mortgage guy. I told him upfront I didn’t think we would be approved for a mortgage because I don’t have 750 credit,’ Kushner said. On top of that, she had just financed a new Nissan Altima and had co-signed another auto loan to help her boyfriend.”
“The New Jersey Housing and Mortgage Finance Agency provides a variety of programs for prospective buyers, including Smart Start, which is designed to help first-time home buyers scraping together a down payment. The program offers a buyer the chance to get a second mortgage to cover down payment and closing costs worth up to 4 percent of the home’s purchase price. For Kushner, that translated into $6,000 toward the cost of buying her $170,000 home.”
“Another perk: If buyers keep the home as their primary residence for seven years, that second mortgage is forgiven. ‘We’re trying to save to buy a house, but we were just starting out so we didn’t have any money put away for it,’ Kushner said.”
The Daily Journal from New Jersey. “Area banks and lending companies say they remain ready, willing and able to make residential mortgages, despite the general fiscal crisis in their industry. ‘We would have no trouble lending a billion dollars tomorrow — if people would qualify,’ said Marc Goldberg, manager of Gateway Funding’s office in Vineland. ‘Qualifying has changed very dramatically.’”
“Goldberg said the secondary mortgage markets, like Fannie Mae and Freddie Mac, require the oversight. ‘It’s very unfortunate that they got pushed into taking the type of mortgages they never used to,’ he said. ‘The effect has been two things — No. 1 is to make sure the property we’re evaluating is actually worth what we’re saying it is. And the other is to make sure the buyer is capable of making the payment — and willing.’”
The Record on New Jersey. “The case was severe, but the storyline as told by real estate agent Karim Dawli is all too common in some areas: A bus driver with a modest income got a mortgage three years ago to buy a $420,000 house in Passaic, N.J. Today, with payments on her adjustable loan soaring, she is months behind on her mortgage, facing possible foreclosure and desperate for a solution. Dawli is working with her to arrange a deal that may bring in a far lower price than she paid but get her out from under her mortgage.”
“‘This case is extreme,’ said Dawli, an agent in Tenafly, N.J. But, he said, ‘there are a lot of cases out there like that.’”
The Observer Tribune from New Jersey. “Valerie and Gary Sylvester and their five children don’t want to become another casualty in the subprime mortgage scandal. But unless the Sylvesters get some last-minute help, they will find themselves homeless when their $1.2 million Birch Street home goes up for sheriff’s sale next Thursday, Nov. 13.”
“The Sylvesters’ story is all too familiar. They bought their 1,800 square foot split level in Mendham in 1989 for $197,000. In the ensuing years, Mr. Sylvester, who is a contractor, expanded and improved the home. By 2006, it was assessed at $1.2 million. Two years ago, they went the route of many people when they applied for a refinancing of their home mortgage, hoping for a lower interest rate and to gain some cash to pay off business bills. The refinancing was approved and a monthly mortgage payment was set at $5,100.”
“Their troubles began when the mortgage company boosted the monthly payments to $7,100. The family couldn’t afford the bills and the mortgage company moved for foreclosure. The Sylvesters have spent thousands in legal costs to no avail. They have lost in court and an appeal would cost at least another $7,000, money they don’t have. The mortgage company, meanwhile, is demanding payment of $200,000 in legal and other fees and repayment of the second mortgage, totaling $850,000.”
“They have pleaded to no avail for help from everyone from Gov. Jon Corzine and Sen. Frank Lautenberg, D-N.J. to Rep. Rodney Frelinghuysen, R-11, and the Morris County Prosecutor. ‘I have five children,’ Mrs. Sylvester said. ‘I can’t be put out on the street. Someone has to step up to the plate.’”
The Washington Post. “Michael Glosserman, managing member of JBG Holding, which is one of Washington’s most prominent private-equity real estate firms, and others have amassed hundreds of millions of dollars that they plan to use to troll the area’s commercial and housing real estate market over the next year in search of bargains.”
“Another prominent businessman who handles investments on behalf of a wealthy local family…talked to me under the condition that I not print his name because the family patriarch doesn’t want the attention. My friend said there is lots of money on the sidelines waiting for an attractive opening.”
“‘The deep discounted values have not materialized,’ said the investor, whose client is listed in the Forbes 400 of richest Americans. ‘The wait continues…What we haven’t seen is the current owner who has come to the point where they are willing to dispose of that asset at the bargain-basement price.’”
“Staff writer David Nakamura, has documented, sleek new buildings with offices, condos, apartments and retail space have risen around the ballpark, but many remain empty. Glosserman said prices for land near the baseball stadium could drop from $120 a square foot to as low as $30, making it too cheap to pass up.”
“Others are looking at the recently burgeoning condominium market north of Massachusetts Avenue in the District. ‘There are some busted condo deals that are still lurking out there that could be opportunities in the District as well as outside,’ said Esko Korhonen, who has $230 million in investor money that he is looking to put to work.”
The Daily News Record from Virginia. “For first-time homebuyers and real estate investors, foreclosed properties can provide an opportunity to get a jump on property that is priced lower than usual, said Angela Andrews, a Realtor with Century 21 Real Estate Unlimited.”
“‘Unfortunately, and honestly, I feel like [having foreclosure properties on the market] is not good from the standpoint that people are losing their homes,’ she said. ‘That being said, it does provide opportunities for purchasing properties at a lower price and helps to normalize the market because prices had become so overly inflated.’”
“In Rockingham County, 64 properties are listed in the various states of foreclosure, according to RealtyTrac. In Harrisonburg, 33 homes are listed in those various stages.”
“In September, one out of every 505 homes in Virginia was in some stage of foreclosure, statistics from RealtyTrac showed. That ranks Virginia No. 11 in the nation for its rate. Foreclosures that month - 6,397 in total - were up 229 percent from September 2007 and up 20 percent from August 2008.”
The Virginian Pilot. “While the abundant supply of homes in the region has caused prices to fall and encouraged some prospective buyers to wade into a market amid its biggest downturn in a decade, a study by an Old Dominion University economist found that, for many, renting may still be a better value.”
“The median monthly rental price of a three-bedroom house in Hampton Roads is forecast to be $1,287 this year, while the median monthly mortgage payment on a comparable house is $1,441, a premium of about 12 percent, according to the ODU study. The comparison does not take into account annual property taxes or federal income tax breaks for home ownership, both of which would affect the model’s conclusion. Real estate agents argue that including those would make up the difference between renting and buying.”
‘Gilbert Yochum, an economist at the university, said the model was constructed so economists could monitor the baseline measure of what families pay for housing on a month-to-month basis.”
“‘Before the price run-up in housing, it was very much in the interest of households to buy,’ Yochum said. ‘That was true all the way to 2003. Only then did you see the ratio climb so rapidly that by 2005 and 2006, the decision to own or rent was seriously moving back to the rent side.’”
“In 2003, the median rent of a three-bedroom home in Hampton Roads was $1,044, while the median monthly mortgage payment was $809. Despite the continuing rise in rental prices during the following years, the prices of homes went up so dramatically that by 2006, the equation had flipped, with rent prices at $1,164 and mortgage payments of $1,457. Greg Grootendorst, deputy director for economics of the Hampton Roads Planning District Commission, looked at the same figures and came to the same conclusion.”
“‘Even though prices on rentals have increased and housing prices have gone down, those two lines have not crossed back yet,’ he said.”
“There are signs that could change, however. Prices for existing homes fell 5.4 percent in September in South Hampton Roads, according to the region’s local MLS.”
“Barbara Wolcott, president of Prudential Decker Realty, said it is impossible to discount the income tax deductions, which offset much of the difference in the prices. Not to mention, she said, for buyers who wait out the downturn, prices will eventually rebound.”
“‘When you rent, at the end of five or 10 years, you have nothing,’ she said. ‘If you’re buying, you’ve not only built equity in your home, but the home value will have also gone up.’”
“Ron Pearson, a certified financial planner in Virginia Beach, said that for some it could still make financial sense to buy if they know they’ll be in the area for many years and have good job security. Having that long-term commitment is essential to making the math work, Pearson said, because it takes years of mortgage payments to build equity in a home.”
“‘It used to be, if you were going to be here a year, you could flip the house and make money on it,’ he said. ‘Realistically, that’s not the case anymore.’”
‘Floyd: ‘I think one of the other things he was talking about is affordable housing for people to not only dream the ‘American Dream,’ but live it in providing them with equal opportunities for first-time homebuyers to buy those homes. I think those homes before this drop were unreachable – even unthinkable – to people in our community…I think where he will come in to help with the housing is to get these banks and lending institutions to open credit so that people can buy some of these houses at affordable prices.’
‘Barbara Wolcott, president of Prudential Decker Realty, said it is impossible to discount the income tax deductions, which offset much of the difference in the prices. Not to mention, she said, for buyers who wait out the downturn, prices will eventually rebound.’
‘When you rent, at the end of five or 10 years, you have nothing,’ she said. ‘If you’re buying, you’ve not only built equity in your home, but the home value will have also gone up.’
You know, with everything that has happened, one would think that these kind of statements might go away. But like the California UHS, the rush to create new FBs continues:
‘We’re trying to save to buy a house, but we were just starting out so we didn’t have any money put away for it,’ Kushner said.’
‘When you rent, at the end of five or 10 years, you have nothing,’
Nothing, except a pile of money, tons of free time, mobility, and a lot less useless junk.
I rented a duplex for 10 years during and after Grad school. In addition to cash, time, flexibility, etc as you mentioned, I also had a lot of pull with the landlord when a bad tenant moved into the other unit. After a couple of complaints from me to the landord, the tenant was quickly told to leave! The landord was very good to me.
Yep - the whole “rent is throwing your money away” line really angers me since it assumes some sort of bizzaro world where the cost to buy a house (monthly PITI) is anywhere near rental costs, when that hasn’t been true for probably 10+ years in many places. In reality, the PITI on a typical over-priced Bubble Shack is probably 2 to 3 times montly rent for something decent, which is a huge amount of money.
“The median monthly rental price of a three-bedroom house in Hampton Roads is forecast to be $1,287 this year, while the median monthly mortgage payment on a comparable house is $1,441, a premium of about 12 percent, according to the ODU study. The comparison does not take into account annual property taxes or federal income tax breaks for home ownership, both of which would affect the model’s conclusion. Real estate agents argue that including those would make up the difference between renting and buying.”
Did the rent-versus-own study consider the value of avoiding a falling knife? Our rent in San Diego is $2,300 a month, and to a reasonable approximation, we rent the median-value home. The median SD home sale price dropped from $517,500 at the peak (Nov 2005) to $328,000 as of the most recently reported month (I believe it was Sept 2008). The capital loss avoided by not buying at the peak is approximately $517,500 - $328,000 = $189,500, which would be sufficient to enable a renter to throw away 82 months — nearly seven years — worth of rent. The rent-own comparison becomes even starker if one takes into account PITI, which this illustration does not.
‘When you rent, at the end of five or 10 years, you have nothing,’ she said. ‘If you’re buying, you’ve not only built equity in your home, but the home value will have also gone up.’
How does it feel to have -$200,000 in built up equity? I hope to never find out.
Old: Salem Witch Trial
“The number of new homes being built in Salem has hit a 30-year low. In Rockingham County, building permits dropped from 2,071 in 2003 to 749 in 2007, a 64 percent decline, according to statistics recently released by the state. Derry has issued just four permits for new homes in the past four months, Building Inspector Bob Mackey said. Mackey said developers are sitting on dozens of empty lots ready for new houses, waiting for the housing market to improve. ‘They’re waiting until the demand for new houses picks up,’ Mackey said.”
New: Salem Wait Trial
‘I have five children,’ Mrs. Sylvester said. ‘I can’t be put out on the street. Someone has to step up to the plate.’”
The don’t/can’t let me fail attitude stretches far and wide across this land. “Everyone is a winner” “It’s a no brainer”
The only person that needs to step up to the plate is her idiot husband who dumped a ton of money into an 1800 sq ft fixer upper and thinks its worth 1.2 million. If they would have invested their money in stocks……oops never mind.
There’s lots of people around the world that have 5 kids or more and never owned a home. They bought in 1989 and should have had little or no mortgage left. They had their chance and blew it. The sense of entitlement is almost maddening.
We’ve wandered around the sheds in Home Depot completely aware of how many families around the world who would be thrilled to be living in them as a home.
It amazes me how self absorbed people can get,,, I know how happier I am when I’m grateful for what I’ve got, rather than expecting that I deserve something more or better.
I’ve looked at some of their bigger sheds, and some of them would make a nice little cabin, if you added insulation, a little kitchen and a bath.
Some of them even have a “loft”.
Gulfstreamfixer,
My wife and I have looked at some of those ( we call them “pole barns” in Oregon ) and properly done they can have very nice lofts. Our neighbor built one and with a woodstove, they make for great places for gatherings.
Especially this time of year. We’re thinking about putting one up on some land in So. OR. You can finish out the interior at your leisure.
The refinancing was approved and a monthly mortgage payment was set at $5,100.”
“Their troubles began when the mortgage company boosted the monthly payments to $7,100.
Damn mortgage company. It’s clearly their fault.
Yea, the $600,000 (a guesstimate) they “pulled from their equity” is long gone and no mention of it.
I thought the same thing. At least 1/2 million dollars ‘disappeared’ into the ether.
Why can’t reporters ask what they did with the money and then ask the people if that was a responsible thing to do when you have 5 children.
“Physicist Albert Bartlett believes the greatest shortcoming of the human race is our inability to understand the exponential function. This function explains, for example, why it took 17 years for an introduced population of 29 reindeer on St. Matthews Island to reach 3,000 animals but only two more years to add the next 3,000 animals.
Unfortunately, reindeer don’t understand the concept of carrying capacity and three years later their population of 6,000 had crashed to only 42 animals. Today there are none on the island. There can be severe consequences to ignoring natural laws.”
Unfortunately most HUMANS don’t understand the concept of carrying capacity either. I often wonder how soon the population bubble will burst.
Hint: The reindeer and human curves are *exactly* the same up to where the reindeers are 6000 on that tiny island… all was well until then.
10 years later? Lotsa shiny skeletons.
Natural laws are the laws can not be ignored. Very thing is governed by it. Reindeer’s extinction on the island is the consequence of natural laws, whether they ignore is or not, consequence is doomed to happen. Maybe they could enforce birth control if they were smart enough, but they could also be accused of lacking animal’s rights.:-)
“The Sylvesters’ story is all too familiar. They bought their 1,800 square foot split level in Mendham in 1989 for $197,000. In the ensuing years, Mr. Sylvester, who is a contractor, expanded and improved the home. By 2006, it was assessed at $1.2 million.”
What the heck is this?…they had a house they paid LESS THAN 200K for… built it into a 1.2 million dollar McMansion..put it into another relative’s name(ruining that person’s credit) and then took out a mortgage for close to a million dollars…and we need to feel sorry for them??????
They think we should feel sorry for them.
I’m wondering if the kids would be better off in a different home.
“‘When you rent, at the end of five or 10 years, you have nothing,’ she said. ‘If you’re buying, you’ve not only built equity in your home, but the home value will have also gone up.’”
Correct me if I’m wrong, but if you bought a house that is now worth less than you paid for it isn’t that less than nothing?
Even if it isn’t worth less, what ever you do have, you’ll have 6-9% less of it due to realtor’s fees and other transaction costs, right off the top.
Not to mention all that you’ll have paid back against the loan balance on a 30 year mortgage in a few years’ time is typically a few thousand dollars at best. It would be interesting to see the rent vs. buy comparisons for 15 yr mortgages, where in fact you really are beginning to make a dent in the loan balance after a few years.
Did I menion maintenance costs?
iftheshoefits,
After TEN years of paying faithfully on our 1st. mortgage our principal was reduced less than 8k on a 130k mortgage! THIS is one of the primary reasons I began to re-think our entire relationship w/ real estate.
It was a huge ( well at the time ) place of over 2,400 s/f on 3 acres and was in no way appropriate for empty nesters. ( So much for the “you were on the 5 yard line argument? )
If your final home isn’t on at ‘least’ a 15 yr. mortgage or less you’re setting yourself up for failure in retirement. I know a lot of people either love or hate Dave Ramsey but I think what I stumbled on made things simple. No New Debt After 40!
Hey, I personally disagree with Dave on politics and religion, but he pretty much bats 1000 every day on personal finance.
I also disagree with him on investing (mostly) and the economy, but that’s fine. He’s a real estate guy and … I’m not.
His books are crap except maybe this latest one, but you can listen to his radio program (which is excellent) online for free. If you are in debt, or have little savings (you should be aiming to have at least 10x income saved), you may want to give him a try. He’s very motivational and knows the ins and outs of dealing with credit card companies, debt collectors, and foreclosures.
His real strength is getting people to realize that it’s completely possible and a worthy goal to live life in the black. He gives me hope, too, to think I’m not completely weird for seeing debt free=freedom.
I agree with you that his weakness is what to do with that money once you’re committed to staying out of debt. He’s pretty well a perma-bull on real estate and stocks.
RE: No New Debt After 40!
Dave Ramsey needs a rip-roaring, nasty divorce stuck up his wazoo.
Then he can really pontificate about financial planning.
hd74man,
I’m more a fan of his ‘message’ than I am of him personally and I don’t even know if the guy is married? Recently though it dawned on me that taking that approach would kind of put him out of a job? I mean as a “guru”.
I’m going to simply start telling couples, you can run up all the debt you’re comfortable with, up until age 40. That doesn’t mean some of your payments won’t continue to be a bummer, but can you imagine what an inspiration that would be!? How liberating, whatever else happens in my life I’ll at least know that if I stick to my plan, if nothing else, I won’t be going any -further- into debt!
A divorce … from Reality! Sounds like a Housing Bubble! Child Support payments = Mortgages. McMansions = Fat Lazy Kids!
“I’m going to simply start telling couples, you can run up all the debt you’re comfortable with, up until age 40.”
What horrible advice! Living in debt is to choose a lower average standard of living over the long-term. Why choose to do that for the first twenty-years of your adult life???
The choice most people make of instant gratification over higher standard of living is one I’ll never get… Most people just don’t “get” math, I guess.
This is why I won’t be taking on anything more than a 20 year mortgage when it is time to buy… the problem being that probably nobody will give me one. I might have to shoot for 15.
It also makes sense to have a 30-year mortgage, but pay it back on a 15-year schedule. That way, if you run into hard times, or an unforeseen medical expense, you can pay only the lower 30-year scheduled payment.
Less risk, and achieves virtually identical results as a 15-year mortgage.
I wouldn’t even consider signing up for a 15-year mortgage — it just doesn’t make sense to lock yourself into the higher payments, given the above scenario.
And property tax? And insurance? And all the gear needed to keep up the place? (lawnmowers, ladders, lawn care supplies?). I’m sure there’s more that I can’t recall right now.
And you didn’t get “nothing” for renting for 5-10 years. You got a place to live for that time period.
Underwater Home = Gov’t Assistance = $$$$$
Underwater homes are actually the most undervalued asset today. You’re crazy not to get in waaaay over your head. You get a $billion no interest loan from the treasury. Use it to upgrade a bathroom. That will add a lot of value to your home.
“The case was severe, but the storyline as told by real estate agent Karim Dawli is all too common in some areas: A bus driver with a modest income got a mortgage three years ago to buy a $420,000 house in Passaic, N.J.”
This is why the gov’t can’t stop the crash. Under the return-to-sanity, conventional lending standards, a HH income of about $140K is required to swing a $420K home purchase. So, that bus driver will never be able to refinance into a loan that’s sustainable over the long haul, and the chances of finding a $140K HH willing and able to make him whole financially are miniscule.
So true.
It will be a long, hard road, I think to get the masses and the media to accept what a “bubble” really means. Too many, including those in my personal circle, currently cling to the hope that the party is somehow coming back a year or two from now.
The party in VT ended in spring 2006 when we were fortunate enough to sell. I believe that our modest little house will never be worth what we sold it for within my lifetime, adjust for inflation.
The “hope that the party will soon come back” meme is still alive here in Tucson.
“Got a mortgage three years ago to buy a $420,000 house in Passaic, N.J.”
There is no house in Passaic NJ worth $420K. He got a house he could afford from a price he couldn’t afford, as did many others.
In booming Sunbelt areas people may have bought too much house. In NY they bought the same house they should have had for too much money.
WT,
Good point and important distinction. We noticed our newly-wed daughter in the same scenario. It wasn’t that the homes they were looking at *wouldn’t have been “reasonable” under normal circumstances?
After all she grew up in a home a lot like they were looking at and “mom and dad” weren’t much older when they… bought it!? So why shouldn’t ’she’ have the same? Well… because when your mom and I bought, the PITI was about 30% DTI ( and not a penny more ) For twenty-somethings it would have been twice that! That’s why not my dear.
It’s hard to swallow that things are different at that age when you go to look at house. At least you have a sensible answer and are encouraging her not to buy. Most of my relatives either gave me blank stares and 1 called my husband to put every scare tactic in the book to get us to buy again immediately.
The blank stares were preferable to the latter.
Until those people get to have their loan “reworked” to a principal of like 100k.
Who benefited? whoever sold the original loan and ran away with the 400k+
The feds will pick up that slack. This is taxpayer’s worth dilluted to “get back” to fundamentals.
Whoever did this should be hunted down and processed like Caucescu was in 1989.
‘ Correct me if I’m wrong, but if you bought a house that is now worth less than you paid for it isn’t that less than nothing?’
The point was raised here every now and then that mobility will be key to staying ahead of the curve in the years to come. JOBS will a big factor for people deciding where to live period. Being tied up into a house as prices drop is a way to learn about markets the hard way. Not until the masses swear off houses as a no-brainer hedge and the REIC starts crying uncle about interest rates killing sales will we have bottomed, IMHO.
Kids in school and “mobility” aren’t exactly compatible. It’s not just about buildings, but family, “haviing roots,” etc, too.
‘Builders should have seen it coming, but they continued building every year, and the bubble has burst.’”
You know, one would almost come to conclude that builders were/are extra, sooper-dooper, particularly REtarded and delusional, if one had a nasty, critical, uncharitable disposition.
Yes, you could conclude that if one is cursed with some sort of “negative nellie” DNA gene. Luckily for us, the media is part of Corporate America and is all positive, all the time.
Therefore we should conclude that failing to notice the largest price run-up in modern history was merely an oversight, like forgetting to put on an outlet cover or putting the building in the wrong place. It happens to everyone and we should cut them some slack.
I look at the builders this way…..It was like a black Jack session…..They were betting 1 bil each hand…As each hand was played and they won they put 1 bil back in their pocket and continued to let the billion dollar bet ride….At the end of the day, they may have lost their billion dollar bet but how many billions did they put in their pocket before the end of the game….They knew it and encouraged it all under the guise of “the ownership society”…Biggest scam I have seen in my lifetime…It dwarfs the S & L scam in the late 90’s….
Well the S&L crisis was a bit earlier but I get your point. It’s a perfect analogy. The builders got addicted to the leverage and that’s why they were “all in” on every project/subdivision!
Primarily though the reason they continue to build long after it’s past peak demand is b/c… they’re builders! It’s what they do! LOL!
Builders will build, as long as they can get financing. They don’t know how to do anything else.
I’m becoming more convinced that the Wall Street boys and their paid peons in Washington enabled this housing bubble (along with manipulating statistics) to camoflage/obscure the fact that they were exporting the job market, in search of cheaper labor.
Normally this would have led to net employment going down, which means a recession, which leads to slower sales and less profit. By pumping a housing bubble, they could maximize profits while minimizing investment (no college trained engineers, no expensive infrastructure, no regulatory compliance, just hire off the street, and easy-to-dispose-of computers, and some leased office space).
Gulfstreamfixer,
I can definitely see how some of us could feel that way but if you look at GWB’s and Greenspan’s relationship from inception their objective was to support Tech/Telecom. They kept lowering rates but CFO’s wouldn’t commit to borrowing money as ( unlike the HB ) they admitted openly there was no demand for “bandwidth” and that taking the plunge would have meant your competitor would only have a lower cost of money with the very next Fed meeting!
So they sat on their wallets and we got a Housing Bubble instead. ( Hey, any port in a storm right? ) I don’t believe there was any plot from the PTB ( they’re not that smart ) In the end what we did, we did to ourselves. Nobody cared about the workplace as they didn’t plan on being in it all that much longer. Once rank and file working Americans saw their home/s put them on a better path to a secure retirement than the stock market… there was no stopping this thing!
I guess my fundamental problem is that government is WAY too involved in picking “winners” and “losers” by using tax and regulatory policy.
IMO opinion, any government support should only be going to companies critical to “national defence”
But as long as you are bailing people out, you can make the case for a Big 3 bailout better than you can make for the continued Wall Street bailout……..$50B to “save” 3 million jobs, vs 1 trillion plus to the banks and AIG
Once rank and file working Americans saw their home/s put them on a better path to a secure retirement than the stock market… there was no stopping this thing!
I agree. My in-laws were “all in” by 2005 when the peak hit. Their retirement money, to this day, is tied up in several rental properties.
I also agree that PTB went along for the ride. My general rule of thumb is to never use conspiracy to explain action in situations where incompetence will suffice.
Vermontergal,
Very well said. Look, I know b/c I recall each Fed mtg. the same way realtors have waited for each recent rate cut!
Oh…oh, this (1) ought to do it! This puts the cost of money at ____. That’s GOT to get these CFO’s off the fence!? They were trying to “re-inflate” the NASDAQ ( but got a housing bubble instead? )
I think Gulfstreamfixer has it absolutely right b/c there wasn’t even the necessity of ramping up people’s skills or qualifications whatsoever! How long does it take to get a realtor’s/contractor’s/mortgage broker’s license? 2 weeks?
these stories are disheartening b/c after a couple years of bat-in-the-face education on the realities of housing in a crash, you still read the moronic quotes of those who have completely internalized the lies of realtards:
real estate goes only up.
rent is a waste of money.
you can’t lose with real estate!
they’re not making any more land.
and you have that 23-year-old pup in the article who hasn’t learned a damned thing — she’s young, of course — financing a car and trying to buy a house on credit. no credit for you! or soup either.
From the 23 year old girl buying her 27 year old deadbeat boyfriend a house to the couple who fought their mortage company in court and lost, this post could be a commerical for bad idea jeans.
“I fought the law and the law won”
AND the 23 yr. old cosigned an auto loan for the boyfriend.
I give them a year.
Oh boy.
I see we have a very, very long way to go with this mess.
It looks like taxpayer dollars, at every level imaginable ( local, state, federal ) will continue to be wasted on very bad loans.
Let’s see…..23 yr old girl has to “cosign” for a car loan for her 27-something yr old “boyfriend”………AND THE BANKS ALLOWED IT. Even considering she was also responsible for a brand new Nissan Altima……Lets see….23 yr old girl is on the hook for two (2) cars and so the “system” goes ahead and approves her for a mortgage.
UNBELIEVABLE, the 23 yr old girl goes out and gets a home with first and second mortgages, NO MONEY DOWN WHATSOEVER, for her and her “boyfriend”.
I am beyond words.
Coming up and entering my adulthood in the 80’s, such things were absolutely unheard of. No loan officer at any bank would ever allow such an oversight and negligence in prudent lending.
I’ll bet my next paycheck that:
1) The 27-something “boyfriend” wants to be a rock star someday.
2) The 23 yr old girl just got a new tatoo.
- AND -
3) In 1-2 years the puppy love will die and the kids will toss the keys on the roof.
We saw a bunch of this stuff here in Central Florida; the shoehorning of young unmarried twentysomethings into homes that they could never have afforded otherwise…..Boyfriend / Girlfriend couples playing “house” for the first time in their lives in a brand-new 4 brd/3ba 3500 sqft home…….
It has happened on a Grand Scale. And, apparently, the practice continues as I type….
..
Ahhhh to be young, stupid and in love…..
Youth and love tend to be self curing. Not so stupid, in my experience.
Nice, Blue Skye…
A crotchety old teacher of mine used to put it this way: “Ignorance is curable; stupid is forever.”
Les,
Hey wait a minute! I wanted to be a rockstar too, ( oh wait I was 17 not… 27? ) Right, this is the very brand of “stealing from future sales” that brought us to this point. It’s not that they couldn’t be qualified ’someday’ just not TOday?
At least she doesn’t call the BF her “fiancé.” LOL
I remember having delusions of homeownership when I lived in Pittsburgh. They struck shortly after I found full-time employment at one of the local universities. My annual salary was a whopping $13,000 per year, and I began bragging to my friends about plans to buy a house.
My friends politely informed me that my salary wouldn’t qualify me to buy a doghouse.
So, I kept on renting and saving my money. A year later, I left Pittsburgh. The job didn’t work out, and I wanted to light out to see the country (again). Me and the bike went from Mexico to Canada, and, oh, was that fun. Not being tied down to a house made it even more so.
But this is what our imbecile Government hacks want……..more people in houses. It’s the job of the government to MAKE IT affordable.
Economics is irrelevant. If they can’t afford the payment, we’ll just adjust the interest rate down.
If that doesn’t work, we’ll re-set the payments down.
When that fails, OBAMA will follow the current administrations and give them an “economic stimulus” check. His FIRST proposal to help the economy. We are soooo screwed.
Nothing matters anymore concerning sound economic principals. The government needs to make it work out somehow, someway, someday …….to be fair to everyone.
Anybody else watching the Housing X Games?
“‘This case is extreme,’ said Dawli, an agent in Tenafly, N.J. But, he said, ‘there are a lot of cases out there like that.’”
A bus driver getting a $420k loan on a house, that’s extreme, dude.
..
Definitely some “Big Air” for the bus driver from Tenafly, NJ.
Next up……A young, under-25 unmarried couple does a $ 400,000 No Money Down mortgage on the half-pipe !!:)
….dude……
..
dude, like when somebody self-waterboards themselves when signing on the dotted-line of something they could never hope to pay off, you know they are so rad.
Oh wipe out! He got nailed by those ARM resets. FICO out man! And look at him take out his frustration on those walls. That’s definitely an extreme artistic make over. And it looks like the Judges liked that ride, appraising it 12% higher.
LOL
Sylvester Stalled Loan?
“Valerie and Gary Sylvester and their five children don’t want to become another casualty in the subprime mortgage scandal. But unless the Sylvesters get some last-minute help, they will find themselves homeless when their $1.2 million Birch Street home goes up for sheriff’s sale next Thursday, Nov. 13.”
Yo, Adrian!
It sucks that FICO scores are usually needed to secure a rental…they wouldn’t be facing homelessness otherwise.
But then again, FICO is totally overrated, inaccurate, and abused. FICO didn’t prevent a lot of folks from getting loans they should have never had.
FICO was supposed to be a way to provide loans without “discriminating” about their qualifications. It provided the excuse lenders needed to write bad loans. It has proven to be the worst decision concerning “‘qualifications” ever devised.
It made computer generated buying decisions possible, without ever looking at the person’s “creditworthness”, in relation to the loan.
Whispers of the moneyed ones stepping up to the plate and buying up all the bargain stocks in 1930, were planted by the trolls of that era, which look amazingly like the trolls of present-day supposedly buying up all the bargain houses…
====================================================
“Michael Glosserman, managing member of JBG Holding, which is one of Washington’s most prominent private-equity real estate firms, and others have amassed hundreds of millions of dollars that they plan to use to troll the area’s commercial and housing real estate market over the next year in search of bargains.”
Everyone wants to
livespeculate here!Excuse me, CrookCounty, but here at thehousingbubbleblog any and all use of the STRIKE element is reserved exclusively for
Get StuccoProfessor Bear.Luv,
Jen
Meanwhile, in the land of Maryland (”Bedlam by the Bay”), nothing really changes…
I saw a “great deal” be advertised around the halls at work: a 3 bed, 3 bath farmhouse built 1912… with updated kitchens, bath, etc. Not really sure about central air, and I shudder to think of the costs of keeping an old place like that going. Oh, but here’s the neat part, FLOOD INSURANCE IS REQUIRED for this wonderful house! Hahaha - wow! How much for this literally “underwater” house? Only $280,000!!! That’s almost 5 times median household income for the county and the state… for an almost 100 year old house build in a flood zone!
And the Bubble just keeps on going!
You know that 40% down in California this year? I wonder if the NYC Metro gets the same next year.
“The median monthly rental price of a three-bedroom house in Hampton Roads is forecast to be $1,287 this year, while the median monthly mortgage payment on a comparable house is $1,441, a premium of about 12 percent, according to the ODU study. The comparison does not take into account annual property taxes or federal income tax breaks for home ownership, both of which would affect the model’s conclusion. Real estate agents argue that including those would make up the difference between renting and buying.”
**********************************************************************************
I might be confused or misunderstanding this, but are they saying that the more you pay in income and property taxes, the more money you will save? Are they saying that the tax breaks will be enought to where the $1,441/month in mortgage will actually have averaged closer to 1,287-1,300/month when factoring tax breaks?
If $1000 of that mortgage payment is interest, and assuming you’re in the 28% tax bracket, your potential tax savings would be $280. This assumes that you’ve already accrued above the standard deduction in tax credits.
“The median monthly rental price of a three-bedroom house in Hampton Roads is forecast to be $1,287 this year, while the median monthly mortgage payment on a comparable house is $1,441, a premium of about 12 percent, according to the ODU study. The comparison does not take into account annual property taxes or federal income tax breaks for home ownership, both of which would affect the model’s conclusion. Real estate agents argue that including those would make up the difference between renting and buying.”
==============================================================
Are they saying that the more you pay in income and property taxes, the more money you will save?
Just what is this “Saved money” and where do you find it?
CRISIS ? WTF
one out of every 505 homes in Virginia was in some stage of foreclosure, statistics from RealtyTrac showed. That ranks Virginia No. 11
With just a little more dedication, and the old college try, they could break into the top ten…….
Ok, I read the posts everyday for about a year and a half. I never posted any thing, but today I have a story that I think you guys will like. My 10 year old had his friend over and I asked what does his parents do. I don’t remember what he said his dad did but he said his mother will be making sandwiches at the deli tomorrow, then he said don’t tell anyone shes does not want anyone to know. I said why? He said she used to be a realtor. Big Mcmanson built in 2005, large taxes on it. Its starting to look crazy here in naperville!
Poor kid!
Why?
There’s nothing wrong in being someone who makes deli sandwiches. He will learn that illusions don’t pay.
Bully for the kid. He’ll probably grow up to be alright.
I agree, FPSS. In fact, this kid is lucky, cause his mother is smart enough to go do something useful rather than sit and whine about how a deli job is beneath her.
I respect pluck and people that try to pick themselves back up. The kid will learn something by watching the choices his parents make.
Because his parents are asking him to lie for them. His parents are putting him in weird spot.
And let’s face it, she does think the deli job is beneath her. She’s willing to do it (for how long we don’t know…) but it’s all “hush-hush”.
I wonder if she’ll get a 6% cut of each sandwich she sells.
I’m thinking that Century 21 jacket will match that Subway uniform quite nicely…..
All kidding aside, I’ve always had a soft spot for people who do their job professionally and efficiently, especially those on the lower rungs of the economic food chain.
No, but I bet she sticks her realtor business card in among the napkins as she packs up the customer’s order.
She will. It’s called the crusts.
It’s a more honest living than her former form of revenue. Apparently, she has limited skills. The child should be told it’s an honest living. IIRC, Louis Armstrong’s mother was a prostitute. She too made an honest living, and actually offered a valid service.
For some people, buying works out great…but you need common sense.
Dont buy because everyone is doing it and you fear you’ll be left behind.
Buy somewhere you want to live for 20 to 30 years if need be.
Buy because you love the house, not because you want to flip it for profit.
I bought a house for 40k in ‘92 and sold for 95k in 2000. So eight years were basically rent free even with taxes insurance repairs and interest.
Next place was175k in 2000 (75k down from sale of first house)
30yr fixed @ 6% It will be paid off this year with accelerated principal payments. The value of this place went to 750k in height of bubble and has now dropped to maybe high 3’s. But who cares? I’m here for the long term, and when I do sell, some portion of these funds that I have paid out will be returned to me. Over 20 to 30 years I will come out financially ahead of someone that rented over that period. And as long as I pay, I can stay. Renters dont know when they will be shown the door.
Opportunity cost loss of $400K is not insubstantial.
Go away, troll! We see through your BS.
Look, he bought at 175k. He’s arguing that he doesn’t care if it falls down from $750k. And that makes sense to me.
If I had to do it all over, I would have bought in 2001 too and been able to watch the nonsense with detached amusement.
Unfortunately, the story does not give me much reason to buy now. I am pretty sure I will buy too soon for the HBB, primarily for emotional reasons.
But it does matter. The loss is real.
That would be the opportunity cost, wouldn’t it now?
Opportunity costs, sure, but you or I could have bought a house in 2002 for no money down and resold it in 2005 for a big profit too. Did we suffer an opportunity loss–I suppose so, but then we missed big opportunities in gold, the stock market, and oil wells too. I like to think of opportunity costs as the forgone income on my own capital, not some bet I did not make on the outcome of a horserace. In that sense, Sam is only out the interest on his $75k downpayment and other tax, maintenance and interest expenses. He is probably still ahead of the game.
“…primarily for emotional reasons.”
I may never again buy, for similar reasons. Real estate is the worst investment, especially when a recession and a credit crunch are killing housing demand, which in turn is driving up foreclosures, driving down comp prices, leading to job losses which are leading to more foreclosures and demand destruction, etc.
The loss is not real if I had no intention to sell. If it were a real loss, I should be able to claim it on my tax return. Why exactly does this make me a troll? All I meant is that if one buys in a sane market/economy,(which this surely isn’t and has not been for some time) then buying can at least return some of your housing costs to you that renting never could
“Renters dont know when they will be shown the door.”
My landlords love our arses, because we are always good for the rent. The feelings are mutual, as for our rent (which did not increase this past year), we get free rec club membership (cost covered by the landlords), access to good public schools (kids get far better education than I had) and even lawn care services. This is symbiosis at its best, and I think we are going to be able to stay here until prices bottom out by 2012 or so, at which point we will find a nice foreclosure home to buy (from which some owner was recently shown the door).
“Over 20 to 30 years I will come out financially ahead of someone that rented over that period.”
Oh right, of course you will, because real estate always goes up, over the long run.
A classic example of someone blinded by their own dumb luck to buy at the right time in the cycle.
What if you had paid $750K in 2005? Would you still say “Who cares, I’ll live here for 20 to 30 years” as you kill yourself paying off a mortgage on a $750K home?
The loss is hardly real if I had no intention of selling. There were many times I looked at what houses were selling for and said ” wow, I should cash in” but you would never get ahead in this game because the replacement house had risen just as much. Only if you moved to a worse area could you maybe get ahead. I’m not sure why this makes me a troll. My only contention is that if the circumstances are right (meaning pre 9/11 prices/economy) one could probably come out further ahead buying rather than renting
Not at all. Rent a house in the same area, and buy back in after the correction.
If renting is so great, why do I often see people extol the virtues of renting, then mention how when the market bottoms out, they too, will jump right in?
People here aren’t anti-house, they’re anti-insane-mortgage-payment.