There Are No Fairy Tales Now
The Helena Independent Record reports from Montana. “New home construction has plunged in Lewis and Clark County, according to figures compiled by the Montana Building Industry Association. In the city of Helena and the closely surrounding area, the average sale price fell 3.7 percent in 2008, to $217,245 from $225,551 the previous year. But most of that drop can be accounted for in the upper end of the market, officials say. ‘It’s been the over-the-top trophy homes that have taken the hit,’ said Steve Netschert, president of the Helena Association of Realtors.”
The Billings Gazette from Montana. “Unlike the national recessions dating to 1991 that largely missed Montana, this one won’t let us escape the ugly meltdown. ‘We thought the national recession was going to miss Montana and this would be the third time in a row it missed,’ said Paul Polzin, former director of the Bureau of Business and Economic Research at the University of Montana.”
“By July, the bureau revised its Montana forecast downward. By September, Polzin said, things had deteriorated so badly that ‘the world is now starting to fall apart.’”
“The Kalispell area might be the hardest hit because of mill closings and the drop in home construction. Construction is the key industry showing significant and widespread declines, especially in Gallatin and Flathead counties. ‘Flathead construction has gone bust entirely,’ he said.”
The Bend Bulletin from Oregon. “A development that was conceived during the height of Bend’s housing boom but failed during its bust has gone back to the bank. The Shire, a 15-lot, village-themed concept in the southeastern part of the city, was marked by its Old World housing styles and fantasy setting styled after J.R.R. Tolkien’s ‘Lord of the Rings’ series.”
“Umpqua Bank, which held a public auction for the property Dec. 29 that received no bids, foreclosed Jan. 16, according to Deschutes County property records. The bank originally loaned $3.4 million in December 2004. Umpqua has listed the 6-acre property — which includes 14 vacant lots and one partially completed house — for $1.3 million, said Brian Meece, the bank’s listing agent.”
“‘We obviously made the loan based on knowledge that we had at that time,’ said Lani Hayward, Umpqua’s executive vice president of creative strategies, based in Portland. ‘Umpqua is pretty good at doing its due diligence on those kind of deals. This was a new development starting at a time that was unfortunate.’”
“One home sold in the development, for $650,000. A partially completed home, the only other home built on the subdivision, was listed for $899,000 in July 2008. The Shire’s lone homeowner, Greg Steckler, would like to see the bank sell the project to a developer who would retain the project’s original vision, he said.”
“‘We don’t know what’s going to happen,’ Steckler said. ‘There are a lot of people interested in The Shire, but with the economy, everyone is pulling in their horns and the bank wants to get their money.’”
From Bloomberg. “The U.S. housing market lost $3.3 trillion in value last year and almost one in six owners with mortgages owed more than their homes were worth as the economy went into recession, Zillow said. About $6.1 trillion of value has been lost since the housing market peaked in the second quarter of 2006 and last year’s decline was almost triple the $1.3 trillion lost in 2007.”
“Seattle and Portland, Oregon, values tumbled 12.1 percent and 11.7 percent, respectively, the first time those cities dropped more than the nation, Zillow said. ‘A witch’s brew of economic insecurity, foreclosures and tightened lending standards are helping to keep hard-hit markets down and to widen the scope of markets showing declines. It’s like a runaway train gaining momentum,’Stan Humphries, Zillow’s vice president of data and analytics, said in an interview.”
“The number of homeowners with negative equity, or those who owed more on their homes than the property was worth, rose to 17.6 percent from 14.3 percent in the third quarter, Zillow said. ‘Negative equity will trigger new foreclosures, and that will add to inventory and depress prices,’ Humphries said.”
The Bellingham Herald from Washington. “Home prices in Whatcom County continued to fall in 2008. Zillow said home prices in the fourth quarter 2008 were down 4.9 percent year over year in the Bellingham metro area (Whatcom County). Percentage of Whatcom County homes sold for a loss in 2008: 12.8. Negative equity: 10.4 percent of all homeowners in Whatcom County were in negative equity at the end of 2008.”
“Whatcom County lost $1.5 billion in home values in the fourth quarter of 2008 compared to the previous quarter. The highest point for the Zillow median price value was in the third quarter of 2006; since that time the value of Whatcom County homes has dropped 10 percent.”
The Seattle Times from Washington. ” Zillow found that 29 percent of homes in the Seattle-Tacoma-Bellevue area sold at a loss during the final three months of 2008. And a Seattle Times analysis of property data from the King County assessor’s office shows that early summer of 2005 was the tipping point. Most homes bought since mid-2005 and sold during the last three months of 2008 fetched lower prices than their owners paid in communities ranging from Mercer Island to Kent to Federal Way.”
“Sellers hardest hit were those who bought in the first three months of 2007. If they sold their homes in the fourth quarter of 2008, they typically lost more than $100,000. The data also show more than 20 percent of all Seattle homeowners are ‘underwater,’ particularly those who bought during the real-estate market’s peak in 2007. More than half of all area homes bought that year have negative equity, the report showed.”
“More than 10 percent of all transactions during 2008 were short sales. All this spells the likelihood of more economic hardships to come, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.”
“Underwater homeowners often lack enough equity to qualify for record-low mortgage rates that could save them hundreds of dollars in payments each month. Those who want or need to sell their homes must offer steep discounts or freebies to woo buyers in a slow market and also convince the bank that they’re in straits dire enough to approve a short sale, Crellin said.”
“‘That’s going to slow the process down and makes it even harder to buy the house,’ Crellin said.”
The News Tribune. “Construction on the eight-story Midtown Lofts condominium project in downtown Tacoma has halted after construction financing expired. The 50-unit building is about 65 percent complete, Tom O’Connor said Tuesday. He’s the managing partner of the company developing the project.”
“Frontier Bank is considering whether to extend the term of the construction loan, O’Connor said. But new appraisals of the project have erected obstacles in the building’s path, he said. Those new appraisals came in at less than half the amount already committed to the building, he said. The bank now estimates that under the current depressed market conditions, selling out the building will take about four years, said O’Connor, who didn’t say how much the loan was for or how much more he needed.”
“The 50 condos were to sell for prices between the mid-$200,000s to $800,000s for a three-bedroom penthouse. The developers have considered converting the building to apartments, but the building, made of concrete and steel, may be overbuilt for that use, O’Connor said.”
“Condo projects around Tacoma have stalled as the housing market declines and loans become harder to find. A four-tower project and a hotel with residential units on the Foss Waterway have been postponed. So have residential projects near the Stadium District.”
The Olympian from Washington. “The nine-story building that stands between Capitol Lake and Budd Inlet in downtown Olympia has a new name and a new look, and the owners spent about three hours Friday trying to land new tenants. Jim Potter, who has owned the building since 2005 with two ownership groups, said Friday’s event was a chance to introduce the building to about 100 people. Potter paid $11.9 million for the building in 2005, Thurston County Assessor data show.”
“So far, nearly $1 million has been spent on renovations, including gutting every floor. The building dates to 1965 and has been vacant for about two years. At one time, Potter’s group considered residential condominiums for the building, but that changed when the real estate market collapsed, he said.”
“‘We believe it’s the finest real estate in Olympia,’ he said, adding that it has views of two waterfronts and Mount Rainier. ‘It’s something special.’”
The Columbian from Washington. “When the Bank of Clark County failed two weeks ago, its sudden collapse hurt hundreds of local developers, investors and depositors. At least six developers who were midway through Bank of Clark County-funded construction projects have found that they can no longer draw down credit. ‘The (FDIC) is going to leave me with unfinished homes that cannot be refinanced, rented or sold,’ one developer told The Columbian.”
“These developers are just the first borrowers to feel the tsunami effect of the Bank of Clark County’s failure, said Jeanne Firstenburg, chief operating officer at Vancouver-based First Independent Bank. ‘Some loans need to be renewed a little ways out,’ she said. ‘Now when those Bank of Clark County loans mature, they will be called.’”
“First Independent, founded in 1910 and family-owned, has 20 branches in Clark County — more than any other bank. Much of First Independent’s growth over the past decade has been fueled by construction and land development loans, which at their June 2006 peak made up 56 percent of all the loans on First Indy’s balance sheet.”
“As the economy has cooled, many borrowers have fallen behind or looked for new payment plans — which in First Independent’s case could have hurt financial measures that federal regulators closely watch. But because its Firstenburg family owners are deep-pocketed, the bank’s holding company was able to buy more than $50 million of First Indy’s loans in late 2008…Combined with a decision to take a $5.2 million paper loss, in order to reserve against further losses, these moves have put First Independent on solid footing.”
“‘There are no fairy tales in banking right now,’ Firstenburg, the chief operating officer, said. ‘You’ve got to be honest about your situation, recognize your challenges early, and make decisions about how you’re going to respond. We are all becoming better bankers because of what we’re going through now.’”
The Seattle PI. “Defendants in the federal class-action suit against Washington Mutual have filed their responses to the plaintiffs’ allegations about the practices that led to the thrift’s downfall, and while they are separate, they appear to share a common argument: Failure to anticipate just how bad the housing-finance downturn would be is not the same as fraud.”
“The defendants — former Chief Executive Kerry Killinger, other top executives, the outside directors of WaMu, accounting firm Deloitte & Touche and Wall Street firms that issued securities for the company — argue the suit should be dismissed for multiple reasons.”
“On the charges about subprime lending, top WaMu executives say, ‘The law does not discourage banks from lending to home buyers who do not qualify for traditional loans. Indeed, WaMu’s regulator encouraged the practice, as it opened the possibility of home ownership to a wider segment of the population and permitted WaMu to earn higher returns for investors in exchange for taking on increased risk.’”
“‘Plaintiffs cannot craft a claim out of the fact that Mr. Killinger, along with the rest of the country, failed to predict the severity of the housing crash and the impact it would have on WaMu.’”
Ben (and anyone else who would care to comment):
A little off topic but…
As a faithful HBB reader since 2006, I have come to this board on a daily (sometimes hourly) basis in a near obsessive manner to catch up with and keep informed regarding the mother of all Ponzi schemes, that is the run up in real estate prices worldwide over the years. Early on, I tried to engage in conversation with my friends and colleagues about how the run up in housing prices was not sustainable and would ultimately be disastrous for our economy. Naturally, this was not welcome news, as everyone knows that real estate always goes up and that owning a house is the fastest way to build wealth, and that it’s never been a better time to buy, and after all, I was just a bitter renter who was jealous of the success of others. Well, it turns out I (and we) were right and they were wrong.
That being the case, this is the situation I find myself in, and would like to hear some advice from those among us who are more business minded than I. I currently rent a place, and the landlady has informed by roommate and I that she will not be renewing out lease, and plans to sell the place this summer. She bought it in 12/05 for $170,000 (previous sale price $80,000 in 1998) and thinks she will be able to sell for $200,000. The house is a nice little 3/1 brick rancher, built in the 50’s, solidly constructed but nowhere her wishing price. Indeed, in the almost 2 years I have been living here, a very similar house down the street has been on the market the entire time (asking $240,000) with absolutely no action. Of course, she has totally partaken of the Kool-aid, and believes that her path the real estate riches is hers for the taking, so no amount of discussion will disabuse her of that notion. Reality is for other people, until it smacks a person upside the head like a 2×4 one day.
Anyway, she wants us to move out early (by 2 months) before the end of the lease, so she can get in here, paint it up and make it presentable so as to sell it in time for the big spring selling season (which we all know is right around the corner). As it happens, I will be looking for a place of my own within the next few months (my roommate and I are kind of driving each other crazy and think it best to move our separate ways before bullets start flying, but that is another story entirely). So then, my question to you is:
1.If the LL wants us out early, should we insist she buy out the rest of the lease?
2.When looking for another place, how aggressive should I be in haggling for rent?
There has been a drastic increase in rental properties coming on the market in the past few weeks, and given that this is a university town (Charlottesville, Virginia), it would seem that as the year progresses and the semester ends, even more properties for rent will come on the market. The places I am seeing seem to be asking rents significantly higher than I am willing to pay, but I am not sure if it is because it costs a lot to live here or I am just a cheap SOB.
Any input you could provide would be greatly appreciated.
SubKommander Dred
Yes and yes.
All anyone can say is No. In a soft rental market, a lease is king. If you want to be really brazen, tell them you need to charge THEM $35 (or whatever) for a credit check.
I had a similar situation with a landlord wanting out of a lease early a few years ago. Now is the time to negotiate if you are willing to leave early. My suggestions:
1) They give you all the deposit and any rent you have already prepaid. No deductions off the deposit for anything since they are going to go over the place anyway.
2) A cash bonus for “moving”. If they want you to move, they can pay for it. Figure out roughly what it would cost to have movers move you and charge her that. If you do it on your own, fine, but you should get paid for it either way since she is the party wanting you to move.
If she isn’t willing to do the two above stay until the end of the lease unless you really like her and want to do a favor…
3) This is the tricky part…Figure out what you want for a bonus to leave. Think of this as the early termination bonus on the lease. I can’t tell you what it should be. So much depends upon the market, your mode, your landlords mode, and how much you like/dislike her. Keep in mind that if you where terminating the lease early you would likely be expected to pay out the full balance. Also, it’s a falling market, so the longer you stay the more you are costing her on the selling price…And make that point!
Go to the house for sale down the street and offer to rent it for what you are paying for your share of the rent now.
Kim,
I like the way you think. Why o’ why would any bubble-sitter cooperate w/ some accidental landlord’s pipe dream? I say “fight delusional fire with delusional fire” and tell her if she breaks the lease you’ll see her in court!
Keg Party!
“‘We believe it’s the finest real estate in Olympia,’ he said, adding that it has views of two waterfronts and Mount Rainier. ‘It’s something special.’
So is a view of a bull elephant with a mortgage papers humping any fool who buys anything because some salesman says…”It’s something special.”
Landlord here:
I needed a tenant out ASAP. I paid them their deposit back right away and though they were month to month I paid them a months rent to vacate within 30 days and also refunded any rent up to the day they moved out. Your Landlady should offer an incentive also, if she is seeing dollar signs it should be no problem. You’ll need your deposit back ASAP for the next place you rent plus any moving expenses and 1st months rent at next place is reasonable.
Mo Money,
Thanks for shedding some sane light on that. If she absolutely has to have you “out of there for the big spring selling season” then fine! ( She just needs to make adequate arrangements that’s all )
If she absolutely needs you out now to sell, well, get your deposit back fast
what Mo Mo said.
While i agree with other comments about your rights in the general sense, nobody has actually examined your lease. Lease agreements can be tricky, especially if it’s not a 100% standard form… an extra word or two here or there, and who knows what sort of protections or privilages the LL gains or the tenant loses.
I’d have an attorney take a look at the lease. A free introductory 30min is common and that consultation might cover it. You might be provided with options that haven’t occured to anyone.
Call 1-800-AmbulanceChaser for an appt and, if asked, claim you’ve been threatened with early eviction for no reason.. being kicked out of your home and are afraid.. or some such thing.. You want to know if you have options.
Don’t just call and say “Would one of your $500 an hour attys mind examining my lease for free?”
If you do decide to leave early get your landlady to pay for your moving expenses.
i agree with JoJo…at least the moving expenses.
your landlord may be an idiot but if she’s nice work with her.
heck…if she is nice and you have your eye on another place maybe just her help packing would be enough.
just cuz you’re a bubblesitter doesn’t mean you got to be a dick.
…so no amount of discussion will disabuse her of that notion.
+1 for using “disabuse”
Tell her to go to hell on the early termination. Not one day.
Then at the end, make her evict you while you spend the rent money on a vicious lawyer to defend the eviction suit while bringing meritless counter-claims.
When you eventually lose due to non-payment, post the appropriate bond and lawyer up for round two at the County Court of Appeals.
When that avenue is finally run out, declare Bankruptcy and force her to seek a lift of the stay in Federal Bankruptcy Court while you sell the appliances H/VAC and have a kegger where you break up the interior with friends and power tools.
That ought to effectively chasten her future interactions with tenants.
Evil;
Remind me never to cross you. To everyone else, I greatly appreciate your feedback. Thanks.
Dred
GET IT IN WRITING REPEAT AFTER ME ….GET IT IN WRITING
The lease has been terminated on …../../2009
She might pull a fast one and sue you for breaking the lease, wanting the 2 months rent and keeping your deposit…and what proof would you have?
My $.02
-Deposit back at time of agreement on move out terms for deposit on renting new place
-Refund of the partial month already paid from the day you are out to the last day of the month at old place.
-Prorated rent covered on new place for time you think moving and getting settled will take (2-5 day overlap)
-moving expenses
-No walk through at end for cosmetic minor deductions, since like another poster said, she is going over it anyway. (Get this in writing)
Look over the contract and see what is in the contract she could come back on you for later on such as damages, etc. Get any conflicts to the lease in writing so she can’t drag you in court later on when she wakes up to the situation that she can’t sell and wants someone to blame.
Congratulations to you and all of us for being right. What’s’ up with Charlottesville ? It’s on my list for long term relocation. Nice college town, I love the mountains. THe bubble seems strong there. The prices are CRAZY for the middle nowhere with TONs of land around ?
‘By September, Polzin said, things had deteriorated so badly that ‘the world is now starting to fall apart.’
Yep, it’s the old, ‘we’re fine, we’re fine’ to ‘it’s the end of the world’ thing seen in market after market. Take an aspirin Polzin, this is the market getting back where it should be.
Also, now that thousands of people are going under financially in Washington, why don’t the Seattle papers track down some of those used house salespeople that insisted nothing could possibly go wrong?
BTW, I looked and looked but I couldn’t find Firstenburg’s first name.
Like Mickey Kaus said, by the time the eCONomists present their findings of a trend in some peer-reviewed chart, it’s too late. That particular post of Kaus’s linked to this blog, and I’ve been reading Polzin’s reports with great amusement ever since.
I had an email exchange with Polzin back in 2006, and tried my best to explain the housing bubble and consequences for Gallatin County. All he could talk about were current trends and past downturns… no ability to look in the future at all. If we shut down all of the econ departments in the country to address budget cuts, would we miss these guys?
“‘We don’t know what’s going to happen,’ Steckler said. ‘There are a lot of people interested in The Shire, but with the economy, everyone is pulling in their horns and the bank wants to get their money.’”
One HOA to rule them All, one spinner to find them, one I/O loan to bring them All, and in the darkness Bind Them….
Beware dark riders bearing foreclosure notices.
Time for the scouring of the Shire. Let Olygal in there to plant trees.
It looks like Gollum got to keep the ring after all…
Dred
Jeanne Firstenburg?
Who’s Jeanne Firstenburg?
Sorry–I was responding to Ben’s statement that he couldn’t find Firstenburg’s first name–she’s the “chief operating officer at Vancouver-based First Independent Bank.”
Oh nevermind - Just read Ben’s post.
“At least six developers who were midway through Bank of Clark County-funded construction projects have found that they can no longer draw down credit. ‘The (FDIC) is going to leave me with unfinished homes that cannot be refinanced, rented or sold,’ one developer told The Columbian.””
Maybe this whiner can contact one of BOCC’s UNINSURED depositors. I’m sure THAT will play well. How the uninsured part happened remains to be seen.
My guess is that they can be sold, I’ll buy them right now for $10.
By the way, it should be pronounced, “wham you.”
Whoooo HOOOOOO! A PNW thread! Thanks, Ben!
Sigh. And here I had decided that today I would NOT spend all freakin’ day long on the HBB, nattering on and on about Twizzlers and owls and assorted such nonsense, like I did yesterday…oh, well.
But are you sure all these articles are correct, Ben? Can…can it really be? That we’re not different here, after all?
BWHAHAHAHAHAHA!
what is a PNW thread?
PNW == Pacific North West, baby!
Otherwise known as Washington/Oregon/Idaho depending upon whether the liberals in Oregon want to count Idaho as being fit for human habitation.
Northern Idaho belongs in the PNW, southern Idaho should secede and join Utah.
Northern Idaho tries to secede every few decades as it is. Now that they have a casino, they are probably stuck for life
“‘There are no fairy tales in banking right now,’ Firstenburg, the chief operating officer, said…’”
Well, sure there are. Just not the Disney cartoon versions. There’s PLENTY of fairy-tales for bankers of the sort where cannibalistic old ladies get burned up in their own oven, and poisonous roses cause immediate and widespread narcolepsy, and little blonde burglars vandalize and deface the house and property of innocent middle-class bears, etc.
And you know, I like those kinds of exciting and substantial stories best, so I don’t mind.
In fact, we need a story called ‘The Poor Little Bankers Meet the Roving Horde of Starving Zombie Wolves, All of Them, Strangely Enough, Wearing Red Hoods and Holding Baskets’.
THAT’D be a great fairy-tale!
Oh, shoot. Here we go again. You’re making me laugh so hard that I’ve inadvertently uploaded the wrong file to a client’s web space. Oops.
Speaking of Zombies:
http://www.msnbc.msn.com/id/29017293/
Cute…They need “Housing Hazards Ahead:
LMAO
That happened last week in Austin. One more reason to stock up on weapons and ammo.
“‘The Poor Little Bankers Meet the Roving Horde of Starving Zombie Wolves, All of Them, Strangely Enough, Wearing Red Hoods and Holding Baskets’.”
LOL….
You crack me up, OlyGal…
Me too. And after I got that Photoshop file away from the JPEG files that my photo client needs to see, here she goes again. Dang, Oly, stop it. You’re making me laugh too hard.
Wow Oly,
Do you have a tiny trained frog with a bell alerting you to HHB comments or something ?
You forgot to include the thundering herds of
carnivorous abalone….
Wasn’t there a B movie once titled “Attack Of The Mushroom People”?
I’d be frightened of such creatures if I lived out Oly’s way.
“values tumbled 12.1 percent and 11.7 percent” ( Seattle/Portland )
Kind of shoots holes in the “Had lenders required traditional down payments” theory now doesn’t it!
Look, if these buyers had placed their OWN funds at risk, THEY would be out that amount if not more! So in conclusion, the lack of down payments had NO effect on the run-up of prices! Not (1) poster here has been able to show me a single shred of “evidence” there’s any link between zero down and inflated home values!
The lack of needed downpayment fueled the speculative bubble. Had the bubble not gotten so large, it would not need to crash so far.
Sure, once the bubble inflated, a downpayment would not have fully isolated losses to the buyer.
Sure, after the bullet had traveled through your heart, putting on a bullet proof vest will do no good. BUT, had the vest been put on first…
darrell_in_phoenix,
You’ll get no argument from me and in a fashion I was being a little flippant, playing the troll role. Still, to this day, I get folks from all walks that demand some sort of ‘proof’!?
Well… you mean other than the fact that the global financial system is in the process of collapsing? No, then I guess I don’t have anything ‘concrete’ for you? Folks like us can refer to smoldering wreckage all we like but when people go to denial mode for their own self-preservation it becomes hard to get them out of their shell. ( Taps with stick, tap-tap )
Besides ( they’ll argue ) “Having worn your bullet-proof vest is NO assurance you’d have survived ANYWAY!
But it would have greatly increased the odds of survival.
They will think twice about paying the bubble price with their own money.
‘Not (1) poster here has been able to show me a single shred of “evidence” there’s any link between zero down and inflated home values!’
What do you want, an economic model? OK then, here is an outline:
A home buyer’s purchase budget is constrained by four key parameters:
a) Downpayment requirement
b) Monthly payment to income ratio
c) Mortgage interest rate
d) Terms of the loan (fixed payment, ARM, option ARM, etc)
Generally speaking, excepting wealthy households, one or the other of these constraints is binding on the amount a household can afford to pay for a home. However, the housing bubble relaxed all four of these constraints, in particular allowing low income households with little income to qualify for purchasing homes on which they would never be able to repay the loan unless inflation went through the roof. It didn’t.
The result was an unsustainable (temporary) increase in purchase demand which drove prices temporarily and unsustainably through the roof. Waiving of downpayment requirements was but one of many factors which drove up prices.
Lesson learned from the bubble: If loaned enough financial rope to hang themselves, many households will happily do so.
Lost another post there but I’m not really arguing the point. All I would say is that when trying to establish fraud it will be uphill when the buyer ‘did’ put down his_hard_earned_money ( as one of Ben’s articles recently pointed out ) and then simply do a MEW extraction on the back end!
No matter how many times they repeat the process ( or the wreckage they leave in their wake ) they -still- put a “down payment” each time! So again, in their minds, DP’s or the lack thereof; was not a factor.
That should be graffiti-ed onto a few boarded up foreclosures!
Kim,
I was thinking more like their foreheads but that’ll do in the meantime. There ’shouldn’t’ be any doubt in anyone’s mind that DP is a factor. “I” happen to think it’s probably -the- most important.
But just saying “no skin in the game” may not be enough. A judge will look at many of these cases and conclude simply that the buyer -was- qualified at the time and agreed to a 30 yr. obligation. As per the letter of the law, everything was above board.
More importantly it provides some much needed cover for REIC players that were coaching flippers through the process.
Well done, prof.
Professor Bear,
Firstly, thanks for responding, and I did mention I was somewhat playing Devil’s Advocate here. Again, ’some’ would argue that many people DID pay hefty down payments to get the best possible terms on the loan ( from their fictitious “appreciation” ) only to turn RIGHT around and back that out via MEW!
So in their minds ( if you want to call ‘em ‘that’ ) it was a “non-factor”! You’re just swinging wildly at… air? They tend to dismiss the fact that ( as you point out ) ever rising home prices assured they were able to do their “extraction”. In many cases to use those funds to put down payments on multiple -other- homes to be in turn, extracted again.
My point is that many lenders -will- legitimately be able to assert that the buyer did in fact put a down payment and what happened from there when it was subject to serial/circle extractions isn’t really their doing? So more; “Making “bad business decisions” isn’t against the law” type defense.
“..Being able to legitimately be able to assert that the buyer did in fact put a down payment and what happened from there when it was subject to serial/circle extractions isn’t really their doing.”
Asserting all this rationalization legally or not does not change the fact that a person who has skin in the game will not defect as easily. Common sense 101, which apparently is not on the requirement list now.
Cracker Jim,
Again I just bring it up to point out how twisted the bubble mentality became.
“I” sell you ‘a’ house. “I” finance the loan for that 1st. purchase. You come in at 100% LTV ( or higher! )
3 months later I have -another- home to sell you. You ask, “How can I buy -another- home, I didn’t even have a down payment for THIS one!
I explain that your home has “increased in equity by 50k! In fact, you can buy 2! And… you’re putting a very standard 10% down on each 250k home! See? It’s all “legit”.
I’m picturing that scene playing out time and again throughout the country and I think you can see why on the surface it ‘appeared’ legit. So NOW can someone please tell me how having/not a DP was/wasn’t a factor!? I know, at that point it’s all garbage in/garbage out. If the borrower put down that it was their “primary” home ( I think the lender is off the hook ) IMHO
% of homeloanership among pop. went up. Not requiring DP brought many more households into the game. Since prices are set on the margins, increased demand, increased price.
At the same time, supply was gearing up and ran away, while the market ran out of GF’s willing to commit financial suicide. Increased supply, steady demand, reduced price.
See, Econ 101 did teach me something after all!
Somebody should clue in my neighbor about this price drop. They knocked down a cute little house (paid under 300) and quickly put up a big boxy house, just listed today for over a million. I rent a half block away in an admittedly older, but nicer house for 1800. My neighbor rents a nice place for 1400. What would compel someone to even think about spending over a million for this thing?
Oh, they have a website too.
http://5010seattle.com/
You can’t put a price on a good “Come on in!” photo.
OK: $32,340
coookieee cutterrrrr
It seems self evident who will win between two house bidders of equal means, excepting that one has a zero percent and the other a 10 percent loan, when they are under their qualification level. Every time a low downpayment loan wins, the price is floated higher all around.
“Underwater homeowners often lack enough equity to qualify for record-low mortgage rates that could save them hundreds of dollars in payments each month.”
More “soft shoe” from the MSM?? What is this crap about “often lack enough equity” if you’re underwater. Geez. They just can’t drop the equity blah-blah.
Actually, that is more “soft shoe” from Glenn “gellin” Crellin, who is head of the Washington State Real Estate Center for Real Estate Propaganda (or something like that).
Glenn Crellin, Director, Washington State Center for Real Astate Propaganda? I.e., Glenn Crellin, Director, Washington State CRAP?
IAT
“A development that was conceived during the height of Bend’s housing boom but failed during its bust has gone back to the bank. The Shire, a 15-lot, village-themed concept in the southeastern part of the city, was marked by its Old World housing styles and fantasy setting styled after J.R.R. Tolkien’s ‘Lord of the Rings’ series.”
Somewhere Suzanne the Realtor is fondling a granite countertop and saying “My Preciousss…..”
Was this like some kind of “Dollhouse Development” marketed to lonely brooding teens? Were they like “troll sized” or whatever those little fellows are called?
I’m still waiting for a “Tijuana Themed” development where the street is lined w/ cantinas that -never- close and HOA’s go toward rinsing the puke off the cracked sidewalk in front of your “casa” and a mariachi band at each corner of the “subdivision”. Now ‘that’ I could go for!
Ahhh… mariachis, or the perfect 3:00 am music to get rid of annoying neighbors….
Was this like some kind of “Dollhouse Development”
There’s a picture in the linked article, have a look…
The house has its very own Hobbit Hole, what’s not to like?
I’m still waiting for a “Tijuana Themed” development where the street is lined w/ cantinas that -never- close and HOA’s go toward rinsing the puke off the cracked sidewalk in front of your “casa” and a mariachi band at each corner of the “subdivision”. Now ‘that’ I could go for!
Dublin…New Orleans…Sydney on New Years Eve….
All those fit the bill.
Sounds like New Orleans
DinOR…Did your Captain place you in handcuffs both before and after shore leaves ?
mikey,
Amazingly I never spent one minute in the brig! Yeah I know, kind of surprised me too? One of my favorites was going “power drinking” in Long Beach, CA. Anyone that knew LB in the late 70’s/early 80’s will tell you there was a liquor store on every corner.
Me and a kid named O’reilly used to slam a six pack of talls one block and a half pint on the next and see how far we could get down I think it was “Orange Ave.”
If Suzanne is fondling anything these days, it’s a brass pole or a streetlamp.
True story — my daughter got turned down for a loan modification today from Ditech. She was told that she owed exactly what the house was valued at.
Where did the valuation come from? From Zillow!!
This is truly amazing — no-one from Zillow has ever appraised the house. Its delapidated (she got it from Dad), its worth about $170k, if that, at 750 sq. feet in Sonoma, CA (my estimate). The house next door is in even worse shape and appraises for even more ($307K).
How can so-called reputable lenders use as their guide a software that doesn’t actually physically appraise???
I told her to wait a while, then go to Fannie Mae.
The Zestimate was no doubt at least 4 months behind latest market developments and valued the house far too high. I’ve never seen Zillow price anything too low.
Lenders know this, and if they see Zillow’s price at the amount owed, the bad news is the house is actually worth less than what’s owed.
I don’t remember what Zillow valued my place in AZ (West side of Tucson) when I sold it in summer ‘06 but I remember that I got more than the ZEstimate. (ZEstimate on that place has gone down over 100k since then…)
Actually, a friend got a zillow appraisal of $ 365,000 and remortgaged 2 months later for $370,000, bank appraisal was $426,000. Closed two weeks ago.
I’m guessing you could typically get a more accurate estimate by taking Radar Logic price per square foot, multiplying by square foot of the home in question, and adjusting up or down for neighborhood quality.
How can so-called reputable lenders
and
Ditech
Go together like Kramer in a Spike Lee movie
It’s not the estimate, they just don’t wanna lend.
latest news
Obama: Excessive Wall Street executive pay is ‘bad strategy’
Libor hits a wall
Bad news from bank sector keeps rates, spreads aloft
By Laura Mandaro, MarketWatch
Last update: 2:29 p.m. EST Feb. 4, 2009
SAN FRANCISCO (MarketWatch) — The sharp improvement in Libor rates since late last year has stalled as anxiety about banks’ health has crept back into this key lending market.
The London interbank offered rate, or Libor, rose to 1.235% Wednesday from 1.09% on Jan. 13. Over the same period, the spread between Libor and rates on overnight index swaps, another indicator of banks’ ability to access funds, has stuck to about 0.99 of a point. That’s far higher than it was before the start of the credit crunch.
Wider rates and spreads mean banks are more hesitant to lend to each other, keeping pressure on their funding costs, and indirectly, the rates they charge homeowners and corporate lenders.
“It’s not really going down as fast as it should — it’s kind of hitting a limit,” said Juan Valencia, credit strategist for Societe Generale in London, of Libor.
He called the recent trend “disappointing.”
“Sellers hardest hit were those who bought in the first three months of 2007. If they sold their homes in the fourth quarter of 2008, they typically lost more than $100,000″
Why are they selling?
The costs of selling are usually about 10% of the sales price. If you aren’t going to be living in a house for AT LEAST 3-5 years, you should not be “buying” a house.
Why were they “buying”………………..because…………..if they didn’t buy NOW, they’d be PRICED OUT FOREVER!!! Realtor-slobber.
Ewwww, gross! Realtor-slobber.
If this were an EKG, I would have to conclude the patient was dead.
Anyone know why PHM is holding up as well as it is?
Oh Ward! I’m getting REALLY worried about the Beazer!
It is dead. You can see the twitches.
Dred,
Put off a response to your landlady for a week or two. Start looking around for a new place. Charlottesville is a university town. So there is built-in demand for rental housing. UVa is a state university and therefore much cheaper than private universities (for in-state students, anyway), so don’t expect huge enrollment declines due to the economy. Given all that, you may find that rents will not decline much in C’ville.
When you have a couple of good rental houses/apartments lined up, tell your landlady you want your security deposit back NOW, and you will be out in 30 days. Make sure she gives you a release for the balance of the lease term.
You are probably not going to get any freebies from the landlady such as moving expenses, which you would have to pay out of your own pocket in a couple of months anyway. So you should be a good tenant and leave voluntarily if you were planning to leave anyway.
I hear fairy tales from Bill Gross at PIMCO and assorted congress critters every day. The fairy tale du jour is “We have to stop the decline in home prices” and we can expect to hear that tired line over and over and over until housing actually does bottom. It’s almost as annoying as hearing about investors “snapping up” foreclosed properties.
I wouldn’t be surprised to learn that a lot of these investors/speculators are first-time landlords. Wait until they get a taste of what that job is all about. They’ll be bailing out of their foreclosed properties faster than the rats jumped off the Titanic.
Bob in Vegas,
Thanks for sharing that. Bill Gross has basically lost his mind. No, rather he has. His comments about “The Decider” were beneath contempt! Suck. It. Up.
“Umpqua Bank”? That’s the name of the bank? Ha! Sorry for not providing any content. I just couldn’t read the rest of that paragraph without laughing.
It’s the name of a local Indian tribe. The name is used for everything around here, there’s even Umpqua ice cream for sale.
http://www.umpquadairy.com
Hopefully this follows my first post.
If you liked that, you’ll love Humptulips, Washington.
Regarding Tacoma half-built condo tower, can explain this statement:
“The developers have considered converting the building to apartments, but the building, made of concrete and steel, may be overbuilt for that use, O’Connor said.”
If I were a renter and apt building was well-built and quieter than most, I would pay a premium. Is this just a false excuse to not turn this project to apartments and gain higher profit?
What they are really saying is that they paid too much for land and construction to break even with apartments… but that is true for just about ANY recent condo development.
The Flathead River near Glacier is a treasure, with water at times as clear as cut glass. If there are fewer septics fouling the environs, so be it.
Seattle’s an interesting place these days. You’d think that news of economic problems had just come onto the horizon in the last two months…. suddenly the topic of social conversation among my peers and friends is all about the layoffs, foreclosed condos in their building, vacant offices, etc., etc. I’m finally feeling vindicated after being pooh-poohed as a doomsayer among my friends over the last year, warning about worse conditions to come and that Seattle wouldn’t be spared.
One story as example: lady friend in the south King County suburbs: had to go back to work at Boeing after she’d retired, because her husband, a realtor, just quit making any money around 2/08 (surprise, surprise). In September she was laid off at Boeing and told her part-time job at Macy’s would be ending, as well. Now she’s doiing housecleaning for all her friends.
Someone at knitting circle on Sunday was trying to elicit sympathy from me for her realtor friend. “Sometimes they don’t make any money at all.” Duh, it’s a sales job, and it’s cyclical… does the concept of saving for a rainy day mean anything to you?
I wonder what happened to that Realtor featured in GNV Sun with three kids who bought an overpriced shack w/ HOA in Magnolia Place and then took out a HELOC on top of that to do a granite kitchen?
BRUSSELS (AFP) – From Greece to Bulgaria and Latvia, European farmers are mounting increasingly unruly protests as the economic crisis causes prices — especially for milk — to collapse.
Greece has seen particularly turbulent demonstrations over the last two weeks with police clashing on Tuesday with farmers from Crete, using tear gas on them as they protested against slumping prices.
Now that sounds like deflation to me.
For that matter, housing prices dropping off by 40 pct in one year in Caleeforneea sounds like deflation to me, but I guess according to the experts at the Fed, housing is an asset, and hence not subject to deflation.
Mmm, cheap feta.